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India's outsource giants feeling the pinch

Infosys, Tata, and Wipro blame global economic conditions, with the former warning the new quarter may be difficult too, as companies postpone decisions on outsourcing.

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, and Wipro experienced slow revenue or income growth in their just-announced quarterly results for the period that ended June 30.

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 postpone decisions on outsourcing.

Wipro experienced a rise in profits of 15 percent over the same period last year, growing to $187.5 million. Infosys reported revenue of $1.16 billion, up 24.5 percent over the same period last year. Tata's profit was up just 2 percent to $296 million.

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

TPI says this year is on track to see the highest total contract value for outsourcing deals on record.

"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," Peter Allen, partner and managing director of TPI, said in a statement.

Nick Heath of reported from London.