In human years the offshoring industry as we know it is getting close to the prime of its life. It has grown from bouncing baby when doting customer service managers and CIOs looked on, excited as their costs fell thanks to those happy offshore agents and developers. Then came the unruly teenagers as vendor attrition rose, customer service levels fell and those at the other end of the line rapidly became unhappy with their new far-flung customer service people. Data blunders and security leaks then worried executives about their sourcing decisions and some publicly advertised their UK sourcing credentials. But outsourcing still continues apace and most would say the mature providers have overcome their early bugbears to become a ‘safe pairs of hands’. Offshoring is now ‘fully grown’ and is out there looking for new challenges, developing new ideas and new services. As a natural progression of this, the offshore outsourcing industry continues to clamber up the value chain into more highly skilled pursuits.

“The approach of only outsourcing “non-mission-critical” processes has become dated,” comments Stan Lepeak, Managing Director of Research for EquaTerra.

Indeed, it seems a natural progression of globalisation that offshore locations and providers will seek to provide higher level services. The larger providers become and the better local educations systems become, it is logical that staff originally happy to tap out mundane code or sell low level products, will require new challenges.

“Individuals in these offshore locations are hungry to learn, grow and be promoted and will switch organisations to gain this exposure if they do not receive it with the providers they currently work with,” says, Kulvinder Reyatt, MD of Europe and Asia, for RR Donnelley.

Local skills gaps are also a big issue. In the UK for example the lack of domestic IT expertise is a very real problem. Recent research by Vodafone found that more than a fifth of companies say they lack the IT skills needed for their businesses to thrive.

“Domestic talent pools are not big enough and they need to focus more on performing higher value added activities. For example analysis not processing and decision making not paper shuffling,” said Lepeak.

Offshore vendors have spotted the obvious opportunities and are continuing to offer new services to their customers. It is almost impossible to find an outsourcing company that still offers only low-end, high-volume outsourcing. Providers want the specialists processes and want the extra kudos, business and income that comes with it.

RR Donnelly, an age-old printing specialist, is one company that has captured the BPO zeitgeist, moving originally into low level print 20 years ago but now taking on more traditionally in-house or on-shore tasks. Creative communications, legal processing and research and analytics all fall under their offshoring menu, delivered from India, Sri Lanka and the Philippines and many European locations. The company has also developed offerings in financial management such as accounting, credit card applications and insurance claim management. The company even offers ‘Pitch assistance centres’ for large corporate, investment banks, consultancies and the like

While many of the ‘new’ services being offered by outsourcers might not have always been done in house previously, it is the offshore element that is new. So are buyers ready to offshore their PowerPoint presentations or legal documentation for example? Clearly some are otherwise the companies would not be offering such services, but the offshoring of such processes is still not widespread. So should companies be weary of sending their high-end processes off-shore?

“As an outsourcer I can confidently say no. However, in some cases there is a longstanding hostility between customers and suppliers, with the gap widening in the current recession,” said Dr Roger Newman of Mahindra Satyam. “The reality is that businesses need greater intimacy with their suppliers and for the supplier to be integrated with their business models if there is to be the mutual benefit required for long term success,” he adds.

The subject of management in high-end offshoring is something not to be overlooked. The switch-on, switch-off mentality of large scale outsourcing no longer fits with the often close collaboration now required. For example, imagine trying to refine an important presentation being developed offshore without numerous phone/video conferences. Likewise management of financial processes and data requires new in-house responsibilities, procedures and security measures.

“To successfully manage multiple BPO providers, companies need to take a number of sophisticated and often culturally challenging steps. Companies that successfully manage offshoring core or mission-critical processes look to create collaborative management models that share responsibilities, risks, and rewards, enabling both sides to reach their objectives,” comments Lepeak.

Assessing the possibility of outsourcing high-end processes begs the question how far should one go. Obviously you cannot outsource everything so surely there needs to be a balance. “You can’t outsource everything – you need something on which to base competitive differentiation – but nothing should be “off the table” when it comes to considering outsourcing options,” says Lepeak.

The advice from providers is of course speak to them to gain a better understanding of what and how processes higher up the value chain can be effectively offshored. Even amongst old-hands at the outsourcing game, a reassessment of possible suppliers is likely to be a first step.

Sukhendu Pal, Principal Consultant at Centrix Consulting, comments, “All companies need to rigorously assess each of their functions to determine in which they have unique skills and sufficient scale and in which they don’t. Better assessment of competencies can improve a company’s strategic position by reducing costs, streamlining the organisation, and improving quality. Finding more qualified BPO service providers to provide critical functions usually allows companies to enhance the core capabilities that drive competitive advantage in their industries.”

The outsourcing industry has clearly come of age so end users must adapt to keep pace. However, in current economic circumstances, it will not take much to encourage executives to investigate what is now on offer.