Just read interesting overview of the Offshore development related issues.

The main point is that NON Co located projects will have approximately 2.8 times as many software defects as Co located projects!

Amazing thing is that Agile could fix one of the Offshoring issues (Many Defects), by cleaning up defects as earlier as possible. Since we deliver smaller releases we are able to make carefull testing of all features. So defects will be fixed earlier with a less price.