The outsourcing of technology jobs has been a lucrative and controversial trend over the past 10 years. But with the dollar declining against foreign currencies, it's getting more expensive for U.S. firms to pay for foreign labor, a factor that has increasingly become a source of concern for Wall Street analysts.



According to Janney Montgomery Scott analyst Joseph D. Foresi, outsourcing is based almost solely on labor arbitrage; if U.S. companies can hire labor cheaper in India and other developing countries, they will continue to take their business there.

?So far, there has been a pinch on margins for U.S. companies, but it is still less expensive for them,? he said.

There has even been some relief as the rupee depreciated against the dollar during the quarter ended March 31, making it more affordable for U.S. companies to hire Indian firms. A drop in the rupee's value has not come fast enough for Satyam Computer Services Ltd., one of India's largest technology outsourcing companies. Its U.S.-traded shares fell more than 5 percent April 22 after the company reported fiscal fourth-quarter profit below Wall Street expectations.

Goldman Sachs analyst Thomas Quinteros said that ?rapid appreciation of the Indian rupee? has been one of the key risks for Satyam Computer Services Ltd., one of India's largest technology outsourcing companies. Satyam last week reported fiscal fourth-quarter profit that missed Wall Street estimates.

The results were not that surprising _ in February, Satyam's chairman said he expected ?significant implications? from the U.S. economic downturn for Indian outsourcing companies.

The majority of Satyam's sales are from the U.S. The company provides data-warehouse, systems integration, software development and other information technology services to General Electric, the U.S. government and other major clients.