That's the discussion that was had at one of my former companies, almost verbatim. Were you listening in? :-)
Outsourcing, of course, was implemented, because the board wanted it. And, of course, it was a disaster. I got out before things got *really* bad, though. Strangely enough, I heard through the grapevine that they needed to bring in five (5!!) H1B's to take over my duties, and those five still couldn't do it.
I went through another IT outsourcing at a large Fortune 500 company. Basically, we changed employers and kept our desks. 85% of a 200-man IT dept (including me) quit within 6 months.
The end results were devastating for the company, the only way they survived was by throwing money (a billion +, if the rumor mill was right) at the problem until they were able to stabilize the situation. Everyone in management at the company who was involved in the outsourcing decision - from the COO down - wound up being fired over that one.
I've no idea why people do it. Arrogance, I suppose. "This has failed every other time, but only because *I* haven't tried it yet!".
Outsourcing critical engineering is always a loser. Call centers are the most popular outsourcing solution, and even that’s a mixed bag. Americans generally do not want to deal with Indian call takers. So now, they’re outsourcing to eastern Europe and Mexico, which I find amusing.
Anytime a company at which I’ve worked has outsourced anything bigger than Tier One (e.g. Call Center), it’s been a colossal failure. Even “certified” professionals in foreign countries generally can’t hold a candle to domestic resources.
I remember it well. “We’re putting together a weekends team to fix the Bangalore code, who wants to volunteer?”
Kinda like socialism and it's big brother, communism.