India's outsourcing boom running out of steam?

We have posted a few times (e.g. here) about the significance of India's outsourcing boom to media: a number of big publishers have outsourced a good deal of work to India while others (e.g. CMP/Cybermedia) have launched businesses supporting the outsourcing industry. We were, then interested to see two stories which point to some warning signals. Is this industry running out of steam?

Firstly, Om Malik has posted on "Troubling Signs for Indian Outsourcers". This is clearly catching people's attention; the number who have bookmarked it on deli.cio.us is climbing fast. His basic message is that grunt work for the mega-outsourcers such as Tata Consultancy Services (TCS) is no longer attracting the brightest and best from India's universities (surprise, surprise). They are now looking to use their not-inconsiderable intellects for more interesting pursuits and the likes of Google are proving more attractive. The call centre outsourcing business has already fallen prey to low quality hiring.

The second post also concerns TCS, and comes over on China Payments News which reports on a new JV from Tata in China. It reports that:

TCS Asia Pacific owns the majority of the JV with a 65 per cent stake. The three Chinese partners, supported by the National Development and Reforms Commission (NDRC), hold 25 per cent with Microsoft expected to take up the remaining 10 per cent. TCS China will focus on financial services, manufacturing, telecom as well as the government sector, providing IT outsourcing services and solutions to the Chinese domestic market as well as the global MNC customers.

You could argue that, far from marking the end of the boom in India's outsourcing business, this just represents the next, logical step in its development. Whether TCS's move to China represents opening the door to the only serious potential competitor to India in terms of brains and manpower remains to be seen.