From the March/April 2005 issue of Foreign Affairs, we learn from P.W. Singer 5 types of problems that arise in military/defense outsourcing. To the extent such lessons, learned from the interaction of military with private military firms (PMF's,) could be leveraged by those who may consider outsourcing/offshoring in the corporate world, it's worth having a look at them:
"The first involves the question of profit in a military context. To put it bluntly, the incentives of a private company do not always align with its clients' interests--or the public good. In an ideal world, this problem could be kept in check through proper management and oversight; in reality, such scrutiny is often absent. Still more worrisome from a policy standpoint is the question of lost control. Even when contractors do military jobs, they remain private businesses and thus fall outside the military chain of command and justice systems.
The second general challenge with PMFs stems from the unregulated nature of what has become a global industry. There are insufficient controls over who can work for these firms and for whom these firms can work. The recruiting, screening, and hiring of individuals for public military roles is left in private hands. In Iraq, this problem was magnified by the gold-rush effect: many firms entering the market were either entirely new to the business or had rapidly expanded.
The third concern raised by PMFs is, ironically, precisely the feature that makes them so popular with governments today: they can accomplish public ends through private means. In other words, they allow governments to carry out actions that would not otherwise be possible, such as those that would not gain legislative or public approval. Sometimes, such freedom is beneficial: it can allow countries to fill unrecognized or unpopular strategic needs. But it also disconnects the public from its foreign policy, removing certain activities from popular oversight.
PMFs also create legal dilemmas, the fourth sort of policy challenge they raise. On both the personal and the corporate level, there is a striking absence of regulation, oversight, and enforcement. Although private military firms and their employees are now integral parts of many military operations, they tend to fall through the cracks of current legal codes, which sharply distinguish civilians from soldiers. Contractors are not quite civilians, given that they often carry and use weapons, interrogate prisoners, load bombs, and fulfill other critical military roles. Yet they are not quite soldiers, either. One military law analyst noted, "Legally speaking, [military contractors] fall into the same grey area as the unlawful combatants detained at Guantánamo Bay."
The final dilemma raised by the extensive use of private contractors involves the future of the military itself. The armed services have long seen themselves as engaged in a unique profession, set apart from the rest of civilian society, which they are entrusted with securing. The introduction of PMFs, and their recruiting from within the military itself, challenges that uniqueness; the military's professional identity and monopoly on certain activities is being encroached on by the regular civilian marketplace."
Despite obvious limitations (e.g.. when offshoring is not an option, one deals with legal contiguity,) the value of such model comes at least in marking the type of problems one is likely to encounter at one end of the spectrum.