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I work for a company that view software development as a necessity, but not a core business.  Ironically, the products we sell are all software deployed on the web.  With that viewpoint, the majority of people developing our software are outsourced to India and Romania where labor is cheaper.  I cannot dispute the cheaper labor, but the variable quality, language barriers and the cohesiveness of the team result in a dramatic reduction in productivity.  I hold the opinion that outsourcing engineering or any other core talent when your core product depends on that talent as a penny wise, pound foolish decision.

So, I figured I would offer my top ten reasons not to outsource your IT department:

1. You spend more time communicating requirements. If your engineers are overseas and you don’t speak the same language, communicating needs to be literal and exact. You can assume any nuance or value add from the engineer.
2. No one is incentivized to move fast. It doesn’t matter to the outsource firm if you deliver on time–they work for a firm, not you.
3. Quality is emotional as well as measurable–If your engineers don’t “get it” you won’t get the results you are looking for.
4. Code is not an assembly line process.  Engineers in many outsource firms are assembly line workers. Code is an intellectual process; not a rote process.  Being part of the creative process has positive intellectual outcome.  
5. Your company’s budget gets shipped overseas. Imagine if you opted to employ a US resident as an engineer.  His/her tax money would recirculate in in the US and his/her earnings would be consumed in the us economy.  Its good for our economy to keep work her if you can.
6. You have less control over your own destiny. You and your company end up in the hands of people overseas. You have limited recourse if things go wrong.
7. Projects tend to take longer. Because revisions and cycles depend on people in different time zones, response times are hindered by the location of your outsourced resources. Software development is inherently iterative and if your cycles require a one-day turnaround time, how fast can you really move?
8. Outsource firm business models are based on growth even when you are not.  You will be compelled throughout your relationship to scale more resource commitments with your overseas firm because that his how they operate. Too many temptations will appear along the way and you will end up with a huge team in India that you cannot afford.  
9. Bureaucracy and red tape.  To really ensure you get results, you have to closely monitor invoices, quality and create newly needed processes.  Innovation will fly out the door as you put controls in place to control the beast in the East!
10. It costs more to offshore! Give me 3 solid US based engineers to any 10 outsourced/offshore ones and I will get more done faster, cheaper and with mush better quality! Moreover, you save money not having to hire someone to baby sit the offshore team and you will spend time writing requirements.