The recession is taking its toll on the billing rates of It and BPO companies. At a time when outsourcing has come under the scanner, companies are forced to offer services at reduced billing rates, some times as high as upto 40%.

A report in the Economic Times states that in certain cases the rates are as low as $16 an hour, which is the lowest ever rates. And such a trend in reduced rate is expected to continue till Q1 of next year.

The last month itself has seen an unprecedented cut in billing rates even for existing customers. Pricing has been reduced substantially for some clients, including higher end projects, specially for long terms strategic clients or those that have been hit quite badly during the recession .

However, despite the rate cuts, the industry has seen no corresponding rise in the volume of deal flow, in either higher value or the lower end services. Diptarup Chakraborti, Principal Analyst at Gartner, says that he does not see the situation improving before Q1 or Q2 next year. “Good old days are not coming this year for sure,” he said.

A Gartner study says prices of IT services in outsourcing are anticipated to shrink well up to 2010 due to an uncertain economic climate, IT budget constraints and general market consciousness. These rates are even lesser than what the facilities personnel make per hour in their client’s offices even in eastern European countries.