* It's difficult for Western businesses to time shift, and there are usually caps on work visas.
* Perhaps until recently, most Western programmers genuinely enjoy the work. What I've heard from Indians is that many Indian programmers are more interested in building a career than in the work itself. Intrinstic vs. extrinsic motivation. I think this may be declining as a factor as software eats the rest of the US economy and brain drains talented people from other fields, though.
* Cultural differences--it turns out that English fluency is necessary but not sufficient to seamlessly slot into an Anglosphere company.
* One way out of this conundrum could be for new software companies to start in India and outcompete Western companies (at which point culture differences and time shift wouldn't matter), except I get the sense there are barriers to that.
My current best theory is that the software industry is overflowing with money, and it's still more beneficial to try to optimize for output quality and quantity (i.e. hire better software engineers no matter the cost, bring people into the same locality instead of hampering progress by splitting work into different timezones), instead of trying to cut costs to improve profits.
Once the growth finally ends, outsourcing to cheaper places might become a very attractive option.
I still don't entirely understand why it turns out to be so hard to outsource. I get some of it, but it seems like something that we should have figured out by now. I'll be interested to see what the post-pandemic shift to remote work does for that.