As long as we're blogging about agency costs, let me point you at George Geis' article Business Outsourcing and the Agency Cost Problem, which argues that:
Why has business outsourcing increased so rapidly over the past decade? ... [B]usiness outsourcing has thrived in recent years not only because globalization has unlocked inexpensive production markets, but also because it is becoming easier for firms to monitor and prevent the agency costs of outsourcing. Drawing upon a detailed analysis of outsourcing contracts, it explores several strategies to minimize agency costs - shedding new light on the structure and terms of a typical outsourcing project. It then contends that the same forces that are opening new markets are also making it economical for firms to mitigate outsourcing agency risk. Taken together, this work adds another important, but previously neglected, context for understanding the essential tradeoffs that arise when economic ownership is divorced from control.