Cute cartoon characters and slick special effects may not seem obvious candidates for outsourcing, but Indian studios are popping up alongside software firms and call centres that do work for firms in the West.
  
In films, television shows and electronic games, latecomer India has started to gain favour over more established animation centres such as Taiwan, Singapore, South Korea and the Philippines.
  
India is winning animation contracts for the same reasons it has become such a hot outsourcing destination for other industries: lower costs, a large English-speaking workforce and a track record in meeting Western companies' technology needs.
  
A recent US$14 million deal between Italy's Mondo TV, Europe's No 2 cartoon producer and distributor, and India's Padmalaya Telefilms, is the latest boost to India's creative reputation.
  
So far, analysts estimate Indian companies have won some US$50 million to $US100 million in business, a small slice of the $US10 billion global animation industry. But that could change, as major US studios, such as Disney, Warner Bros Studios and
Metro-Goldwyn-Mayer, who previously have done much of their animation in-house, try to cut costs.
  
Indian companies, such as soon-to-be-listed UTV Software Communications (UTV), Toonz Animation, Pentamedia Graphics, Crest Communications and Jadooworks, are leading the way.
  
Local units of Los Angeles-based Rhythm and Hues and France's Millimages, which makes content for American and European TV shows, also have increased their output.
  
But analysts warn the sector could become nothing more than low-cost sweatshops unless Indian companies seek to offer advanced formats and compete to become co-producers and owners of their creations.
  
"Animation outsourcing is the media equivalent of business process outsourcing," said Jyotirmoy Saha, director of UTV's animation division. "The dynamics are the same: it's too expensive to do it in the West."
  
In the initial rush to meet demand from North America and Europe - the biggest animation markets besides Japan - Indian firms took on low-end production work.
  
But that's not the lucrative end of the market, and most have not yet moved on to invest, co-produce or retain intellectual rights - the areas where bigger profits can be made.
  
"For many players, this is still a costs game rather than a creative exercise, but (even) this advantage will be short-lived," said Farrokh Balsara, a director at consulting firm Ernst & Young.
  
Analysts say Chinese companies are quickly becoming competitive in the animation sector as they have in other industries. China's lower costs, coupled with a shortage of skilled Indian animators due to a lack of training institutes, may soon negate India's temporary low-cost advantage.
  
Another limiting factor is that local demand for animation projects remains low.
  
"Unless India also becomes a big consumer of animation, we cannot grow as fast," said Saha of UTV, which is slated to launch a children's channel and source local animation.
  
Others also recognise there's a growing audience to be tapped in India, the third-largest cable TV network. Turner Network's Cartoon Network has bought seven locally-made shows from Pentamedia, Toonz and CB Media Ventures for broadcast in India.
  
Foreign firms have offered cartoons such as Mondo's The Legend of Zorro and Sandokan. India's Sony Network, meanwhile, is about to launch an all-Japanese animation channel.
  
The Mondo deal, signed in March, demonstrates that at least a few Indian firms are moving up the food chain. Padmalaya will make 104 cartoon episodes for US$14 million and distribute Mondo's library for US$15 million in cash and stock.
  
Padmalaya, a unit of India's largest listed media firm, Zee Telefilms, will also set up a 3D animation studio in Bombay to make cartoons for US$7,000 a minute - a third of costs in Europe.
  
"We are going beyond mere production to stand shoulder to shoulder as a co-producer," said Rajiv Sangari, director of Padmalaya's animation division, which also has a US$5 million deal with Scotland's Mallard Media and London-based Ealing Animation.
  
Diversification by big Indian entertainment firms into animation, and players backed by large companies such as Tata's Elxsi, Reliance's Paradox and the Escorts Group's Escotoonz, will also help boost growth.
  
But analysts remain sceptical.
  
"Not many firms have gone beyond being a sweatshop," said Apurva Shah, an analyst at Prabhudas Lilladher.
  
"I think it's tough for an Indian firm to be another Pixar."