Does Agile practices suffer in outsourcing model?

I wonder why Agile practices suffer in outsourcing model, is that only so because of failure in maintaining good communication model/channel between team?

I understand Agile practices succeeds, for sure, given entire team is together from the same culture and with same goals, and same company.

How about when that is not the case? which is typically experienced current day project outsourcing, with teams from different geography, culture and interests (company they represent).

Does Agile challenge outsourcing? or Does Outsourcing challenge agile practices?

In my opinion outsourcing doesn't really challenge agile practices, but it challenges itself, and that challenge comes from cultural gaps, working together on a common interests & goal. Mostly soft interests IMHO i.e., willingness to share, and/or -Ve sense of job..etc. So Agile can be fragile :) if there are any impedance mismatches between teams. In an Outsourcing this is typical, mismatches can occur due to maturity of individual interacting, skills gaps & soft vrs hard goal differences. I believe this has nothing to do with Agile practices. However we have to be cautious and carefully model our outsourcing operations and transition.

Some one asked me - just because of outsourcing should we fall back on age old project management methodology - called 'water fall' model ? Hmm.. good question as such but answer to that again depends on how good are the agile practices in parent project/company. Some may attempt to water fall, if there are large impedance mismatches that I mentioned above and some may attempt to tune agile practices. At what cost & who should win is dependent on governance model of your deal :)