Does outsourcing offer savings at too high a price?

Outsourcing and offshore seem to be the rage these days for companies that want to save money relative to their IT environments. But do they really save money, or do they actually place their businesses in peril?
Outsourcing is effectively paying another organization to take responsibility for certain facets of a company's business. It can work very well for hardware and infrastructure, yet it can be very risky when applications, systems development and systems maintenance are involved.
Offshore is similar to outsourcing in that the company pays another organization to take responsibility for certain facets of its IT. In this case, however, the control and work take place offshore. Today's primary offshore locations are India, China, a number of Eastern European countries, the Philippines and Vietnam.
Though it is widely believed that outsourcing and offshore are sure ways for corporations to save money, the popularity of outsourcing and offshore is more likely attributed to upper management's failure to view its company's applications as company assets. Given that many CEOs and CFOs at large companies have virtually no idea of what constitutes IT, they tend to look at IT as a black hole -- something that swallows large amounts of money.
ERP: A company's heartbeat
Most large companies have vast ERP systems in place. Accounting, purchasing, manufacturing, inventory, order entry, distribution, CRM and even payroll generally operate in these systems.
Virtually all of a company's data -- and secrets -- reside within these systems. Many systems contain information that controls vital processing information at facilities such as power plants. Other systems contain information about how products in industries like aerospace and weaponry are manufactured. If these systems were to disappear or malfunction tomorrow, chances are some of the companies wouldn't survive.
Given that ERP systems are clearly vital company assets, that begs the question: Is it good corporate policy to place these assets into the hands of others? Outsourcing and offshore operations are doing just that.
The outsourcing scenario
Outsourcing fundamentally promises that an outside organization will run a company better than the company itself, within a schedule and at a fraction of the cost. Does this make sense? Of course not. But this sales pitch is what regularly drives corporate executives to enlist outsourcing support. They hear promises of cost savings without comprehending the asset value and control issues relating to IT.
Once the IT functions are taken over, there is little to no assurance that security issues are being addressed as in the past. Company secrets and processes are