I was reading a post by Steve McConnell on his blog How to Scale Up Quickly and he commented
Trying to startup quickly by outsourcing is a dead end as far as I'm concerned, especially to India where turnover is so high. Offshore captives can work, but minimum workable size seems to be about 100 people, and it probably takes 2-3 years of ramp up to get to financial break even.
There are some points here that I agree with and some that I don't.
I agree with the fact that there is high turnover is true in a lot of organizations and yes it does effect a lot of projects. An industry average of 15-20% attrition is quite startling for the west to grapple with. Making a project succeed with this kind of turnover is also hard. Searching in Google will give you enough proof to substantiate this high figure. In order to complete a project it is important to have a consistent team right through the project.
I do not agree with the fact that you need a minimum workable size of about 100 people, and it probably takes 2-3 years of ramp up to get to financial break even if one wants to go offshore. If you have a clear idea of what you want to use the offshore center for with clear and precise requirements and you work with a company with enough experience in handling offshore projects you can get a lot of stuff done at a very reasonable cost. If you are planning to move anything offshore setting up a captive unit is not the way forward. There are a lot of small and big players that will do services based work. It is good to go this route and I have seen a lot of small projects needing 2 - 10 people succeed.