Infosys Results Signal Rebound in Offshoring

Outsourcing vendor Infosys Technologies Ltd. posted strong financial results for the quarter that ended Sept. 30, as customers started placing orders that they had postponed during the recession.

India's second-largest outsourcer reported that revenue was up 30% and profits grew 18% over the same quarter last year. Tata Consultancy Services Ltd. and Wipro Ltd. are expected to report similar results.

In anticipation of new business, the Indian outsourcers are hiring employees at levels comparable to those in place before the recession, said Amitabh Das, CEO of Vati Consulting, a recruitment firm in Bangalore.

However, analysts warned that Indian outsourcers could see their margins shrink as a result of competition from multinational services companies that have offshore operations. Indian firms also face higher costs as they set up larger operations in the U.S. to counter a growing anti-offshoring sentiment in the U.S., said Jimit Arora, research director at Everest Group.

Meanwhile, customers are reducing the number of outsourcing firms they use and are asking for deeper discounts from those that they retain, Arora said.

This story was originally published in Computerworld's print edition. It was adapted from an an article that appeared earlier on Computerworld.com.

Copyright © 2010 IDG Communications, Inc.

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