Maybe we're using the term outsourcing in slightly different ways. It seems like you're talking about the practice of outsourcing to an overseas company which does essentially contract work. That indeed has every drawback you mentioned, and a few more (e.g. they might get coy about sharing source code even if it technically belongs to the parent company, and even if there are security vulnerabilities involved -- had a pleasant experience involving that at my job recently). But what I was specifically talking about is that scenario I described, where the company just hires (directly) some dude from Indonesia, which goes through the same interviewing and vetting process as a regular employee. Just, of course, gets paid significantly less.