Indian IT groups face changed prospects.

(From FT Investor (Stories))

Indian technology services companies are reeling from a wake-up call after a spate of full-year earnings results that signal the end of a decade of heady growth.

In spite of performances that beat anything in developed markets, rising pessimism about the business outlook has chastened Wipro, Infosys Technologies and Satyam Computer Services, the trio of listed companies that lead India's $10bn information technology services industry.

Nasdaq-listed Infosys was the first to add a devastating rider to its otherwise healthy results: a vastly lower-than-forecast profits outlook that stunned investors. Wipro and Satyam followed with equally gloomy forecasts.

Two key factors will define the prospects for companies that have prospered by servicing western corporations' IT systems.

First, Indian IT's lower cost base will continue to attract more business as customers turn to India to confront their biggest internal pressure point: cutting expenses in weak home markets.

Outsourcing volumes are forecast to rise 20-25 per cent, helped by the end of the war in Iraq and the resumption of site visits. There is speculation among analysts in Bombay of $100m-plus deals waiting to be signed. "Despite what has happened, we see a long-term trend towards more outsourcing to India," says Nandan Nilekani, chief executive of Infosys.