Companies are increasingly moving functions such as product design and research and development to China, India and other offshore locations because they can provide highly skilled workers who are in short supply in America and Europe, a study by Duke University and management consulting firm Booz Allen Hamilton has found.

"Clearly a new logic is driving decision-making as offshoring entails more highly skilled work," said Vinay Couto, vice president of Booz Allen. "It's less and less about low-skilled labour and more and more about accessing new pools of high-skilled talent."

The research found that as companies offshore more high-skilled work, they are increasingly concerned about the loss of managerial control that accompanies outsourcing functions close to their core business.

India remains the preferred destination for offshoring. China, however, is emerging as an important location for engineering, product development and procurement as more companies co-locate engineering groups alongside manufacturing operations. The Philippines is increasingly attractive for office administrative work and contact centers. 

European firms perceive cultural differences as an offshoring risk, while American firms are primarily concerned about service quality.
The survey found 48% of companies identified "increased speed to market" as a significant driver in their offshoring decisions, an increase of almost 70% in just one year.