Fred Reichheld has a gift sometimes for coining a neat turn of phrase. One I really like is his concept that there are "good profits" and "bad profits".
Good profits come from a satisfied and loyal customer base that has few problems and enjoys doing business with you. Bad profits are usually about cutting costs—they come from measures that increase profits in the short term but hurt customer satisfaction and loyalty. in the long term bad profits can lead to a vicious cycle of falling margins, plummeting loyalty and ever greater commoditisation. Bad profits are bad both for organisations and for their customers.
Offshoring customer servce seems like a classic case of bad profits. Customers don't like it, and organisastions know they don't like it, but offshoring still goes on because companies are desparate to save costs and benefit from the easy boost to profits.
Now we have some research into the long term effects. Three american academics (including the brains behind the ACSI) have published a paper summarised in a Wall Street Journal article that shows offshoring customer service damages customer satisfaction and loyalty. Historically, such a drop in ACSI goes along with a fall in market capitalisation. The paper also shows that, by contrast to offshoring customer-facing functions, back-end systems can be safely offsourced as long as efficiency is maintained.
The moral of the story? If you're interested in long-term success give customers what they say they want. Doing best what matters most to customers over the long term will lead to financial rewards, and helps to prevent the race to the bottom of commoditisation and cost-cutting. But offshoring in itself is not the problem, the problem is that customers don't like specific functions being offshored.