[Luis Gonzalez]

This article details explicitly why outsourcing works.

[Texasforever]

I take a fairly simple but time tested stance on competitive advantage. It is a 3 legged stool, labor cost, quality, schedule=final customer price and profit. If any source of labor can provide all 3 attributes that is where the work should be done. If a labor source can only provide low labor costs but not quality or schedule(efficiency), then that source of labor is not viable. If a labor source is costly but high quality and highly efficient, in other words, on time the first time then that is usually where the work should be done.