More evidence of the myth of de-globalization: outsourcing to India rebounds dramatically

WSJ story:  India's three top outsourcing firms (TCS, Infosys, Wipro) all experience big rebounds in revenue for work outsourced from West.  Each had negative first and second quarters in 2010 and each will have 10-20% boosts happening in 2010's 4Q.

Doesn't mean everything goes back to what it was; it never does.

The turn of events marks a reversal from a year ago, when Indian firms were reeling from a steep drop in orders for software services. But the tech-services sector differs now from the Indian firms' boom years of 2003 to 2007, and new hurdles have arisen. 

Long-term challenges include rising labor costs, sliding billing rates and currency-exchange risks. The upshot is that despite optimism in Bangalore and Mumbai spurred by the recent turnaround, the companies likely won't be able to return to 30%-plus annual revenue growth without restructuring their business models and the types of services they provide.

"Is there a revival? Certainly. But is it a return to the go-go days of offshoring three years ago? No," said Sid Pai of Houston-based outsourcing-advisory firm TPI.

Pricing will be a long-term issue. Indian firms cut billing rates 5% to 10% during the downturn to keep clients, and many analysts say increasing prices now won't be easy.

"There'll be niche services where you can charge a premium, but in other areas, the pricing pressure is only going to continue," said Forrester analyst John McCarthy.

Meanwhile, as they grow bigger, the top Indian companies are beginning to confront a problem that larger competitors like International Business Machines Corp. and Accenture Ltd. have struggled with for years: how to increase revenue faster than head count.

A sign that the outsourcing sector in India is moving off the easier challenges of extensive growth to intensive growth.

It happens to the best; it happens to the rest.

[name the movie by David Mamet in which that line appears!]