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Indian IT companies, especially those with big exposure to US markets, may be in trouble next year as the US slides into a steep recession. However, there could be some hope that exporters of geo-services will fare better than most.

'The December quarter will be the first full quarter after the credit crisis and the results could be quite ugly,' says Karl Keirstead, an analyst with US market researcher Kaufman Brothers, guoted by ZDNet, an IT newsletter. 'A great myth spun by all the outsourcing companies is that a downturn will help the outsourcing firms because they deliver cost savings to clients. A recession doesn't help anyone.'

Another market research firm, Gartner Inc, slashed its forecast for 2009 IT services spending. They also argued for a slowdown in outsourcing. It now expects such spending to fall 0.2 per cent next year at $815 billion. In August, it predicted 7 per cent growth over 2008. Gartner also predicted developed markets would be harder hit than emerging economies.

'Indian services firms will feel the heat from the meltdown in financial services for sure,' Forrester Research analyst John McCarthy says. But Forrester analyst Christine Ferrusi Ross says the industry has to diversify from financials – where most of them make their money at the moment – and seek growth opportunities in utilities, manufacturing, telecoms and health care.

There is thus a reasonable prospect that companies with GIS experience, such as Rolta and Infotech, may fare better than their bigger cousins. Both companies specialise in utilities, government departments and telecoms.

Some evidence that these views are well-founded comes from Infosys Technologies Ltd, India's second largest IT services exporter. It has cut its full-year revenue forecast due to the global financial crisis. Other Indian outsourcers, such as Tata Consultancy Services, and Wipro are expected to follow suit.

But Rich Niemiec, the head of Rolta/TUSC Consulting, which has large exposure to US utility markets, says he still expects to show growth. Ít will have little effect on our operations in 2009,’ he said.

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