Controversy over MS IDC and outsourcing

Now they are complaining against offshoring their job. Read the story from SEATTLE POST-INTELLIGENCER

A Seattle-based labor union is seeking to use newly obtained internal Microsoft Corp. documents to fuel the debate over outsourcing and draw attention to its assertion that the company is shifting fundamental work offshore.

Microsoft rejects the claim and says a certain amount of overseas contracting is natural given the company's worldwide presence.

The Washington Alliance of Technology Workers says it obtained the previously confidential Microsoft contracts, spreadsheets and phone lists this month from a source inside the firm. The documents describe a series of agreements between Microsoft and outsourcing firms in such countries as India.

One conclusion the union draws from the papers: More than 1,100 people work for Microsoft in India under contracts with outsourcing firms, in addition to the 970 direct employees the company acknowledges. That brings Microsoft's total presence in India to more than 2,000 people -- significantly larger than previously known.

"They clearly have not been forthcoming about the extent of their offshore outsourcing," said Marcus Courtney, president of the union known as WashTech.

Microsoft said it doesn't disclose the size of its contract work force in India or anywhere else, because the figures can fluctuate significantly. But the company disputed the union's broader assertions about the role of its overseas contracts.

"These accusations don't reflect an understanding of the global nature of our business," said Microsoft spokeswoman Stacy Drake. "As a global company with operations in more than 80 countries, we absolutely work with partner companies around the world."

She noted that top Microsoft executives have said repeatedly that they plan to keep the majority of the company's core software development work in the United States.

During the fiscal year ended June 30, about 4 percent of Microsoft's research-and-development budget went to contract work by outside firms, Drake said. About 1 percent of the R&D budget went to work by contractors outside the United States.



Examples of work for which the company has recently contracted with Indian outsourcing firms include the development of a promotional computer program that advertises the company's software. In another case, Microsoft contracted with a company to replicate problems reported by customers and provide the information to Microsoft employees, who analyze and fix the problems.

Microsoft uses contract workers for "projects -- not products. There's a big difference there," said S. "Soma" Somasegar, the Microsoft corporate vice president who oversees the company's 6-year-old India Development Center in Hyderabad, India.

"Anything that is core to what we are doing, core to our mission, we are going to do it in Microsoft," Somasegar said in a recent interview.

WashTech's Courtney, however, pointed out that the documents leaked to the union include long lists of outsourcing contracts that refer in two instances to Longhorn, the code name for the next version of Windows. One contract with Infosys Technologies is described as "Longhorn Migration Guide," and one with Wipro Ltd. describes testing for Longhorn and other products.

Courtney called it "a red flag" suggesting that fundamental work on the next operating system is being outsourced overseas.

But one analyst said the descriptions don't seem to refer to fundamental development work. "Based on the names of these contracts, I don't see that you can reach that conclusion," said Michael Cherry, an analyst at Directions on Microsoft, a Kirkland-based research firm.

Microsoft's Drake said the company uses employees, not contract workers, for "all intellectual property work," including the design and creation of Windows and other products that the company sells. "All development work on Longhorn is done by Microsoft employees, the vast majority in Redmond," she said.

It's the second time in recent months that WashTech has obtained documents outlining Microsoft's outsourcing practices. Last month, the union publicized two Microsoft outsourcing contracts, including job descriptions, seeking to show that high-end jobs are prone to outsourcing.

As part of its broader campaign against outsourcing, WashTech also is running an ad in The New York Times today urging Congress to protect technology jobs. The ad doesn't mention Microsoft.

The latest documents received by WashTech also include a recent agreement between Microsoft and a Russian outsourcing company, Luxoft. Courtney said the deal shows that Microsoft is developing "a global supply chain of labor." Drake described the company's relationship with Luxoft as new and said the firm isn't yet doing any work for Microsoft.

Courtney said the union received the latest documents in early July, from the same source as before, but waited to provide them to reporters until this week to coincide with the recent release of Microsoft's hiring projections and the company's annual meeting with financial analysts, to take place today on its Redmond campus.

Microsoft last week said it plans to hire 6,000 to 7,000 employees worldwide during the next year, including 3,000 in the Puget Sound region, but a significant number of those people will fill jobs vacated by others, rather than new positions, making the net gain in employment smaller. During the past year, for example, Microsoft hired about 3,000 people in the region, but less than half of those filled new positions, and the company's local employment expanded by about 1,400 people.

That is much smaller than the company's growth during the economic boom of the late 1990s.

"Microsoft has significantly reduced its hiring," Courtney said.