Indian outsourcing giants see sluggish growth

Despite record-breaking spending on outsourcing so far in 2008, Infosys, TCS and Wipro have reported slow first-quarter growth

India's outsourcing giants are suffering sluggish growth, despite 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 recently announced first-quarter results for the period ended 30 June.

The results contrast with figures in the quarterly index by outsourcing adviser TPI, which show 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 that the next quarter may continue to be difficult as companies postpone decisions on outsourcing.

Wipro saw a rise in profits of 15 percent over the same period last year, to 8.14bn Indian rupees (£95.2m); however, in the first quarter of 2007, the company saw 16 percent growth on the corresponding quarter of 2006. Infosys reported revenue of £580m — up 24.5 percent on the same period last year, but falling short of 40.6 percent growth reported in the first quarter of 2007. TCS's profit was up just two percent, to £148m — lower than the 55 percent rise for the same period in 2007.

Meanwhile TPI's index found that companies signed £12.9bn of outsourcing contracts in the second quarter of 2008, making it the third quarter in a row to break the £10bn mark and the best recorded performance of three consecutive quarters.

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

Value grew fastest in Europe, with 58 percent more TCV in the first half of 2008 compared to the same period last year. Europe accounted for 10 of the 13 £500m-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 £24bn in TCV, and nearly £5bn 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."