Now that the Academy Awards have been handed out and Slumdog Millionaire has walked away with eight Oscars, 2009 has \n\nbeen dubbed by some as "the year of India." But how does that height of popularity translate outside of Hollywood? Will it \n\ntrickle down to IT outsourcing services?The Mumbai-set movie is now credited with everything from increased donations to India-related charities to a surge in \n\ndownloads of Indian music. But in the business realm\u2014particularly the IT services industry\u2014India is not exactly \n\nhaving a banner year with the unexpected unraveling of \n\nSatyam, the aftermath of last year's terrorist attacks, and increased competition from other emerging economies. And the \n\nsurprising success of the underdog film will not necessarily translate into good news for or good will towards the subcontinent's IT industry. "2008 was a year of irrevocable perception change for India's reputation as a peaceful business destination," says Scott \n\nWilson, co-founder of outsourcing research firm The Brown-Wilson Group. Just one quarter into the new year, 2009 looks to be an even more difficult year for India's outsourcing giants. The \n\ncountry's IT service providers are reducing headcount, freezing salaries, and struggling to win new business, says Mark Kobayashi-Hillary, a London-based outsourcing analyst and author of the book Who Moved My \n\nJob? Satyam Computer Services is on the selling block after its chairman admitted to cooking the books, with customers \n\nincluding Nissan, Pfizer, and SanDisk reportedly seeking to exit their contracts with the Hyderabad-based company. "The Satyam scandal has caused many outside India to worry whether it was really just a one-off event or a systemic \n\nfailure," says Kobayashi-Hillary. One troubled provider has caused all smart outsourcing customers to take a second look at \n\ntheir offshore portfolios. "Satyam is making companies look at their vendor management strategy," says Ben Trowbridge, CEO of Alsbridge. "Simply spreading the work out over four vendors in India \n\ndoesn't solve the problem." Some customers may decide to insource work once send abroad if the risks prove too great, says \n\nTrowbridge. "No location is ever perfect, but some of the workforce challenges\u2014such as salary inflation and attrition\u2014and \n\nthe downstream effect of quality and consistency concerns , when coupled with economic change\u2014such as the rupee's \n\ngrowing strength against other currencies\u2014and then the terrorism and Satyam incidents, will inevitably have an effect," \n\nsays Ian Marriott, research vice president for Gartner. Terrorism occurs throughout the world, the Satyam incident is no different than any similar accounting scandal stateside, and currency fluctuation is a \n\nconstant around the world, Marriott points out. But the confluence of India-specific events\u2014combined with a global \n\neconomic crisis\u2014is hitting the high-flying Indian IT industry hard. The expected expansion of India's IT market to smaller "tier II" cities has slowed, as has revenue growth for most tech \n\nservices vendors. "Wild swings in currency and changes in demand have meant they're only growing in the low teens, with some \n\ncompanies making projections that they are going to have a level year," says Trowbridge. Although even modest growth would \n\nstill put India's players ahead of many U.S. or European outsourcers, it's a far cry from the 30 percent annual gains to \n\nwhich industry leaders had become accustomed. This year is going to be the "the toughest ever for those companies that have only ever known hyper-growth for the past \n\ndecade," says Kobayashi-Hillary. Local IT executives are putting a positive spin, citing India's strength relative to the \n\nglobal IT services market. During a recent presentation in New Delhi, the co-chairman of Infosys Technology said that India \n\nshould be among the first to bounce back when the recovery begins. "Many tech firms in India appear to be deluding themselves over the scale of the crisis\u2014the common mantra being that 'We \n\ncame through the dotcom crash so we will come through this,'" says Kobayashi-Hillary. "The service companies need to entirely \n\nchange the way they interact with their clients," Kobayashi-Hillary says. "Now, more than ever, more of the same is not going \n\nto work." An End to H-1B Hate?Although the exceptions to the rule, movies can bring about change. The Errol Morris documentary The Thin Blue Line led to \n\nthe swift overturn of wrongful murder conviction in Texas. Alfred Hitchcock's Psycho reportedly caused a decline in sales of \n\nboth opaque shower curtains and motel rooms. Slumdog Millionaire could help some Westerners overcome cultural biases. The movie reveals "the intense poverty \n\nthat makes the lure of IT and call center jobs so attractive and that drives a strong work ethic, where the graveyard shift \n\nis the key to a rich and rewarding future," says Alsbridge CEO Trowbridge. "Four hundred million Indians don't have a home to \n\nlive in. Six hundred million are without potable water. There is overwhelming poverty; it is crushing. This creates an \n\nenormous pressure for education and betterment that's hard for Westerners to understand." But the prize-winning film is unlikely to change the minds of those who protest against H-1B visas or preach \n\nprotectionist trade policies. "Embracing cultures from other parts of the world, as a result of the entertainment industry will not deflect people from concerns about their jobs," says Gartner's \n\nMarriot. "Regardless of the cultural acceptance of Indian music, art, and food, there will be an increased hostility to \n\nIndian technology services if the economic slowdown continues and firms struggle to bounce back from the recession," predicts \n\nKobayashi-Hilary. A feel-good movie doesn't take the sting out of layoffs for long, if at all. For a certain population in the U.S., the \n\nattitude toward Indian nationals working in the U.S. on visas or on outsourced projects abroad remains less "Jai ho!" than \n\n"Go home." And although U.S. president Barack Obama has argued against "buy American" manufacturing sourcing provisions in \n\ngovernment spending bills, he recently promised to eliminate tax incentives for U.S. companies who send jobs overseas, a \n\npledge that has made some in the offshore IT services industry uneasy. "However," says Marriot, "A greater appreciation of being a part of a global marketplace, where the U.S. buys and sells \n\nproducts and services with other countries for mutual benefit, will help to place some context around the global issues" for \n\nthe average American. "Isolationist or protectionist policies are clearly short sighted, and it would be a surprise if U.S. \n\nbusinesses or the current administration allowed micro economic considerations damage the long-term benefits of globalization \n\nto the United States." India as TrendsetterOf course, long before Slumdog Millionaire swept the Oscars\u2014before the book upon which the movie was based \n\neven hit the page\u2014India's IT services industry was setting trends abroad. "The drive to incorporate offshore, or global, delivery models began with the success of Indian firms and Indian \n\nresources," says Gartner's Marriot. "The delivery approaches and processes employed by the leading Indian IT service \n\nproviders have had a dramatic impact on the overall marketplace." However, that international influence has created more competition for India. Today Gartner tracks 72 other countries \n\ndetermined to replicate India's success as a preferred outsourcing destination. Their \n\nlocal governments are actively promoting foreign direct investment in their outsourcing industries. And large international providers are pouring money into these emerging markets to access new talent pools, lower costs, move closer to customers, and mitigate risk. Meanwhile, IBM announced that it has captured 10.8 percent of India's outsourcing market, cementing Big Blue\u2014not \n\nWipro or Tata Consultancy Services or Infosys\u2014as the local outsourcing market leader on the subcontinent today. Still, 2009 is hardly all doom and gloom for the Indian IT services industry. The economic downturn has its advantages. \n\nIt's been instilled in the corporate American mindset for nearly a decade now: If you need to cut costs, you go to India. \n\n"Companies that a year ago would have said no to \n\noutsourcing are now forced to look at it, which creates more demand," says Trowbridge. "Some companies will say yes, some \n\nwill say no. But more will look at it." Indian service providers focused on financial services report a relatively healthy pipeline of work. "It may seem \n\nparadoxical as the banking sector is in such crisis," says Kobayashi-Hillary, "but these tech firms are supporting huge waves \n\nof transformation and regulatory compliance." Concerns about talent turnover are abating. Indian IT professionals\u2014used to double-digit raises and job-hopping for \n\nprofit\u2014have settled down as growth has slowed. "Indian workers are now recalibrating themselves to demonstrate higher \n\nproductivity and greater loyalty to their employers," says Doug Brown, principal of outsourcing research firm The \n\nBrown-Wilson Group. Trowbridge worries there may be plenty of Indians, but too few chiefs. "India needs to worry about training their next \n\ngeneration of leaders," says Trowbridge. "There's no shortage of workers. But they grew so fast that they are running out of \n\nleaders." However, this year could provide a chance to replenish leadership resources. "(Indian IT service providers) are still well positioned to play an important part in the IT services plans of many \n\nbuyers. Indian firms have continued to grow their range and depth of services, and continue to extend their geographic \n\nfootprint into many more buying centers," says Marriott. "Their plans to move up the value chain with their customers may be \n\naffected by the drive towards cost optimization, but they are still well positioned for success." The rest of the year will see more mergers and acquisitions in the industry\u2014both of and by Indian firms, says \n\nMarriot. In fact, Gartner is predicting that a Tier 1 Indian service provider will buy a Western-headquartered outsourcing \n\nprovider with a top 20 market share. In 2011. Maybe that will be the year of India\u2014for IT services.