Major companies such as 37Signals (creators of Basecamp and Highrise) have done this very successfully for years. We have also done this ourselves.
The keys (imho) are the following:
1) OK to outsource to foreign countries, but always pay above market rate so you can secure the best talent. Even at above market rate, you’ll save loads.
2) Test the actual people you hire, just as you would test a full-time, in-house employee. You’d be surprised how many employers find out AFTER they hire a virtual employee that he/she can’t even speak the required language properly.
3) Set really clear expectations and manage against those expectations weekly.