More banking clients means IT outsourcing firms are doing very well indeed

The fact that revenues at Indian software services firm Tata Consultancy Services rose 12% for the first quarter of this year isn't especially significant in itself. However, financial services accounted for nearly half of the firm's revenues, and banks are tipped to outsource yet more IT functions going forward.

During the firm's Q1 presentation, TCS's chief exec, Subramanian Ramadorai, let it slip to Bloomberg that demand from Citigroup was "increasing as we speak" and Bank of America and JPMorgan were likely new clients.

One of TCS's other clients is Lloyds TSB, which (you might remember) was embroiled in controversy for massively increasing offshoring and bringing in cheaper Indian contractors to replace UK techies. It also works with Axa.

Financial services accounted for 44% of TCS's revenue in the first quarter of 2009, and the firm has added 2,828 employees worldwide over the last 12 months.

Its closest rival Infosys, which counts RBS as one of its clients, also posted an 8% increase in revenue from financial services clients in the first quarter of 2009.

Ramadorai also said that other banks were looking at "rationalisation", and hinted that he expected an uptick in business from European institutions.

Rajeena Brar, senior consultant at technology think-tank Pierre Audoin Consultants, agrees that an increased focus on cost-efficiencies is likely to see banks outsource more IT functions.

However, she added: "We haven't seen any really significant outsourcing deals over the last 6-12 months, in terms of banks offloading more complex functions. A lot of these software services companies are able to offer greater economies of scale, but it just depends on how much faith the banks have in the companies to take on more highly skilled work."