News

Microsoft IT Consolidates Outsourcing Contracts with Infosys

Deal puts much of Microsoft's IT operations into a global contract with major Indian SI.

• By Jeffrey Schwartz
• June 01, 2010

Microsoft is outsourcing its IT help desk, PC, infrastructure and application support to Bangalore, India-based Infosys Technologies Ltd. in a three-year deal that involves 450 Microsoft locations in 104 countries.

Infosys CFO V. Balakrishnan was quoted by Dow Jones saying the deal was worth $100 million. Anand Nataraj, Infosys vice president and unit head of infrastructure management services, said of the contract in an interview, "It's a fairly large deal," and described it as "a major win." Microsoft would not comment on the terms.

Nataraj said Microsoft has tapped Infosys to implement ISO 20000 and ITSM Processes -- a set of best practices aimed at providing effective IT service management and meeting customer requirements.

The pact will involve the transition of work now performed by other partners and is not intended to displace work done by Microsoft, according to Nataraj. "There's no job loss for Microsoft, per se," he said. Microsoft for years has used offshore services providers to manage its infrastructure, applications, help desk and desktop support. Infosys will subcontract the PC support to Unisys, which is based in Blue Bell, Pa.

According to a Microsoft spokesperson, the company decided to consolidate its IT support services, previously provided by multiple providers to a single company. Infosys won that contract. "Microsoft has had a concentrated effort to be more efficient and save money and this was a major area where we could do this," according to a statement issued by Microsoft. "This new contract will not impact internal resources."

A Unisys spokesman said the company has been tapped by Infosys as a subcontractor to provide support for 120,000 employees and contractors worldwide. "This is a pretty large deal for us in terms of scope and the number of end users we're supporting," the spokesman said.

While Infosys had already been doing some work for Microsoft, Nataraj said 90 percent of the business is new to the company.

"Microsoft has outsourced parts of its internal IT before," said Directions on Microsoft analyst and RCP columnist Paul DeGroot. Our original news report, posted to RCPmag.com, generated some less-than-enthusiastic comments. "C'mon Microsoft -- use U.S.-based workers," wrote a poster identifying himself as Bob. "No wonder no one wants to go into the tech field. Even Microsoft drinks the outsourcing Kool-Aid."

Added a poster named John: "What bugs me more than anything is that, like anyone who offshores to China or India, the cost of Microsoft products will not be cheaper. On the one hand we're too expensive to employ, on the other hand we live in the U.S. and are paying a premium for goods and services. Well, we may be seeing the last of the great experiment we call the U.S.A."

DeGroot pointed out that outsourcing of IT support could have other ramifications for Microsoft. For example, with fewer internal operations being performed by Microsoft employees, it could mean that there are no longer as many people internally with easy access to product groups and to highly detailed operational data.

It's also potentially providing less access to "the world's best Exchange/Windows/SharePoint/SQL Server engineers who they might be able to call on to solve a problem that a lot of customers are having," he said.

"Microsoft also uses its internal systems to 'dogfood' new products," he added. "For example, new products are often put into full production internally while they're still in external betas. Microsoft users put up with the problems they might encounter because they understand that their experience will help the company make a better product."

Still, some think the reaction to the Microsoft move was overstated. "These were already outsourced jobs, among various companies," a poster identifying himself as Matt from Ohio wrote. "These are not U.S.-based jobs, they probably have not been for a very long time. Would we all like them back in the U.S., I'm sure we would, but you can't work for $3 per hour and I bet you wouldn't, given the option."

For Infosys, business is on the rise: the company in April said revenues for the quarter ended on March 31 were $1.3 billion -- a 5.2 percent increase over the same period last year and a 15 percent increase over the prior quarter. Net income of $349 million for the quarter reflected a year-over-year increase of 8.7 percent, Infosys reported.

"We've been able to take advantage of the opportunities in the market and grow faster due to our investments in capacity and capability building even during the economic downturn," said Infosys CEO and Managing Director S. Gopalakrishnan in a statement.

Infosys is forecasting that its revenues will grow from 16 percent to 18 percent for the year and from 18.5 percent to 19.4 percent for the current quarter, year-over-year.