The United States Agency for International Affairs or USAID, in a controversial move, has decided to fund the development of Sri Lanka’s, as well as Armenia’s offshore outsourcing industry.

Expectations were high for the end of quarter results of India’s number two outsourcer, Infosys (NASDAQ:INFY). As the first of its peers to release quarterly results, the outsourcing company is responsible for setting the tone for India’s outsourcing sector. It was therefore a big disappointment when Infosys announced a 2.6% drop in profit for the period of April to June 2010.

IT outsourcing growth is on the rebound but it is unlikely that it will ever be the same again. After the big boom that the industry experienced a few years ago before the recession, analysts estimate that this is unlikely to happen again.

Following the UK elections and subsequently, the naming of the country’s new Prime Minister David Cameron and Chancellor George Osborne has pushed government outsourcing contracts in limbo, as companies anticipate the stance the new government will enforce.

The big three of Indian outsourcing companies have a lot to evaluate, as their lower ranking rival Cognizant (NASDAQ:CTSH), is slowly starting to emerge ahead of the pack following the company’s first quarter results. This comes with the continued albeit slow rebound of the outsourcing market this year.

Prospects for outsourcing in the current year seem very bright indeed; this is according to different surveys and market estimates indicated during this first quarter.

For the first quarter 2010, expectations and estimates are high, buoyed by the continued recovery of the economy from the recession. And although there have been job cuts and closing of centers in some outsourcing companies such as Convergys (NYSE:CVG) who is laying-off of 677 people in Albuquerque in the US as it closes its center there; the outlook still remains positive.