In Israel, all cases involving Israeli companies must be tried in Israel unless the contract specifies the sole and exclusive jurisdiction is elsewhere. So the American buyer had to litigate the case in Israel. The litigation costs skyrocketed because the American attorneys had to set up shop in Tel Aviv. And now they had to play by someone else's rules, which included learning the rules. That may be the 10 million dollar question for American buyers.
Outright theft is the first concern.
Protecting your intellectual assets is one of the major difficulties in outsourcing offshore, points out Franklin Blackstone, a lawyer with the New York firm of Arter Hadden. This becomes a real worry for companies who are providing original source code or a proprietary process to their outsourcing providers.