Microsoft denies sending jobs to India – the real behind the scene story
Pam Bhandari, Special Correspondent
August 08, 2004

Microsoft recently has vehemently denied sending jobs to India. The Seattle-based labor union, Washington Alliance of Technology Workers (WashTech), had claimed that it was in possession of internal company documents that showed that Microsoft now employs nearly 2,000 workers in India, double the 970 number it previously acknowledged. Microsoft denied the labor union's charge, but agreed that there has been some overseas contracting work because the company has presence in several parts of the world.

Internal sources in India report that Microsoft is correct in their statement in the short term. However, Washington Alliance of Technology Workers (WashTech) is absolutely correct long term. Microsoft has assigned four Indian “Cyber coolie” (desi software professionals) suppliers – Wipro, TCS, Infosys and Satyam to provide master plans for migrating repetitive software engineering jobs to India. While Microsoft has least confidence in India’s ability to innovate in systems software and application software, it strongly believes that Indian operation will be critical for increasing profit margin in the next ten years specially if US economy under performs.

Microsoft Corp. Chief Executive Steve Ballmer is planning to cut costs by $1 billion annually since the company's expenses have grown faster than its revenues for three years running, The Wall Street Journal reported in its online edition.
India will play a major role for Microsoft’s cost control mechanisms. The software giant is eyeing Goa, Kolkata and Chennai for future expansions. These areas provide real value in comparison to Bangalore and Hyderabad, says Microsoft.
Ballmer sent out a memo to the software company's employees on Tuesday laying out a billion dollars in cost cutting and promised stepped-up innovation to boost the company's sales and stock price, the paper reported. India will be a major factor in this innovation.
In an interview with the paper, Ballmer for the first time confirmed the company would cut $1 billion in expenses in the current fiscal year, ending June 30, 2005, and said the cost cuts were necessary, according to the Journal report. 
He also urged employees to take more accountability for their work, setting more realistic goals and meeting them, the paper reported. 
The cuts will come from employee benefit changes and primarily from savings from unifying its marketing and advertising across business units, and consolidating the number of outside partners it uses for event planning, direct mailing and other customer relations activities, the Journal reported, citing a Microsoft spokesman. A major part of the cost reduction will be through outsourcing from India.
Microsoft's costs per employee will still rise by 6 percent in the current fiscal year due to significant increases in health-care expenses, Ballmer noted in the memo, according to the Journal report. 

Microsoft also said it does not use contractors for core development. The union said it had obtained the ''confidential'' Microsoft contracts, spreadsheets and phone lists last month from an inside source. WashTech alleges the documents show that while Microsoft employs 970 full-time direct employees in India, there are an additional 1,100 people working for the company in India under contracts with outsourcing firms, bringing Microsoft's total presence in the country to more than 2,000 people. WashTech, which wants to unionize Microsoft employees, is one of the most vocal critics of offshore outsourcing, a hot-button in the current presidential campaign. The documents include wage lists and projects for Microsoft at Infosys, Wipro, Satyam and Tata Consultancy Services. The internal documents, WashTech said, suggest that the contractors and employees are involved in high-level development projects and not just low-level work such as call center customer service. "They clearly have not been forthcoming about the extent of their offshore outsourcing," said Marcus Courtney, WashTech president and organiser. 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," Microsoft spokeswoman Stacy Drake was quoted by the Seattle Post-Intelligencer as saying. "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 US. Of the $6.9 billion spent on research and developing new products in the fiscal year that ended June 30, 4.0 per cent was done by outside companies and 1.0 per cent was done by outside companies based overseas, she said. 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 next version of Windows that's due around 2006. One contract with Infosys Technologies is described as ''Longhorn Migration Guide,'' and one with Wipro Ltd describes testing for Longhorn and other products. "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," he said.