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A lot of outsourcers do this. Here's my experience with a few companies.
At one time, these people were pretty good, but they realized they had skills and left for other countries for better pay and better working conditions. The bids got more and more competitive, cutting costs until they were literally filled with low-skilled labor who can't be promoted or leave for economic or competence reasons.
Now that I read this, I'm kinda glad that our company doesn't do anything like that. But it's just a small indie team porting games to consoles, so I guess what you're mentioning is the bigger corp problem.