Back when there was a 6 month release cycle, you could lose 1 day to communication lag and it would be no big deal... now that amounts to losing 20% of your dev time.
The culture gap is significant too. Everybody in the US sees some of the same ads, some of the same "viral" apps, memes, etc. They share the same slang and vocabulary, that kind of stuff is important in software development, and it can't be exported, no matter how hard we try. When you have ONE developer that can talk to your sales/marketing/client relations teams, your product quality goes way up... when you have a whole team of them, you can knock it out of the park. When you have to hire 5 Business Analysts just to write documents that will always be wrong, in order to get any work out of your geographically diverse team, you lose that magic.