mscampusMicrosoft employs tens of thousands of people in the Seattle area, but those teams are supplemented by a large “shadow workforce” employed and supplied by outside firms — often working side-by-side with Microsoft’s direct employees at the company’s offices.

A new move by the Redmond company is the latest illustration of Microsoft’s underlying power in its arrangements with outside vendors.

In an email yesterday, a Microsoft manager informed hundreds of vendors that the company is increasing its “chargeback” fees — the amount it requires these firms to pay Microsoft for vendor workers based inside the Redmond company’s facilities in the Seattle region.

An aerial view of Microsoft's Redmond campus. (Microsoft image.)
Aerial view of Microsoft’s campus. (Microsoft image.)

The rate is going up from $450 per month ($5,400 per year) for every workstation to $510 per month (or $6,120 per year) starting on July 1. The message said the increase is allowed under the terms of the company’s agreements with its vendors.

Multiplied across the affected workforce and vendors, the overall amount of the “chargebacks” adds up to millions of dollars each month.

“Currently, there are approximately 4,600 individuals representing more than 600 companies occupying space in Microsoft facilities in the Puget Sound,” wrote Microsoft’s John Trujillo in the message to vendors, obtained by GeekWire.

(Those numbers don’t include contractors, a separate and large category of outside workers who work on projects for up to a year at the company.)

The message continued, “Microsoft highly values the work and services these companies provide, and housing all of these individuals comes at a significant cost. This rate increase will result in companies continuing to share this cost with Microsoft, and will ensure that our office space is being used efficiently by vendors and Microsoft employees.”

Some vendors complain privately that Microsoft pushes them to reduce the rates they charge the company, then asks them to put workers on campus, and then hits them with these additional charges. These types of cost increases can ultimately impact compensation for workers as some vendor companies effectively pass along the costs rather than take a further hit to their own profit margins.

Microsoft implemented the cost-sharing program in 2009, charging vendors a monthly fee for the space and services used by their workers at Microsoft facilities.  The company says the program also takes into account the services consumed by workers (café, beverages and shuttle services, for example).

Asked about the chargeback rate increase, a Microsoft spokesman says the rates that vendors would pay for their own space in the real estate market have risen since then, and the rate increase is an effort to stay on par with the market.

Although Microsoft facilities in Silicon Valley and other locations also are involved in the chargeback program, the rate increase only affects workers in the Seattle region.

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  • Guest

    Wow, for $510 I get free sodas and crammed into a room with 2 or 3 other vendors who are also paying $510. This is the stupidest policy at Microsoft by far. I would rather work offsite at my company location if my sponsoring program manager would allow it… I don’t like being in the slave pit.

    • Jackie

      Why do they make you stay onsite?

    • Vendor

      I just started a contract today. They didnt know where to put me so they put me in an office with two other people. My workdesk is literally 3’x3′. I feel like im working in a sweat shop. I walk around and many people like this. The indian culture might be used to living and working in such toght small spaces but i think this is just reicoulous. They pay me $65/hr for my services and require me to onsite as much as possible. However i feel very undervalued and brushed off. I also had to hunt around for basic office equipment from other people such as a network cable or power strip.

      “Lets hire a code monkey and stick them in the closet and see how ling they last. Oh and lets charge them cause that closet is expensive to maintain.”

  • MovingtoGoogle

    Boeing doesn’t do this, Amazon doesn’t do this, Nordstrom doesn’t do this. Google
    doesn’t charge for contractors they hire to help out on their projects.
    And they give you FREE lunch!

  • Walmart

    Actually, that statement that person makes is incorrect. This is not Walmart where
    you charge your vendors for everything, Microsoft is hiring professionals to help them in a lot of areas and to ask them to pay for their space there is a joke. This policy needs to be changed.

  • Harkonnen

    I worked in the cafeteria and consumed the free beverages like there was no tomorrow.

  • Nolm

    When Microsoft instituted this policy in 2009, my company decided not to pay for the memebers on my team. All five of us were then “mobile” and we would just crash wherever in order to do our work. It made for a very inefficient way for us to conduct our business, and no one ever knew where to find us.

  • Guest

    Some ‘smart’ person in Microsoft figured we can charge vendors that work onsite because they take up office space and consume free drinks, etc. They probably got to claim ‘savings’ for the 1st year- woohoo-brilliant-promotion.

    What they didn’t figure was – when the contract was renewed, the vendor company would have raised the rate by that amount or just included it in their future rates. So they only got the benefit of implementing this short sighted program in year 1- that’s it. This rate increase is also just going to be charged back to them real soon. You don’t really expect Volt or the contractors to suck this up- do you?

    I bet they hired 5 people to keep track of these charges- creating work out nothing at all…

    • Steve

      Onus should be on Microsoft to have the discipline to not let all vendors pass this through, IMO.

      • Guest

        Easier said than done. Its like you get a contractor to work on your home project for $1000 and after he starts working you say- oh btw- since you are going to drink my water, use my heating, electricity, I’m going to deduct $100 for it- what do you think the contractor is going to do?

    • guest

      This is my experience exactly. My vendors have simply raised their rates.

  • recruiter

    Another brilliant move by MS and their workforce solutions. Somebody has to pay for it and the margins are so slim as a vendor – the end result is passed down to the employee of the vendor. They wouldn’t need programs like this if they were capable of actually hiring people but management still thinks the “best and brightest” are breaking down the barn doors to become widgets. Everyone asks for Ballmer’s resignation but Lisa B should either follow him….or carry him out the door with her.

  • Carl Setzer

    I remember having the fun discussions with both my teams and my vendor companies back in 2009. Makes vendor management lovely fun.

  • Tarnished

    Microsoft has always treated its vendors, temps, etc like third class workers. As a contractor, I loved getting emails announcing parties and free promotions of products I worked on with an asterisks that stated only blue badges would be allowed to get the free t-shirt, software, etc. It was especially awesome when the group I worked in was 2/3 comprised of contractors, temps, etc. Translation, we did much of the work and Microsoft went out of their way in every team email and meeting to make us feel unappreciated and excluded. I will never work for Microsoft again in any capacity or buy another of their products.

    • unan

      Thank the contractors that went before you and sued them for millions of dollars in a class action suit. Unfortunate, I agree.

  • Guest

    “The company says the program also takes into account the services consumed by workers (café, beverages and shuttle services, for example).”

    Right, but these vendor workers still have to pay for food in MS cafeterias and do not have access to the Connector. But yeah, I guess someone has to pay for all that free coffee and Fresca that they drink …

    • Will

      I hear it’s heavily subsidized but it’s outrageously expensive still. I don’t get it.

    • Brian

      You’re wrong here, Vendors do have access to the connector. Get your facts straight.

  • Anthony W. Brown

    Continuous demonstration that Microsoft is no longer the company they used to be and reinforcement that it is the unhealthy environment that most of the talented people left. They are not committed to innovation, partners or modern leadership and it is reflected in the stale, culture-less experience of their products. The cost of this decision will be calculated in the aftermath of replacing current vendor staff with cheaper versions and increasing the rates in the next fiscal year to compensate. Poor management, poor culture, poor business.

    • Guest

      The “cheaper” version of the vendor staff has nothing to do with the rate increase.

  • ClassAct!

    Upside: we can add “slum lord” to the list of epithets we use for Microsoft these days.

    Keeping it classy Steve, Lisa, Kevin and Brad!

  • Guest

    Then go find class A office space for less, good luck!

  • delimitaciones

    For that price why don’t they start living on their cubicles?, It’s like a rent for a room but you can get services, or they can sub-rent the night to other people.
    It’s like they say: It’s not a problem, it’s an opportunity.

  • Grrtime

    Vendors at M$ are the new permatemps…

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