I've just encountered a blog entry on managing offshore consultants: http://blogs.msdn.com/techleaders/archive/2008/12/18/how-to-manage-remote-employees-part-1.aspx
At my workplace we are pretty big into using offshore consultants. As a matter of fact, half of my team is offshore.
We use a Globant for an offshore resource provider (http://www.globant.com) In two words: Highly recommended. Our interaction with the Globant team is somewhat different then what I am used to with an offshore development team.
- They are considered full fledged members of a development team.
- They all speak excellent English
- They work our hours
- They join all regular meetings
- They are able to travel onshore when required
There are always certain inefficiencies of working remote, some of them I can relate to (I work away from the main office most days of the week). However, there are always ways around them.
- It is sometimes hard to get in touch with a person in a moments notice. This usually requires planning, as well as an ability to put off your "onshore" things when you receive calls from a member of an offshore team. Time Management and flexibility is key.
- Regular scrum meetings are a must. It is very critical to have understanding between everyone on the team, on what all tasks are delivered, when, and by who.
- I found it extremely useful to have offshore developers come onsite for at the beginning of the engagement to establish communication. This allows all members of the team (offshore and onshore) to understand how the engagement will work. Offshore developers get a chance to see firsthand how their product effects the business, possibly meet the end users. Most importantly it opens up the communication channel where offshore developers are able to openly engage onsite team.
- Having an offshore project manager to help with the engagement helps.
Offshore consulting is not something to be afraid of. Most people I know, work for companies that are split across multiple locations, sometimes across the street, but sometimes across the country or the world. Who knows, your business partner might be considering you "offshore"
Update: Interesting set of answers on the Stack Overflow : Offshoring: does it EVER work? (http://stackoverflow.com/questions/502995/offshoring-does-it-ever-work/503037#503037)