Despite talk of the playing field leveling as rising labor costs in India are undercut by the cheap production costs, favorable business environments and superior infrastructure found elsewhere, India still does more than three times as much outsourcing business as any of its international competitors, according to the sourcing advisory firm EquaTerra. The value of India’s exported IT services are expected to approach $40 billion in 2008. Estimates for Canada and China are $12 billion and $5 billion, respectively.

India owes its continued dominance to several developments that have expanded its ability to capture more business from U.S. companies, where the hunger for outsourcing services has been fueled by the struggle to bring on new IT talent. India’s best-known outsourcing firms—led by Infosys, Tata Consultancy Services and Wipro—have been adding more non-Indians to their management ranks, which, in turn, is helping them more effectively sell services overseas. These firms also have been recruiting on U.S. college campuses and gobbling up larger portions of U.S. visas so they can assign more service professionals to the U.S. market.

India’s outsourcers are reaping the benefits of having more graduates from the seven Indian Institutes of Technology (IIT) seeking employment in their native country than ever before, according to a survey by Evalueserve, an Indian knowledge process outsourcing firm. While 65 percent of IIT graduates stayed in India between 1964 and 2001, Evalueserve says that number has ballooned to 84 percent in the past seven years.

What American IT execs should find especially troubling, however, is that 72 percent of IIT graduates expect India to hold the most promise for IT career success over the next 10 years, compared with just 17 percent who favor this country. Not exactly the vote of confidence American CIOs are looking for.

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