Microsoft Courts Offshore Outsourcers

Microsoft's aggressive strategy of partnering with IT services companies is leading it to form tight connections with a controversial group--overseas outsourcers in India and China.

Of 18 services companies that Microsoft designates as global partners, five of them--HCL Technologies, Infosys Technologies, Satyam Computer Services, Tata Consulting Services, and Wipro Technologies--are based in India.

Microsoft is helping those vendors and nine others in India and China develop service offerings, devise marketing strategies, and find customers, many of which turn out to be U.S.-based companies. "Our job is to help those companies in their targeted markets," says Jared Wheeler, Microsoft's general manager of enterprise services and technology partners.

Infosys, for example, worked with Microsoft to establish a service to help companies migrate desktop PCs from older versions of Windows to Microsoft's latest release, Windows XP. John Conlon, VP of global alliances for Infosys, says the company's Windows-related business exceeded $200 million last year and grew faster than the company's overall growth rate of 30%.

"We have a well-established Microsoft practice," says Conlon, who joined Infosys last year after a 10-year career with Accenture. "It's much bigger than any other practice we have in the company." Infosys and Microsoft engineers are brainstorming now in Bangalore and on Microsoft's Redmond, Wash., campus about ways to support radio-frequency identification projects.

Microsoft's relationship with offshore outsourcers is a potentially sensitive subject in the United States, given the belief by some that domestic IT jobs are threatened by overseas programmers, who generally work for lower wages. "That's very interesting and very disturbing," Marcus Courtney, president of the Washington Alliance of Technology Workers, says of Microsoft's work with offshore outsourcers.

Courtney says that as offshore outsourcers grow, it can be at the expense of U.S-based technology workers. Microsoft's relationships with those companies, he says, should be "watched closely."

But Microsoft officials say they're simply treating offshore outsourcers the same as other partners with more traditional services models, such as McLean, Va.-based BearingPoint or France's Capgemini. "I really don't want to distinguish where they're headquartered," Wheeler says.

Tarun Gulati, director of global partners with Microsoft's platform strategy group, says that if Microsoft doesn't work with fast-growing offshore outsourcers, it will lose the business to other software companies. "They're going to grow their business whether they work with us or not," Gulati says. "We want to get our share of that growth."

Indeed, Infosys works with Oracle, SAP, and Siebel Systems, among other technology companies. Wheeler says Microsoft's business within its offshore partners is growing faster than those companies' overall business, a sign that Microsoft's strategy is working.

Ralph Szygenda, General Motors Corp.'s group VP and CIO, sees the logic in Microsoft's strategy. Microsoft is "selling software through services," Szygenda says. "I believe what you're seeing is just the globalization of the IT marketplace. Microsoft is saying, 'I'm seeing this globalization. I'm going to participate.' "

Of Microsoft's 57,000 employees, only about 300 work in the company's software-development center in Hyderabad, India. The company said this week that it plans to hire about 7,000 people in its current fiscal year and indicated that some of those jobs will go to India. Under current plans, the Hyderabad center would grow to between 500 and 600 employees by the end of the fiscal year. Microsoft has also outsourced some of its own development work to Infosys and Satyam.