High-End Technology Work
Not Immune to Outsourcing

From The New York Times

June 16, 2004
By STEVE LOHR

In the debate over high-technology work migrating abroad,
there has been widespread agreement on at least one thing:
the jobs requiring higher levels of skill are the least at
risk.

Routine software programming and testing jobs, analysts
agree, are the ones most susceptible to being grabbed by
fast-growing Indian outsourcing companies. By contrast, the
people who devise the early blueprints for projects - the
software architects - have been regarded as far less likely
to see their jobs farmed out.

But Microsoft contract documents show that as far back as
2001 the big company had agreed to pay two Indian
outsourcing companies, Infosys and Satyam, to provide
skilled "software architects" for Microsoft projects. The
documents were obtained this month by WashTech, an
organization of technology workers based in Seattle, which
gave copies to The New York Times.

"The policy prescription you hear from people again and
again as the response to the global competition of
outsourcing is for Americans to move to high-end work,"
said Ronil Hira, an assistant professor for public policy
at the Rochester Institute of Technology. "It's important
to dispel the myth that high-end work is immune to offshore
outsourcing."

"What is not clear," Mr. Hira added, "is how much of that
high-end work will go abroad."

A Microsoft spokeswoman, Stacy Drake, said that as a matter
of policy the company did not comment on individual
contracts with suppliers. But, she said, "we often use
outside companies for projects."

The outside contractors, Ms. Drake said, are used to bring
in specialized expertise Microsoft may not have internally
or to bring additional technical support to a project.

Still, Ms. Drake said, building the "core intellectual
property" in Microsoft products is left to full-time
company employees.

Though definitions vary, software architects are highly
skilled workers who often earn six-figure salaries in the
United States. The Microsoft contracts with Infosys and
Satyam show that the work of software architects, senior
software developers and software developers was being done
by employees of the Indian companies working at Microsoft
facilities in the United States.

Their work did not come cheap for Microsoft, which was
billed $90 an hour for software architects, or at a yearly
rate of more than $180,000. Senior software developers were
billed at $72 an hour and software developers $60 an hour.

The on-site work, said Mr. Hira, an expert on offshore
outsourcing, is usually done by Indian software engineers
who come to the United States on H-1B visas, which allow
foreign workers to be employed in the United States for up
to six years.

The Indian workers themselves are paid a fraction of what
their employers collect. The top annual salaries paid by
Indian outsourcing companies to Indian software experts
working in the United States range up to $40,000 or so, Mr.
Hira said.

The contracts also say that for short stints of work, less
than 90 days, Microsoft will pay for round-trip economy
airfare for travel between India and the United States.

The contracts also include work done in India, by project
managers and by software development and testing engineers.
The billing rate for this work ranges from $36 an hour to
$23 an hour.

A spokeswoman for Infosys said the company did not comment
on its contracts, and a Satyam spokesman could not be
reached.

Critics of the outsourcing trend regard such agreements
with Indian contractors, with work done both in the United
States and in India, as a step toward shifting more and
more skilled technology jobs overseas.

"Microsoft has hired vendors whose whole reason for being
is to transfer work offshore," said Marcus Courtney,
president of WashTech, an affiliate of the Communications
Workers of America.

The foreign competition for work at Microsoft, Mr. Courtney
said, will help the company's management put more pressure
on wages for its American workers and reduce employee
benefits.

Last month, Microsoft announced that it planned to cut
costs by an estimated $80 million a year by trimming
prescription drug benefits, tightening parental leave
policies and making it more expensive to buy Microsoft
shares through the employee stock purchase plan.

Despite its use of foreign contract workers, Microsoft
expects to add 3,000 to 3,500 full-time employees to its
United States payroll of 37,000 in the fiscal year that
ends in July.