Tuesday, November 16, 2004

Microsoft Expands Operations in India

The New York Times
November 16, 2004

Microsoft Expands Operations in India

BANGALORE, India, Nov. 15 - The Microsoft Corporation announced on Monday that it was significantly expanding its software development operations in India as it opened a new campus near Hyderabad, its second-largest campus after its headquarters in Redmond, Wash.

Microsoft's chief executive, Steven A. Ballmer, formally opened the 28-acre campus in the suburbs of Hyderabad, which is 250 miles north of Bangalore, a rival technology center. The campus thus far has only one building, with capacity for 1,600 workers.

Besides Mr. Ballmer, the chief executive of the Intel Corporation, Craig R. Barrett, is to arrive in India this week, highlighting the country's growing role as a source of skilled technical labor as well as a sizable market. Mr. Barrett is scheduled to visit Bangalore and Delhi this week.

The issue of outsourcing, the movement of work to cheaper labor markets like India, was an issue in this year's presidential elections in the United States. The Democratic contender, Senator John F. Kerry, had promised to get tough on companies that were moving jobs overseas.

Even with the re-election of President Bush, corporations like Microsoft are still wary of being tarred as the cause of job losses. Mr. Ballmer said that his company would expand in India, but that this would not reduce job opportunities at its operations in the United States.

"The nature of our business is such that there is enough growth potential which allows us to hire both at our Redmond headquarters and here in India," Mr. Ballmer said after the opening. Microsoft has nearly 450 programmers at its development center in Hyderabad. "Since we are looking for very high levels of skills, we are looking to hire in the hundreds," Mr. Ballmer said.

Last year, Microsoft said that it expected its development center to have 500 employees by 2005, but Mr. Ballmer said the company would exceed that target.

Microsoft is not alone. Global corporations like General Electric and American Express started by outsourcing low-end code-writing work to India, but taking advantage of India's pool of technical workers and lower labor costs, many multinational companies have recently stepped up outsourcing. Microsoft's own software development center in Hyderabad opened in 1998 with only 12 employees.

Increasingly, though, these corporations are outsourcing high-end technology work to India. Microsoft, for instance, outsources work, from call centers to advanced embedded software development, to India.

"Many corporations have super-, hyperaggressive outsourcing plans to India to meet their growing needs while keeping costs under check," said Chris Disher, the Chicago-based vice president and head of Booz Allen Hamilton's outsourcing advisory service.

While Microsoft's hiring plans are not huge, Mr. Disher said, its moves do send "an important signal about the competencies and innovation skills that are available in India."

Mr. Ballmer, who visited three Indian cities on Monday, signed major agreements with two of India's leading outsourcing companies, Infosys Technologies and Wipro in Bangalore. The deals will enable Infosys and Wipro to use Microsoft technologies to build software for their clients at more favorable terms. With Infosys, Mr. Ballmer announced an $8 million joint venture.

"These deals signify Indian outsourcing companies' growing clout in influencing technology decision in American boardrooms," said Sudip Nandy, chief strategy officer of Wipro.

Microsoft is one of Wipro's top five customers, and Wipro provides it with a range of services, from call centers to I.T. services to software development. The work for Microsoft employed 200 Wipro employees in March 2001; now it uses more than 5,000.

"I'm excited about what's going on here in India," Mr. Ballmer told reporters in Bangalore after signing the two deals.