Posted by : Anonymous on May 30, 2004 - 11:27 PM Microsoft

Microsoft Corp. has bought its first plot of land in India and is constructing its initial building there, solidifying its presence in the country at the epicenter of the debate over the outsourcing of U.S. technology jobs. The Redmond company had previously only leased space in India, where it employs slightly fewer than 1,000 people. The new building, in the high-tech Indian hub of Hyderabad, is the first in what may ultimately become a three-building complex.
Microsoft has a much smaller presence in India than most of its counterparts in the software business, and the company yesterday said its decision to pursue the project doesn't signal any departure from its "thoughtful and deliberate" approach to international expansion. Much of the new space will be used for existing employees in India, while also making room for growth.

But one Seattle labor leader called the purchase of land and the construction of a building a disturbing move that should serve as a "wake-up call" for the more than 27,000 Microsoft employees in the Puget Sound region.

"That's a big building far, far away from the shores of Redmond," said Marcus Courtney, president of WashTech, a labor group that wants to organize Microsoft employees. "Every employee Microsoft hires overseas means they're placing an employee at Redmond in direct competition with someone that makes a fraction of their wage."

But Forrester Research analyst John McCarthy, who published a recent report on outsourcing, called fears about Microsoft's plans in India overblown. He pointed out that the company's presence there pales in comparison to that of companies such as Oracle Corp.

"Aww, come on," McCarthy said last night, when told of the WashTech president's concerns. "They have more people calling in sick in Seattle on any given day than they have working in India."

About 450 of Microsoft's 970 employees in India currently work in Hyderabad. A Microsoft spokeswoman said the new building will let the company bring its existing operations in that city under one roof. Its employees there are currently distributed among a number of leased offices.

Given the growth of the high-tech industry in the Hyderabad region, Microsoft considered it "a sound business decision to purchase land for potential future growth when we had the opportunity," said the spokeswoman, Stacy Drake.

Company officials including Microsoft Chairman Bill Gates have given repeated assurances that they plan to keep the bulk of the company's development and research work in Redmond. Drake yesterday reiterated those statements.

"We continue to grow our business internationally, and we'll continue to explore ways to increase efficiency," she said. "However, the majority of our core development work will remain in Redmond.

The new building, to open early next year, will have capacity for about 1,000 people, including the company's existing 325 software developers in Hyderabad and its additional 125 information-technology staff members there. The building may also house some workers from Microsoft partners and vendors, Drake said.

The company expects to expand to about 500 software developers in Hyderabad over the next year, in line with its previous growth projections, Drake said. She said the company isn't certain at what rate it might grow beyond that.

"We are exploring and evaluating various opportunities that will enable us to strategically build on existing operations, but at this time we don't have any specific plans," she said.

At 250,000 square feet, the Hyderabad building will be about 50,000 square feet smaller than the latest building to open on Microsoft's Redmond campus, Building 36.

The Hyderabad building is going up on an 18-acre plot acquired by the company last year. Microsoft has a memorandum of understanding that gives the company the right to acquire 24 adjacent acres, on which it would be able to construct two smaller buildings, Drake said. But the company hasn't made any decision on when or even whether it ultimately will proceed with those buildings.

Microsoft declined to disclose the project cost or the purchase price for the land.

WashTech's Courtney said he sees a connection between company's moves in India and its recently announced plan to scale back some employee benefits as part of a broader effort to cut costs. Microsoft is "aggressively pursuing a strategy to cut employment and wage costs here in this country," he said.

The total of 42 acres in Hyderabad is less than a third of the size of Microsoft's proposed campus in Issaquah. The company owns and holds options to buy about 150 acres in the Issaquah Highlands development, where it plans to ultimately construct buildings totaling about 2.9 million square feet.

Microsoft has had sales and marketing operations in India for about 14 years. It opened its development center there about five years ago.

The company also employs 270 people at a call center in Bangalore, India, which started taking product-support calls last fall. The creation of that call center has stirred fears about the prospect of job losses among workers at the company's call centers in Las Colinas, Texas; Charlotte, N.C.; and Sammamish.

Drake said yesterday that the company is still in the process of evaluating which products will be supported by the Bangalore center and the rate at which the facility will grow.

Although Microsoft acquired the Hyderabad property last year, and the project was noted previously in overseas news reports, it wasn't reported in the United States until this week. Andy McCue of the online news site Silicon.com published a story about the project yesterday after seeing the work site on a recent trip to India.

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