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In his research report titled, How To Benefit From The New Offshore Reality, Forrester analyst, Sudin Apte, says that rising staffing cost, attrition, infrastructure, coupled with unrealistic staff expectations, project scalability, expected tax and other issues are making the clients disillusioned about India being a “low cost high quality destination.” Business Standard reports:

"Clients are walking unpleasant walk. There is a rising chorus of offshore dissatisfaction," said Sudin Apte, Senior Analyst & Country Head, Forrester India as he presented the findings of the report, a result of meeting with nearly 130 global clients of Indian IT vendors. Couple this with looming recession in the US economy and one can figure out the gravity of the situation going forward for the Indian IT vendors.

Forrester has added that the IT services & outsourcing sector will grow by 4 per cent during 2008 to $162 billion, as against a growth of 6 per cent it witnessed during 2007. "New contracts will take the backseat and discretionary spends will be cut," said Apte. Compounding this is the other  distressing fact that the total IT purchases will drop by half and will grow by 2.8 per cent during CY08 as against 6.2 per cent growth during CY07.

The only silver lining, according to Forrester, is that the clients will not be going in for big transformation deals and will opt for modules. "Dont boil the ocean is the motto these large clients are going for. Little transformation deals will benefit Indian vendors as they take on smaller projects and incrementally mine into clients," detailed Apte.

Apte further says that in the first six months of this year, 15% of the total revenue of the Indian IT service providers will be at risk.  

This is very bad news for India. At present, hundreds and thousands of people are working in the IT sector. IT is a very dynamic sector. Everything changes at a very fast pace. If India loses its viability as an attractive IT outsourcing hub then it would leave hundreds and thousand of people jobless.

Last Wednesday, I wrote a post on the Indian IT sector. India may produce large number of IT graduates every year, but not all of them are equally well qualified. When it comes to highly qualified IT workers, even India falls short of it. The Indian IT industry should give more effort to produce well qualified IT professionals. It is true that at present, India is the best possible place for outsourcing IT related jobs but the situation will not remain the same. Indian government and IT companies should develop various short term and long term plans if they want to remain as an attractive outsourcing destination.

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Business Standard