During the transition period, the ratio of offshore employees in the United States to offshore employees working at the vendor's overseas headquarters is high. But after the transition is complete, CIOs have to get those employees out of the office if offshoring is to be a money-saving move. "It's got to be 80 percent or 85 percent working offshore or the numbers just don't work," explains GE Real Estate's Zupnick.

It makes sense for offshore service providers to place as many of their employees in the United States as possible. The provider's margins - already quite decent for offshore work (Indian companies charge U.S. companies $20 an hour for an employee they pay around$10) - really skyrocket when they're on American soil. "They make more money and often the client feels better having them close," says Praba Manivasager, CEO of Minneapolis-based offshore adviser Renodis. "But the customer immediately loses all of the bill-rate savings." If not included in the original contract, additional travel and visa costs also must be figured in. Tally it all up and you will pay as much as you would for one of your own employees.

It's a difficult area for CIOs to manage. Work is much easier to do with offshore workers onsite, but to cut costs they must push as much overseas as possible. Conversely, the more manpower based offshore, the more project problems and delays. Barry-Wehmiller's Hergenroether says the amount of workers you can reasonably send offshore depends on the type of work being done. Industry- or company-specific system development requires more developers onsite. Legacy maintenance or simple upgrades may not require a soul.

"On some of our projects, up to 50 percent of offshore workers are onshore; on others it's closer to 10 percent," Hergenroether says. In some cases - where specific skills are the reason for offshoring - he may even bring in offshore talent over long term. "But if you're going to do that, your cost savings diminish dramatically," he says. In fact, there may be no savings at all.

Bottom line: Expect to spend an additional 2 percent to 3 percent on transition costs.