Kernan has dropped the deal, which had been agreed only a few months earlier by the state with TCS America, a subsidiary of leading Indian firm Tata Consultancy Services.
"The difficulty we had with this contract was not with the company itself," said Kernan. "After having a chance to discuss our vision of how the state should do business, and how we can provide better opportunities to Indiana companies and workers, we concluded that this contract did not fit in that framework. The procedures we had in place virtually knocked Indiana companies out of the running."
A New Jersey politician is also rebelling against offshore outsourcing's popularity. Senator Shirley Turner is reported to be considering legislation that will ban the outsourcing of state contracts to companies based abroad.
On Monday, Dell sent shockwaves around the off-shoring industry when it announced that some technical support jobs were moving back from Bangalore, India to Texas, USA.
Dell spokesman Jon Weisblatt told Associated Press on Monday: "Customers weren't satisfied with the level of support they were receiving, so we're moving some calls around to make sure they don't feel that way anymore."
Weisblatt did not discuss the nature of the dissatisfaction, but the news agency reports that some US customers had complained that "Indian support operators are difficult to communicate with because of thick accents and scripted responses."