The BPO business will see a pull back in demand by the fourth quarter. Industry leaders say, incremental business is coming in from new and existing clients and the cost pressure has not dented plans significantly, atleast not for the big boys. Companies like Genpact and Accenture say there is plenty of light at the end of the tunnel as cost cutting measures in the US have resulted in more work being offshored.

Pramod Bhasin, President & CEO, GENPACT says, “The US companies which might have gone through some turmoil in the firstt quarter or the first half will start picking it up now because as they refocus on taking costs out I think that is a very important element of their strategy will be to aggressively drive out outsourcing even more.”

The Silver lining of the slowdown has been a significant drop in attrition rates, down to about 25-30%. Even Cost of hiring has reduced significantly  as have entry level wages. Industry leaders said they dont anticipate lay offs, or significant pay cuts.

Nandita Gurjar, VP & Group Head HRD, Infosys says, ”We are not seeing recession right now. In some clients we are seeing that the decision is taking much longer than it used to. But in terms of hiring we have made a commitment to the campus last year and we will be going ahead with that. Last year we hired 18,000 people this year we in it we would be hiring 20,000 people.”

PG Raghuraman, Lead Executive, Accenture says, “We’ve been having the best 6 quarters in a long long time so i’d say there is not much turmoil we are doing very well. We had about 25-26 billion dollars as our global revenue plan for next year and for the current year also we have reconfirmed the upper end of the guidance so we are looking at a very positive year. in terms of the verticals as I said there are a lot of vertical BPO opportunities that are coming up. it could be in eng services, product supply chain kind of companies.”

But a shakeout is inevitable. The next 12 months could see frenzied M&A action Industry sources say that after the captives it is now the turn of mid size cos. The biggest worry continues to be the lack of employable graduates and the end of tax incentives in 2010.