While cost reduction remains the single biggest driver for sourcing IT functions overseas, gaining access to skills that are difficult to find at home is an increasingly important motivating factor for many organisations.

EquaTerra, an independent outsourcing advisory firm, recently published its annual outsourcing service provider performance study. It found that more UK firms are looking to offshore than in previous years – 63 per cent in the 2008-2009 survey compared with 54 per cent in 2007-2008.

Significantly, it also reported that of the UK companies polled, 40 per cent cited access to skills as the primary driver for outsourcing.

When looking for access to skills, India is an obvious choice. It was the primary offshoring location for 85 per cent of those questioned.

Moreover, 55 per cent of EquaTerra respondents said the main opportunity brought by increasing globalisation of IT services is access to skilled labour abroad, while 53 per cent cited lower labour costs.

For the most part, the type of IT skills commonly being offshored remain those that companies have been farming out to third-party providers since the earliest days of outsourcing.

Application development, software testing, frontline IT helpdesk support and business process management all continue to figure heavily. According to EquaTerra, application management (76 per cent), infrastructure management (80 per cent), user management (53 per cent) and business process management (34 per cent) are the skills and processes that are offshored most frequently.

And a recent survey published by Roland Berger Strategy Consultants revealed that the use of outsourcing and offshoring is accelerating. More than two thirds of UK companies have already moved or are considering moving some IT support functions overseas, it reports.

Ian Marriott, Gartner research vice president responsible for external service provision, says the range of skills available from offshore providers is growing to encompass wider disciplines than those mentioned above.

“The initial work was application development and legacy application maintenance, but that has extended over time to include business intelligence, data warehousing, enterprise resource planning, customer relationship management and testing services,” he says.

“There is a level of software architecture and design work done overseas now, and in theory at least, about 70 per cent of enterprise infrastructure work could be offshored, as well as knowledge-processing activities.”

There is also evidence to suggest that offshore IT providers themselves are looking to offset falling revenue from cash-strapped UK companies by extending their own skill sets.

According to a report by analyst Datamonitor, many offshore contact centre service providers are now looking to diversify into marketing and sales, technical support and even debt collection services, for example.

“Debt collection and accounts receivable management have been highlighted by many firms recently as a growth area,” writes Peter Ryan, the report’s author and lead analyst for contact centre outsourcing. “This is due to the rising personal indebtedness in Western markets, and the need for creditors to recoup these funds.”

For some organisations, a desire to simplify in-house IT service provision can be as compelling an argument for offshoring as cost reduction. But anyone who thinks managing a relationship with offshore service providers is simple is in for a rude awakening.

Keeping close tabs on IT staff working in different countries and time zones is a challenging task.

According to the EquaTerra survey, fewer than half of respondents believed that their skills in this area were good, while 39 per cent rated them as average, and nine per cent weak.

That said, the job of managing offshore relationships is arguably getting easier thanks to advances in communication technology, particularly software t hat provides shared workspace facilities, enabling remote managers to catch up with what has been happening at the offshore location during the night, for example.

“Videoconferencing is also quite good once the initial relationship is established, and you can use simple things such as instant messaging to keep in touch,” says Marriott. But the most common approach is for firms to place some of their own management people in the offshoring location to provide oversight.

“Some businesses have moved a small number of key people to the remote facility to help with project development and act as a liaison,” he says.

Offshore IT staff who do not have this sort of regular contact with, and supervision by, the parent company often feel independent and not linked to the rest of the business – a dislocation that can cause problems when it comes to making sure they meet requirements, says Marriott.

“Companies need to make some hard decisions about the right people to lead that organisation, either somebody who can be placed there or locally hired, who knows the dynamics of the market they are working in,” he says. “Somebody from the UK on assignment might not understand that particular market, but somebody from outside the business might not understand the corporation. So some companies look for expats who have worked in India, for example, for a number of years and are happy to go back.”

Employing expats with local knowledge is also one way of overcoming the cultural barriers that often trouble offshore relationships.

Martyn Hart is chairman of the National Outsourcing Association (NOA), an industry body initially set up as a forum for companies using outsourced and offshored IT provision, which now offers advice to other companies looking to go down the same route.

Hart argues that firms using offshore contact centre agents need to be especially aware of how cultural differences between staff and customers can affect not only operational efficiency, but also customers’ perception of a company’s brand.

“You and I take it for granted that it is best not to phone people when EastEnders is on, but this is not necessarily so for people from different time zones and geographical environments,” he says.

Marriott agrees that cultural awareness is important. “It is a challenge if you run a contact centre, for example, because you need to have some cultural awareness of the market you are servicing – so people can talk about football, the weather or what they have seen on TV,” he says.

Cultural differences aside, it is vital that the offshore provider has a clear understanding of what is required from it at the outset.