The Indian outsourcing market just got a bit more competitive, following Tech Mahindra's $500 million offer for a majority-stake in the beleaguered outsourcing giant Satyam Computer Services. In January, Satyam's founder and chairman admitted profits had been overstated for years, leading a number of outsourcing clients to begin looking for a new vender, including:

  • The United Nations, which announced its intentions to terminate its contracts with Satyam and bar it from bidding on future work.
  • Selective Insurance, which had outsourced about a quarter of its IT staffing requirements to Satyam.
  • SanDisk, which is reportedly considering ending its outsourcing arraignments from Satyam.

The redistribution of some of Satyam's clients was welcomed news to its competitors, who are facing difficult market challenges. Tech Mahindra's investment in Satyam may lead some clients to rethink uprooting their current outsourcing contracts. "The amount of uncertainty today is unprecedented. This is probably one of the worst economic environments we have seen in our lifetime," Infosys Chief Executive S. Gopalakrishnan told reporters last month following his company's earnings release.

Infosys said 89 percent of its top 135 clients in a survey last month said their 2009 technology budgets would be lower than last year. Infosys told investors that it now expects revenues to fall 3.1 percent to 6.7 percent in 2009, it would be the first year of contracting revenue since the firm was founded in 1981.The decline in revenue is being blamed on intense competition, longer sales cycles and intense pricing pressures, which have led fees to fall by 3 percent between January and March and are forecasted by the firm to fall by 6.5 percent by the end of 2009.

Infosys is the first of the big Indian outsourcers to report quarterly earnings. Stock analysts polled by Reuters found that revenue expectations are not much higher for rivals Wipro and Tata, who will report earnings in the coming weeks.

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