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State of IT Outsourcing Market

December 18, 2009

Indian IT / Outsourcing companies, some of which have transformed themselves from Pure-Play IT Offshore Development into Business Consulting and IT Management companies. Across the board they seems to be cautious of pipeline conversion to bookings and then further the bookings conversion into revenues, as clients remained more focused on getting it right than getting it started.

The telecom outsourcing market (Infosys 17%, TCS 20% and Wipro 27%) remains weak across developed markets.

Expect only modest earnings upside for Indian vendors from our current estimates. We prefer companies better geared to the recovery – Infosys, Wipto, TCS, HCL, Tech Mahindra. Predictability and timing of improvement remains challenging.

UBS’s Views on the IT Sector at Current State of Market is as follows,

TCS remains the only stock under our sector coverage with a Buy rating due to its higher level of forward-looking investments, strengths in the financial services vertical and emerging markets. We have Neutral ratings on Infosys Technologies and HCL Technologies and a Sell rating on Wipro.

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