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Friday, May 28, 2004 - Page updated at 07:35 A.M.
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Microsoft campus going up in heart of high-tech India

By Brier Dudley
Seattle Times technology reporter

AMI VITALE
An agrarian scene mixes with a futuristic office park in Hyderabad. Cattle stand not far from the building that currently houses offices for Microsoft and rival Oracle, which is also planning a permanent campus.
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HYDERABAD, India — In a sign of Microsoft's ambitious plans for India, the company is building a huge campus complete with a cricket field on the outskirts of this high-tech boomtown.

About 600 engineers and administrative staff are expected to be based at the India Development Center campus when it opens early next year.

Although Microsoft has steadily expanded its product group in India since 1998 in rented space, the campus signifies it plans to be here permanently and that it may expand dramatically in the future.

It has reserved 42.5 acres, enough to build several more buildings and house several thousand employees.

The construction comes as U.S. politicians and labor groups raise concerns about the effects of globalization and India's burgeoning technology industry on U.S. jobs.

It's also unsettling for the Seattle area, as Microsoft's rate of hiring in Redmond slows, employee benefits are cut to save money and plans for a new campus in Issaquah are on hold.

But Microsoft executives promise that most of its software-development work will stay in Redmond. They say they are not replacing U.S. jobs but expanding the company to participate in India's booming technology industry.

Microsoft in India: a timeline


1990: Microsoft opens sales office in New Delhi.

1997: Chairman Bill Gates visits India.

1998: Development center started in Hyderabad.

2000: Gates visits India, announces alliance with Infosys.

2002: Gates visits India, announces plan to invest $100 million in Hyderabad center, triple staff to 500 by 2005.

2003: Microsoft opens call center in Bangalore.

2005: Hyderabad campus scheduled to open.

Microsoft is also positioning itself to sell more software to India's potentially vast market.

"We've historically been a single development-location company," said S. "Soma" Somasegar, the vice president overseeing the India center from Redmond. "If you look at our customer base, though, they aren't all American customers. In our ideal world, we want every person on this planet to be our customer."

In order to do that, he said, "we better figure out how to think and act more globally than we've done in the past."

Microsoft also opened a call center last year in Bangalore, another Indian city that has emerged as a world center for software development. There, it has 270 employees who mostly take calls from software developers using its products.

Additionally, the company has about 125 employees in India who develop and run systems used internally by the company.

Room for 1,000 more

Altogether, it employs 970 in India, and the campus is expected to have room for at least 1,000 more.

In March, the company posted a job listing for an operations manager in India that said it would increase staffing to more than 5,000 over the next two years. But a Microsoft spokeswoman yesterday said that's incorrect.

"There is no forecasted plan to support that job description," said Stacy Drake. "We're exploring and evaluating different opportunities for growth all over the world, including India. However, as we explore international growth opportunities, the majority of our core development work will remain here in Redmond."

Microsoft is among hundreds of U.S. companies that came to India during the past decade to take advantage of the country's large pool of well-trained, English-speaking technology workers.

Some hired Indian companies to write and test software, and others created Indian subsidiaries. One reason is salaries can be 70 percent lower than those in the United States.

But for Microsoft, Somasegar said, low-cost labor is a secondary benefit. The development center was created to tap into India's pool of skilled engineers, he said.

The company also wanted to raise its profile in India's software industry, where it's trying to persuade programmers to use its products.

Well-entrenched competitors

AMI VITALE
Microsoft is erecting a 250,000-square-foot building on 18 acres in Hyderabad, India, where it has reserved 42.5 acres.
Microsoft also is playing catch-up to competitors such as IBM, Sun Microsystems and Oracle.

In the late 1980s, India liberalized its trade policies and began recruiting foreign technology companies, which then set up subsidiaries that together have more than 10,000 employees.

Most of the U.S. technology companies went to Bangalore, India's Silicon Valley.

Hyderabad, like Redmond, joined the party later and is smaller and less crowded.

Indian-born employees at Microsoft first suggested opening a development center here in the late 1980s. The idea took shape after Chairman Bill Gates visited the country in 1997 and was impressed by the talent pool, the nascent software industry and the potentially huge market for Microsoft products.

Somasegar was asked to develop a plan for India, and in early 1998 Gates authorized him to hire 20 people.

Initially, the operation built products that took advantage of Indian programmers' expertise in competing software languages, such as Unix and Java. It built products to connect Microsoft Windows software to Unix and Java products.

Recently, it also has worked on components for MSN, the Office productivity suite and Microsoft's small-business division.

Future half-hour from past

The India Development Center now rents space in a futuristic office park dubbed Hitec City, a half-hour drive from the ancient city's center.

On the floor below Microsoft is its arch competitor Oracle, a Redwood Shores, Calif.-based software company that's also building a permanent Hyderabad campus.

Other tenants include General Electric and HSBC, a London-based banking giant.

Nearby are the offices of large Indian software companies that partner with Microsoft, including Infosys, Wipro and Satyam.

Microsoft's India team


Microsoft has 56,100 employees worldwide, including 27,700 in the Puget Sound region. In India, it currently has 970 employees. Here's the breakdown:

• 325 at the India Development Center in Hyderabad, where software products are created.

• 125 in Hyderabad working for the company's information-technology department, mostly writing, running and maintaining software used internally by the company.

• 270 in Bangalore providing technical product support.

• 250 in sales and marketing. Most are at the India headquarters in New Delhi, but some work in other cities.

Inside Microsoft's space, the offices and hallways look much like its facilities in Redmond. But the break rooms are more likely to serve fried snacks called samosas than popcorn.

The company also employs aides, usually older women in saris, who bring cups of spiced, milky tea to the workers.

Hyderabad's population has grown about 17 percent over the past decade to 3.5 million.

The city is still less crowded than most Indian metropolitan areas and has the outward appearance of prosperity. Its downtown has wide boulevards with grassy medians.

Stores sell fancy cars and electronic gadgets, and restaurants are crowded at lunch and dinner with cellphone-toting men in dress shirts and slacks.

The site of Microsoft's new campus is an area of mostly undeveloped fields, but there are signs of coming growth. Nearby is a large Infosys campus, a business college and new apartments.

Also planned is a large sports complex, including a stadium that's part of an effort to boost tourism as well as industrial development and further diversify the economy.

Lots of tech jobs

India's software and computer-services industries employed about 770,000 people at the end of 2003. The U.S. industry employed about 5.7 million people last year, down about 250,000 from the year before.

Indian government officials contend the recent economic growth has broadly benefited their country. But the majority of the population remains poor and left out of the boom.

That was made clear in elections earlier this month, when two of the country's biggest trade boosters were voted out of office. One was the prime minister.

The other was the governor of Andhra Pradesh, the state that includes Hyderabad, who helped Microsoft buy state land for its campus.

With options to buy up to 42.5 acres, Microsoft so far has purchased 18 acres, where it's building a 250,000-square-foot building. It will resemble the company's buildings near Group Health's Eastside Hospital and include amenities such as a gym and the cricket field.

Spokeswoman Drake yesterday noted Microsoft is also expanding in Redmond. In April, it completed a 300,000-square-foot building on its main campus. In October, it expects to finish remodeling two buildings across Highway 520 that it bought from SpaceLabs.

Those projects are likely contributing to the delay in Issaquah, where the company in 1998 reserved 152 acres for a campus with up to 15,000 workers. Construction is unlikely to begin before 2006, said Keith Niven, the city program manager working with Microsoft.

Last year, Chief Executive Steve Ballmer said Microsoft benefits from doing most of its development work in one location.

"A lot of people would like us to do more R&D elsewhere, but we like having things close," he said. "And that could conceivably change at some standpoint if the Seattle market really does saturate for us, but I don't think that's anytime in the near future."

Still, Microsoft's plans for India have created uncertainty in the Seattle area, where the company is a cornerstone of the economy.

Sammamish Mayor Kathy Huckabay was so concerned that she attended Microsoft's shareholders meeting last fall to ask Gates and Ballmer about their India plans.

"You hear it at neighborhood meetings, you hear it at church, because a lot of people work at Microsoft," she said.

"We all hear about it from a variety of sources, and I've not heard Microsoft speak about it in broader terms," she said.

"From a community standpoint, we all need to be prepared to deal with it and get our arms around the issue."

Somasegar said the company is growing all over.

"What is going to happen five years from now in terms of how many employees I'm going to hire in the U.S., I cannot predict, but this year we hired 3,000-plus people," he said.

"Next year, we have a projection to hire 3,000 more people."

Whatever the growth in India, he said, "the numbers pale in comparison to the numbers that we are talking about here."

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com

Copyright © 2004 The Seattle Times Company

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