They can work, yes - but it requires both parties to be open and honest with each other, and entirely willing to accept that it will never evolve into an emotional relationship. (Unless, of course, both parties feel the same way about one another; which then begs the question, why were they not in a 'conventional' relationship in the first place?)
I would like to say, 'Inevitably, one will fall for the other at some point down the line' - but it's not strictly true. I have known people who have successfully maintained a friends with benefits dynamic until one or the other found a partner with whom they wished to be emotionally attached to as well as sexually/physically.
It all depends on the individual parties involved.