Infosys Technologies, India's second largest outsourcer, has reported revenue of US$1.2 billion (£745 million) for the quarter ended 31 December, up 5.2 per cent over the same quarter in the previous year.

Despite the rise in revenue, the company's profits for the quarter were basically flat, rising 0.6 percent to $334 million (£207 million).

Analysts have forecasted a recovery in the market for offshore outsourcing, but cautioned that the industry will take some time to reach growth levels matching those before the recession.

Infosys revised upwards its forecast for its fiscal year ending March 31. The company's annual revenue is now expected to be in the range of $4.75 billion and $4.76 billion, a year-on-year increase of 1.8 percent to 2.0 percent.

Infosys said that offshore outsourcing is likely to benefit from the recovery, even though IT budgets will be flat this year.

TechMarketView analyst Anthony Miller described Infosys management as unusually bullish, saying that client decision making is “much faster ... even though IT budgets are expected to be flat in 2010, offshore outsourcing is expected to benefit from this recovery.”

The recovery, which started in a small way in the third quarter of last year, is expected to continue strongly in the current quarter, said Diptarup Chakraborti, principal research analyst at Gartner.

Most of the IT services business is still expenditure considered necessary by user organisations, which was postponed because of the recession, Chakraborti said. Discretionary expenditure on IT services is still to pick up, he added.