...but just can't handle remote employees that they have so much more control over?
Sounds like complete nonsense to me. If they can handle vendors located on a different continent - they can handle remote employees, full stop.
I'll believe the complaints about WFH when they'll ban offshoring.
All of this involves varying degrees of transaction costs (ie. how hard is it to have everone aligned, communicating effectively, etc). Outsourcing is usually done for (parts of) jobs that can be easily carved out into fairly complete packages.
For example, have the QA team offshore, or outsource the design or slide-deck preparation. Most dev outsourcing is also done at least per-component if not per-project.
True distributed teams are HARD. But having everyone aligned, on the same page and motivated, if half (or more) of the team is remote, means a lot more effort on clear communication, management, etc and many office patterns will need reworking.
As one example, onboarding (esp junior) team members is much harder, as new people learn as much by osmosis as by reading the documentation.
This is not to diss WFH - I prefer it to office esp. cubicle hell - but we should be realistic about the challenges involved.
A drop in empathy, trust, relationships for me was very small. It's there, but for work related stuff, I believe it didn't actually matter. Everyone was nice with me and we got things done. Whenever I had questions, they would help me out.
We were since then a couple of times in the office and talking to them in person was nice, I felt I could ask more questions, I got to listen to their unfiltered opinions as we could have spontaneous 1-1 conversations in the office. It was also because we didn't make time to "just chat" online, except for online watercooler team calls, but with 3-4 people in the call, we pay more attention to what we are allowed to say.