With a boom in offshoring expected amid a recovery in 2010, the battle for outsourcing contracts is undergoing stiff competition.

There is some talk that India might lose its lead in the global outsourcing arena, but most analysts say that is unlikely.

What they do agree on is that a consolidation is likely in the outsourcing sector precisely because the competition is fierce and small firms are not able to survive in the post-recession phase.  There have been some changes in the outsourcing sector, with more nations such as Poland, Egypt and Mexico joining the bandwagon in nearshoring practices. Apart from the BRIC nations, which include Brazil, Russia, India and China, there will be some new players emerging from Latin America as well and this is likely to change the outsourcing scene a bit.

With analysts pointing to mergers and acquisitions in the sector, there are rumors that Indian outsourcing giants Infosys and Capgemini are due to merge. Whether this is true is yet to be determined, but the rumor does imply the sentiment of the markets at this time. In about one or two years, analysts say that more mergers and takeovers are expected to take place in the outsourcing industry.

Adding to losses taken by Indian outsourcing firms is concern that India might no longer lead the world in outsourcing. Analysis of markets in China indicates that China is poised to overtake Indian outsourcers. However, analysts from an opposite camp say that Indian outsourcing firms will lead the industry for the next twenty years, simply because of their enhanced global footprint. In addition, Chinese outsourced skills are still considered inferior to those of India, though Chinese skills are cheap.

Nonetheless, Indian outsourcers like TCS, Infosys, and Wipro are not taking any chances. Recently, Wipro expanded its operations in China in an effort to bid for Chinese and Japanese contracts.

According to a report by research firm IDC, Chinese outsourcing firms were expected to overtake Indian outsourcers as the destination of choice for global offshoring in 2011, reports Silicon.com.

Although a rebound from the recession in the U.S. looming, new activities in the offshoring sector will determine how major players will be placed in the global outsourcing scene. Another factor that is likely to play a significant part in the reallocation of contracts is an effort by President Barrack Obama’s administration and U.S. corporations to keep U.S. jobs secure at the home front.

This is likely to make the focus on continental Europe and U.K. more intense. With European outsourcers being more expensive, there might be some room to leverage more outsourcing contracts from the region.