as long as there are companies that continue to do this and put themselves in a competitive cost position amongst their peer companies. The rest of your rant is assumption you treat as given (missed deadlines, reduced service, additional resources et al)
If industry benchmark says company X spends 2.25% on IT and via an outsource company Y reduces that number to 1.75%, then they have, in that area, given themselves an extra .5% margin which they can use to price their services/wares at more competitive offerings to their customers...or simply to earn more profit.