Despite a renewed focus by clients to cut costs and to renegotiate rates, offshore providers are showing some positive signs — with Infosys, TCS, and Wipro recently posting better than expected quarterly earnings. Strong dependence on US and on banking and financial services clients had created fears that offshore business would be hit particularly hard in the economic downturn.

However, preliminary data from Forrester's 2009 Enterprise IT Services Survey shows an increase in offshore outsourcing this year. Half of respondents, up from 42% last year, indicate they use offshore (including commitment to offshore IT services and pilot projects). Furthermore, 54% of respondents have put implementing or expanding the use of offshore resources as an agenda item, a dramatic increase over 30% last year.

Clients should remain cautious and continue to monitor the health of their providers. A new report by Sudin Apte, "Will Your Offshore Provider Survive The Recession?" outlines key indicators of vendor risk and can help you plan for mitigation.