I'm a big proponent of this; I guess because it's worked well for me. You can get spectacular results for much less, but you have to know what to watch out for.

For example, you should have (at least) one person in the off-site location who really 'gets' what you're doing. This person should be the CTO/Architect, if possible. Development should be agile. You need to know if it's ever going off-course as soon as possible. Communication can't be understated; have daily scrums, for example.

There's a lot more. Feel free to write me. My email is in my profile.