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Microsoft outsourcing high-level work, labor group says

By Brier Dudley
Seattle Times technology reporter

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But the company said nothing has changed, and its core products are still built by company employees.

Microsoft has long hired outside companies to supplement its labor force and develop partnerships in the technology industry, but its activities in India are being scrutinized amid the national debate over the outsourcing of technology work to developing countries such as India.

A concern is that even the highest-skilled and best-paying work, such as software development, is now subject to competition from lower-cost locales abroad.

The evidence is a cache of Microsoft contracts with Indian technology vendors that were leaked to the Washington Alliance of Technology Workers, an AFL-CIO affiliate that has focused on outsourcing in its effort to organize tech workers.

"The notion that next-generation technology is going to be the exclusive domain of domestic-based employees of the company is rapidly fading away with the disclosure of these documents," said Marcus Courtney, WashTech president and organizer.

The documents include wage lists and projects for Microsoft at Infosys, Wipro, Satyam and Tata Consultancy Services, the four largest Indian software and technology-services companies.

Much of the work involves testing, preparing user guides and building specialized tools. One of the Infosys projects is a guide for customers switching from an Oracle database to a Microsoft database.

Yet a Microsoft spokeswoman said none of the company's core intellectual property is being developed outside the company.

Of the $6.9 billion spent on researching and developing new products in the fiscal year that ended June 30, 4 percent was done by outside companies and 1 percent was done by outside companies based overseas, spokeswoman Stacy Drake said.

"These accusations don't reflect an understanding of our global business," she said. "As a global company with operations in more than 80 countries now, we absolutely work with partner companies around the world, but both Bill Gates and Steve Ballmer have clearly stated the majority of our core development work will remain in the U.S."
 
Courtney noted that several of the vendors are doing work related to Longhorn, the next version of Windows that's due around 2006. Drake said it's peripheral and that "all intellectual property development, including Longhorn, is done by Microsoft employees."

Microsoft's telecommunications group hired Wipro for testing of Longhorn and update kits for Windows XP and Server 2003. Infosys is working on a guide that would help customers upgrading to the Longhorn system.

Courtney received a batch of similar documents last month and thinks they are coming from a Microsoft employee concerned about the overseas work.

Microsoft develops software at its own facilities abroad, including a relatively small development center it has operated in India since 1998.

Courtney also obtained phone lists of Microsoft's offices in India and tried to quantify how many are from outside companies, but the lists don't specify the working arrangements and they appear incomplete.

Drake would not say how many of the Indian companies' employees are involved or how many are working out of Microsoft offices.

Infosys declined to comment on the documents but issued a statement saying it "places a high value on the confidentiality of client projects and contracts."

Regardless of the project involved, Microsoft employees may have less leverage over wages with the company since it's hiring Indian vendors that provide engineers for as low as $18 per hour, Courtney said.

"Clearly Microsoft is trying to increase profit margins at the expense of its U.S. employees," he said.

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com