Indian outsource giants feeling the pinch

India's outsourcing giants are suffering sluggish growth in contrast to record-breaking spending on global services in 2008.

The country's big three outsourcers Infosys, Tata Consultancy Services (TCS) and Wipro experienced slow revenue or income growth in their just-announced first quarter results for the period ended 30 June.

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The results fly in the face of figures in the quarterly index by outsourcing adviser TPI, which shows global spending on outsourcing is on track to break records in 2008, with Europe forging the biggest contracts.

All three of the Indian outsourcers blamed challenging global economic conditions, with Infosys warning the next quarter may continue to be difficult as companies postponed decisions on outsourcing.

Wipro experienced a rise in profits of 15 per cent over the same period last year - growing to 8.14bn Indian Rupees ($187.5m) - but putting it below the 16 per cent growth in the first quarter of 2007. Infosys reported revenue of $1.16bn - up 24.5 per cent on the same period last year but falling short of the 40.6 per cent growth in the first quarter of 2007. TCS' profit was up just two per cent to $296m - lower than the 55 per cent rise for the same period in 2007.

Meanwhile TPI's index found that companies signed $25.6bn of outsourcing contracts in the second quarter of 2008 - the third quarter in a row to break the $20bn mark and the best recorded performance of three consecutive quarters.

TPI says this year is on track to realise the highest total contract value (TCV) for outsourcing deals on record.

Value grew fastest in Europe, with 58 per cent more TCV in the first half of 2008 compared to the same period last year, accounting for 10 of the 13 $1bn-plus contracts.

A total of 146 contracts were signed in the second quarter, leading to one of the strongest first halves in more than a decade, with 282 contracts valued at nearly $49bn in TCV, and nearly $10bn in annualised contract value.

Peter Allen, partner and managing director of TPI, said in a statement: "Companies across industry segments are expressing their concerns regarding the uncertain business conditions by taking steps to reduce operational costs, and the outsourcing industry is benefiting."