U.S. slowdown to spur IT outsourcing - Gartner

NEW DELHI (Reuters) - A slowing U.S. economy will push firms to hike IT outsourcing to low-cost locations for savings and productivity, and India has an edge over other countries to attract these deals, research firm Gartner said.

Overseas firms have given deals to Indian software firms, attracted by an army of English-speaking workers and cheaper wages, but there are concerns about the impact of an economic downturn in the United States on the local companies' revenue.

"Organisations are likely to conclude that increasing the proportion of work to offshore locations is the best way to reduce labour costs, among other benefits," Arup Roy, a senior research analyst, said in a statement issued on Thursday.

"Factors that will give India the edge over other offshore locations are scale and quality of labour ... India is central to almost any discussion of offshore services delivery for these buyers," T.J. Singh, research director, said.

But buyers of such services would be more aggressive on containing costs, and demand "immediate savings" from service providers, Garner said.

Gartner's comments come at a period when Indian's leading software exporters say they are cautious on the short-term outlook because of the global economic uncertainty, but are confident of about long-term prospects.

Top exporter Tata Consultancy Services and No 5 HCL Technologies, have said they have strong deal pipelines, despite two of their large clients each delaying some projects.

Similar sentiments were echoed by No 2 Infosys Technologies Ltd, Wipro Ltd, the country's third-largest exporter, and Satyam Computer Services Ltd, the fourth-largest.

Even if the United States went into a prolonged recession, firms would still look abroad to outsource routine IT work to cut budgets, Gartner said.

"In most sectors, the watchword is 'caution' - IT budgets have not yet been cut, and offshore services options are being considered or accelerated as a prudent step to contain labour costs," Roy said.