New Delhi: With sinking profits, eroding margins, cost-cutting and an acquisition bid gone awry, 2008 was a year with more jeers than cheers for the country’s over $50 billion IT sector, which has seen nearly a decade of uninterrupted boom.

In the year filled with economic disasters, the failed attempt of country’s fourth largest software exporter Satyam to botch up two family-promoted firms for $1.6 billion not only resulted in loss of face but also hit the reputation nurtured by the Indian IT sector over the years. Faced with shareholder’s revolt and heavy criticism over corporate governance issues, Satyam withdrew the offer within hours of making the proposal. But within a space of 24 hours, the scrip lost over 30% in India and was down 55% in New York Stock Exchange trade.

As a fallout,the Board size also shrank with four independent directors resigning from the 10-directors strong Board of the company in the wake of the fiasco.

The Satyam saga is likely to continue next year as well with the Board scheduled to meet on 10 January. If Satyam made it to the headlines for a failed deal, it was HCL Technologies, the country’s fifth largest software exporter next to Satyam that made the country proud by inking the largest takeover deal in the software space overseas.

HCL pipped rival country’s second largest IT giant Infosys to bag UK-based SAP consulting firm Axon for $658 million. While Infosys had made a 600 pence per share offer for Axon, HCL made a counter bid of 650 pence a share to acquire the UK-based firm.

The year also saw some significant mergers and acquisitions on the IT front, such as the $13.9 billion acquisition of Electronic Data Services by HP.

Back home, Wipro acquired Citi Technology Services, Citigroup’s IT arm in India, in an all-cash $127 million deal.

Earlier, Tata Consultancy Services had bought out Citi’s captive BPO arm Citigroup Global Services for about $505 million, which reiterates the strength of the Indian IT story.

Another reason that will give the software services sector a reason to rejoice is the IT Amendment Bill. The Lok Sabha passed the Information Technology (Amendment) Bill 2006 in December, which gives the government the power to tackle data theft. The bill might act as a shot in the arm for the BPO firms for whom data security is of utmost importance. The Bill has provisions to deal with new forms of cyber crimes like publicising sexually explicit material in electronic form, video voyeurism and breach of confidentiality, leakage of data by intermediary and e-commerce frauds, among others.

However,as 2008 draws to a close, the sector is bracing up for a tough time ahead as the scars of global recession are showing up on the country’s sunrise sector. The sector, which has been charting a growth of over 30%, had to settle for a growth rate of 20%, as the global slowdown plunged the industry into unpredictable times.

The US is the world’s largest technology market and accounts for 50-60% of the revenues of the top Indian firms. Since September 2008, however, the economic situation in the US and the rest of the world has worsened.

Country’s software lobby group Nasscom has estimated that India’s software and back-office services industry would grow by 21-24% in the 12 months to March, but its president Som Mittal said recently that this number could be revised downward.

With no signs of an early revival, all the IT biggies such as TCS, Infosys, Wipro and Satyam have revised their revenue guidance downwards.

The sector also experienced slowdown in hiring. Already under pressure to cut cost, most of the IT biggies had to freeze their hiring. Moreover, the joining dates of the new recruits were also postponed, ringing the alarm bells in the job market. The top five IT companies posted a 36% decline in their rate of manpower addition in the last quarter of 2008.

As for hiring by BPOs--for long looked upon as poor the cousins of information technology companies--also faced the heat. However, BPOs remained a bit sanguine, as Nasscom’s figures indicate that the BPO sector recorded revenue growth of 31.6 % whereas IT companies grew at 28%. In 2009, as the new administration led by Barack Obama takes a look at the outsourcing story vis-a-vis India, it is the efficiency and resilience of the IT sector which can help it sail through the troubled waters.