In recent years, there’s been a seemingly endless boom in offshore outsourcing. But companies that think handing off an operation to an overseas provider is easy can get a rude awakening.

The transition often proves to be much more costly and complicated than expected. And companies often find that their high hopes about cost savings and greater efficiency don’t pan out.

To get a better understanding of the problems and solutions, we conducted a survey of senior executives at 62 of the 100 largest financial-services firms in the U.S. and Europe. Arguably, this industry is the deepest repository of leading-edge practices in outsourcing and offshoring. We also conducted approximately 100 interviews with outsourcing clients and vendors from financial services as well as other sectors such as pharmaceuticals and the media.

We found seven common myths that vendors and clients cling to about offshore outsourcing—false assumptions about how the process should work. They range from unrealistic expectations to poor ideas about how to structure contracts to mistaken views of risk. These ideas can prove deadly to the success of outsourcing projects and even to an organization’s overall services-sourcing strategy.

Here’s a look at those destructive myths, and how to overcome them.

1. We Can Have It All

In our survey, the executives told us their top criteria for judging the success of an outsourcing project were efficiency, or cost reductions; effectiveness, or improvement in service; and flexibility, or the ability to increase and decrease production rapidly.

Each in itself is a perfectly valid objective. The problem is that many clients expect—and, indeed, many vendors promise—all three in the same outsourcing project. The fact is, achieving one objective means making a trade-off in another area.

Let’s say a company wants to boost effectiveness by adding more features to its outsourced products or services. Even under the most efficient conditions, costs will increase. For instance, a company with