I work at a company that does outsourced programming for for US and EU companies. I have been working at this for the last 5 years aproximately (always in programming & analysis roles).
I am really amazed at how much our clients undermine their own goals. I understand that cost is what drives programming jobs to my country - but I still have to see a really successful product come out of this. It would be difficult to find a single cause for this, but all of the following are at least partially responsible:
1 - Low wages.
2 - Lack of good programmers getting involved: some of the programmers you can get for the lower wages are great, some suck. I've seen companies taking just anyone interested to fill programmer positions for such jobs (you can train them, right?). Getting involved in the selection process may help prevent this.
3 - Lack of trust in the the outsourced team: you can't think of the outsourced team as a bunch of mindless morons and expect them to care about your product. In those cases in which the outsourced team was a very good team, it didn't make the slightest difference because people was told what to do, and not to think - which makes hiring inexperienced people a pretty attractive alternative.
4 - Giving more importance to cost & time, than to quality: what would anyone expect to get, when quality is secondary to time & cost? This is a huge way to undermine your projects.
5 - Communication: communication is harder when people is spread all over the world. IMHO you need to compensate this difficulty by having some tool to help you keep in touch. In my current company, we use skype, and we keep in touch at all times with the client, which really helped solve this particular problem.
6 - Planning: planning is much more difficult when delivering work to someone who is not right at your side.
5 - Etc, etc.