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8 August 2005 British businesses will increase their use of offshore outsourcing in the next few years, according to a survey of 100 UK executives conducted by outsourcing consultancy TPI.

The survey found that 81% of respondents plan to further the amount of work they outsource to foreign countries in the next 2-3 years. Just 4% of respondents said they plan to reduce their offshore outsourcing contracts.

The increase in popularity of offshore outsourcing is also accompanied by a growing move for organisations to run operations in these locations. During 2004, the number of staff employed at independent IT service providers grew by roughly 25%. At the same time, the number employed at wholly owned subsidiaries of Western companies almost doubled.

The success of these companies, so-called 'captives', reflects an increased sophistication among Western companies in outsourcing work abroad. "The growth of captives stems from companies now being more aware of how to conduct an offshore operation, and less reliant on external service providers," said Duncan Aitcheson, international MD at TPI.

Western companies are also becoming more discerning about which business processes and functions suit which outsourcing destination, whether at home or abroad - another indication of market maturation, says Aitcheson.

"Large organisations now tend to have a pretty in-depth understanding of the quality and skills available onshore, near-shore and far-shore locations. Some outsourcing models now under discussion involve keeping customer facing functions either on- or near-shore to ensure customers are happy, while offshoring the transactional process elements."

By far the majority of respondents, (75%) outsourced work to India. Second place was closely contested Central and Eastern Europe (28%) and China (25%).