http://www.businessweek.com/globalbiz/content/mar2008/gb2008034_420014.htm?chan=technology_technology+index+page_software A few years ago, I played a relatively significant role in engaging and bringing in an offshore consulting service into the org. We piloted the company's rightsourcing strategy with one consultant who worked for me. He and I had a very positive relationship and delivered great things together. We took advantage of the time zone difference by ensuring that handoffs were flawless and by adhering to a self-imposed collaborative practice to communicate with each other on a daily basis.
After the consulting group got their foot in the door, however, all subsequent services were crap. Since that first consultant, I had 4 other ppl work for me and all of them had mediocre to average technical skills, didn't quite understand/appreciate operational and functional processes, and most frustrating of all, couldn't think out of the box to solve problems without me having to hand hold them through a solution design. After a few iterations of disappointing results, we replaced them with another (US-based) company. I am not very concerned that the H1Bs are granted to a disproportionate amount of Indian workers, but I think that domestic companies need to be painfully aware that they'll get what they pay for; this may translate to a lot of lost time, miscommunication, and failed projects. There is quite a lot of good local talent around, so let's not forget about them!
IMHO, there is definitely a place for offshore consulting companies. Right now they have over 15 strong years of experience in implementing helpdesk services and have appropriate talent for order-taking programming work. Over the next few years, per the 2007 gatner outsourcing/contracting hype cycle, these companies aspire to conquer the world of functional design. One of the major reasons why it is difficult to break into this area is b/c it requires an extensive understanding of current and future BPs. BPKM is an important focus area within the tech world simply because getting to the next level requires that expertise. Unfortunately, this isn't something that may be learned overnight and I suspect that consulting companies all around (especially offshore ones) will find it challenging to gain significant experience that will allow them to be strategic in the long run if 2-yr rotations continue to be mandatory. My recent exp has given me insight to procurement practices and how it impacts relationships with 3rd party vendors but I'm feeling too nerdy right now so let me stop.
Anyway, I hope the economy will look up soon. Even though I live way below my means and don't have to change my spending habits yet, things (i.e. gas, oil, milk and wheat) are obviously getting more expensive by the day so I can imagine that it is negatively affecting some of my friends'/coworkers' lifestyles. Not good.