India has long been the offshore outsourcing hot spot for companies around the world to send parts of their business to cut costs. But where do India’s outsourcers outsource?

In the first half of 2007, India outpaced Australia and Japan as the largest market for outsourcing contracts in the Asia Pacific region by awarding a total of $1.68 billion worth of contracts, according to Business Standard. This accounted for 30 percent of the total contracts awarded in the region.

And Indian information technology outsourcing companies are taking advantage of a stronger rupee to launch a record number of cross-border acquisitions this year, The Financial Times reports: “The industry has announced overseas deals worth a total of $1.43 billion in the year to date, nearly double the total for last year, according to figures from Dealogic, the data company.”

“We see this is a one-time phenomenon as this strong growth of India as an outsourcing market may not last long,” Siddharth Pai, partner and managing director at sourcing advisory firm TPI India, told Business Standard.

Yet working on Western contracts in India isn’t enough anymore for Indian outsourcers, Forbes noted not too long ago:

Now, after profiting for years from the outsourcing boom that brought riches to their doorstep from the developed world, they are sending work to locations across the globe in search of specialized skills and new markets.

So where do India’s outsourcers outsource?

China, the Philippines, Malaysia, Vietnam, Brazil, Romania and Morocco — you name it. And Indian information technology majors have already set up base there or bought controlling stakes in local companies.

India’s largest software services company, Tata Consultancy Services (TCS), announced earlier this year that it was adding 250 employees in Uruguay to service 40 clients in the U.S. and Caribbean markets. TCS recently reported a 55 percent increase in earnings to $291 million on a 42 percent increase in sales to $1.3 billion for its first fiscal quarter ended June 30 compared with the similar quarter one year ago.

India’s third-largest IT company is expanding in Curitiba, Brazil, and sites in Finland and China.

As with other Indian offshore firms, India’s second biggest outsourcer is diversifying its development locations by opening facilities worldwide, including offices in China, Vietnam, the Philippines, eastern Europe and Latin America. In January, the Indian outsourcing giant announced plans to expand its operations in the United Kingdom, creating 500 new jobs in the process. And in February, Wipro said it plans to set up a 250-seat call center in Bucharest, Romania.

Last month, reports came that Wipro was “in the advanced stages of finalizing a plan to build a software center in Atlanta, Georgia; the facility, the first of four centers planned for the U.S., is expected to accommodate up to 1,000 employees over the next three years, according to ComputerWorld.

This week it announced its plans to take over its U.S.-based peer Infocrossing for $600 million — the largest overseas acquisition by an IT firm from the subcontinent.

The acquisition is the latest in a wave of foreign merger-and-acquisition deals by Indian companies “aiming to penetrate new markets and access latest technology by buying foreign firms,” Reuters reports, pointing to Wipro’s larger rival, Infosys Technologies, which last month signed a $250 million outsourcing contract with Royal Philips Electronics and bought three of the Dutch firm’s back-office centers to extend its presence in Europe.

According to Reuters:

Before the Infosys deal, outbound India M&A deals had totaled $15.26 billion from 108 transactions in 2007, according to data from Dealogic. That compares with $5.95 billion from 89 deals in the same period last year, and $21.7 billion from 167 deals in the whole of 2006.

Meanwhile, at a conference organized by the Confederation of Indian Industry last week, a representative of the Turkish Prime Minister’s office said that Indian companies “keen on capturing the European market” should use Turkey as an alternative manufacturing hub, according to India’s national newspaper The Hindu (via IndustryWeek). At the conference, Ravi Chaudhry said that because Turkey was part of the Customs Union with the European Union and has trade agreements with 14 other countries, it was an ideal location.

Currently automotive companies use Turkey as an export base. The article pointed out that Foreign Direct Investment increased to $20 billion in 2006, from $2 billion in 2003, and that the country is planning to build “an IT city.”

Moreover, the first “Made in India” PC has rolled off Dell’s line. On July 30, the computer maker announced the commencement of production at its new manufacturing facility at Sriperumbudur near Chennai. Last month, Dell announced it is starting to target Asia’s small and medium-sized businesses — whose numbers are conservatively estimated at more than 21 million, excluding Japan — to rejuvenate the computer maker. July’s ceremony was marked by the handing over of the first “Made in India” desktop computer system to Infosys, which is one of Dell’s largest customers in the country.

There has long been talk of India losing its edge in the offshore-outsourcing market, but the bigger threat to India’s dominance could lie closer to home.

According to a study by analyst IDC, cities in China will overtake their Indian counterparts as top destinations for offshore global delivery by 2011. While it remains unlikely that China will outstrip India in the outsourcing business overall, the trend is for increasing globalization of the market as more regions seek to cash in on the offshoring boom.

In fact, according to AT Kearney’s report on Global Services Location Index (via Forbes), the No. 1 destination for Indian outsourcers to outsource: China.