Look for a locale that does not suffer from high turnover. If you can find the right team, outsource to a nearshore or onshore locale. In many cases, their Total Cost of Engagement (TCE) is the same or less than offshore.
Make sure that at least one team member in the remote locale, preferably the lead, has experience working in the US or Western Europe. Make sure that you have competent and committed local management.
Outsourcing is here to stay, because of its many benefits. The key is to learn from past mistakesand do better next time.
A version of this paper is published as an article entitled “Outsourcing QA” in Software Development Magazine, January 2006, in the “Global Success Stories” special section on outsourcing [registration required]