Banks did not factor in risk adequately in their quest for growth after meltdown of 2000-01, not to mention the lending crisis etc. Equity markets are slowing. Banks are announcing record losses for '07. How does this impact IT & outsourcing strategi

Mortgage revenues account for 1% of revenue for top 10 Indian IT firms and therefore there is not that big a impact at this point of time. But that could change if the housing slump triggers a broader recession, forcing price adjustments, contract delays and changes in personnel from Indian providers doing business with U.S. companies.

To understand the impact, one needs to look carefully at the the kind of contracts of US and Indian players. Unlike the U.S. outsourcing industry, which makes its money from long-term maintenance contracts, a big chunk of the work the U.S. sends to India comes out of discretionary budgets. It will be some time before the impact of the mortgage crisis is known, because discretionary spending is typically planned with a six- to 12-month time frame. Decisions taken today may impact us a couple of quarters down the line.

Some of the strategies that Indian providers are  adopting(largely influenced by rising wages and appreciating rupee)

1. Smaller bench size:
2. Hiring of junior staff:

These strategies can help maintain margins but will impact negatively revenues. Smaller bench means longer lead times to start project and junior staff will make it difficult to fill niche positions in projects.

But these strategies can hold ground if the impact is going to be short term. Meltdown of 2001-02 had led to increase offshoring and so can cost pressures that are bound to dvelop due to possible recession.

The thought i will leave you guys with is that Deutche Bank has procured huge land in India to build an outsourcing campus.