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By Ed Frauenheim, 29 July 2004 09:05

NEWS Microsoft is outsourcing some of the work related to its next-generation operating system to India, according to a labour group.

The WashTech organisation said Wednesday that it obtained internal Microsoft documents showing that at least two of India's offshore outsourcing companies are working on the forthcoming operating system dubbed Longhorn. One of the documents indicates that a contract with India-based Infosys Technologies concerns a 'Longhorn Migration Guide'. WashTech also said Microsoft indirectly employs more than 1,000 people in India through contractors.

"The high-tech industry and proponents of offshore outsourcing have argued that the next generation of technology work will always be done by US-based employees while the low-level and routine legacy work will be sent offshore," WashTech said in a statement. "These documents clearly dispute that idea and show that US employees are directly competing with Indian companies for work on next-generation technologies - that originally were developed in the United States."

Microsoft denied that work on key pieces of Longhorn is being done by third-party companies but declined to comment on the number of workers assigned to the company through contractors in India. "The development of our core technologies, our intellectual property, is done by Microsoft employees," Microsoft spokeswoman Stacy Drake said.

Drake also emphasised that most of the company's "core" development work is done by US employees.

WashTech disclosed what it said were contact lists for direct and indirect Microsoft employees in India, agreements with companies such as Satyam Computer Services and Wipro and lists of alleged Microsoft contracts with companies including Infosys, Satyam and Wipro. Among the contracts with Wipro were two that indicated testing work for Longhorn.

Microsoft's Drake said the company does business with Indian technology services companies but she declined to comment on specific projects. She did say, though, that "testing is not development work". She also said a migration guide would not involve a key piece of Longhorn but rather a way to move from another technology platform to Longhorn.

Wipro and Satyam could not be reached for comment. Infosys said in a statement that it "does not comment on the specifics of client contracts".

Microsoft has about 1,000 employees in India, Drake said. The company has about 57,100 employees worldwide. It plans to hire 7,000 people in the coming year, with 3,000 of the new hires to be added to its Redmond, Washington offices.

Ed Frauenheim writes for CNET News.com.