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Talking from personal experience of having managed off-shore projects from an on-shore base the most significant challenges are:

- misaligned interests

- availability of information

- control

- security and compliance

- communication

As far as "does it EVER work" concerned: it does. It doesn't work well though. Most people can run, doesn't mean that most people can run as fast as Usain Bolt.

My whole opinion at: http://programmers.stackexchange.com/a/46934/12348



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