Says the CEO of a Prague-based remote contracting firm.*

Personally, having a crap ton of experience working with overseas teams, the timezone difference is absolute hell. Moreso than the "not physically in the same room" thing. You can't even get on a phone or be in a chatroom together for most of the regular working day. That blows.

*(He mentions that he has experience hiring European developers, but it's not obvious from this post alone that he has a direct financial interest in the offshoring model.)