>India Computer Services (MERRILL LYNCH)

2H08 like 1H01, only maybe worse

# Deteriorating environment in 2H08; Indian vendors gain share.

Global IT and BPO outsourcing consultant TPI had its 4Q call on Tuesday.

2HCY08 was significantly weak on the back of few mega deals. Clients focused

on near-term profitability with propensity for short-term / small ticket deals. Market

share gains achieved by Indian vendors during 2008. Our proprietary CIO Survey

(carried out in Dec. by our US software team) also, not surprisingly, shows the

lowest IT budget growth expectation in the last two years, with IT budget expected

to decline 1.7%. Typically the IT budget growth expectations start optimistic and

deteriorate as the year progresses.

# 2008 showed growth, but dismal 2H08

Total Contract Value (TCV) for 2008 increased 5.6% to $89.4 bil. Impact of macro

turmoil in H2CY08 was clearly visible with TCV declining 22.1% to $39.1 bil in H2

vs $50.3 bil in H1. Both Q3 & Q4 were soft in terms of new contracts.

To see full report: ICS