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Infosys Bags $100 Million from Microsoft

After declining to disclose the value of its outsourcing deal with Microsoft, Infosys CFO today reportedly revealed that it's worth a whopping $100 million.

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

CFO V. Balakrishnan revealed its windfall to Dow Jones today.  When I spoke with Nataraj, Infosys VP and unit head of infrastructure management Tuesday, he emphasized that the deal will not lead to any job displacement.

Nataraj also said that the work it has picked up was support already farmed out to a multitude of partners in the past -- that this was mainly the consolidation of that work to one partner. "Microsoft has outsourced parts of its internal IT before," notes Directions on Microsoft analyst Paul DeGroot.

Our original news report generated some less than enthusiastic comments. "C'mon Microsoft -- use US-based workers," wrote Bob. "No wonder no one wants to go into the tech field. Even Microsoft drinks the outsourcing Kool-Aid."

Added 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 points 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 are 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."

Posted by Jeffrey Schwartz on April 15, 2010