March 30, 2022
By Paresh Dave and Jeffrey Dastin
OAKLAND, Calif. (Reuters) – Microsoft Corp President Brad Smith wrote to Ukraine’s leader this month with a clear message: despite Kyiv’s calls for it to sever all ties with Russia, the U.S. software behemoth would continue doing business in the country with non-sanctioned clients, including schools and hospitals.
“Depriving these institutions of software updates and services could put at risk the health and safety of innocent civilians, including children and the elderly,” Smith said in the previously unreported March 14 letter, seen by Reuters.
Smith told President Volodymyr Zelenskiy that Microsoft was “mindful of the moral responsibility” to protect civilians. However, he said the company was discussing with U.S., British and EU governments whether “to halt any ongoing services and support” in Russia and would move “in lockstep with their sanctions and other economic goals.”
Asked about the exchange, spokespeople for both Microsoft and Ukraine said a constructive dialogue was underway about actions to support the country.
The decision by some leading Western business technology makers – including Microsoft, German software multinational SAP SE and U.S. giant International Business Machines Corp – to maintain operations or staff in Russia despite Ukraine’s appeals have angered their workers in several countries.
Small groups of employees at Microsoft, SAP and IBM have called for management to withdraw fully from Russia in the wake of its invasion of Ukraine, according to comments seen by Reuters on internal discussion forums and interviews with 18 workers familiar with the companies, who sought anonymity because they were not authorized to speak publicly.
The employees – echoing Ukrainian officials – have urged the companies to go beyond ending new sales and dropping sanctioned clients in order to increase economic pressure on Moscow. They want their companies to suspend every deal in Russia, including for software clients may use to track sales, supply chains and workforces.
Asked about the internal criticism, IBM said it has ceased working with Russian companies anywhere in the world – though it has stopped short of layoffs or suspending support of foreign businesses in Russia.
SAP told Reuters it was complying with government actions and even going beyond them, and it would “welcome new sanctions currently under discussion.”
SAP responded to Ukraine’s requests to cut all ties in Russia with a previously undisclosed letter this month to President Zelenskiy – reviewed in part by Reuters – saying that it was supporting essential Russian services, including “hospitals, civilian infrastructure and food supply chains.”
The three companies have not ruled out further pullback. But for now, their employees in Russia are getting paid and accessing workplace tools, colleagues said. Local phone numbers are active for all three, Reuters found.
Questioned about the demands on Western tech businesses from their own workers and the Ukrainian government to quit Russia, a Kremlin spokesperson said that “some companies are leaving, others are staying. New ones will come in their place.”
The spokesperson noted that companies had legal obligations to employees that must be fulfilled, such as paying wages.
Russian prosecutors have warned some Western businesses that their staff could face arrests if production of essential goods was stopped, according to media reports. The Wall Street Journal named IBM among those warned.
The Kremlin spokesperson denied the reports about pressure on companies from prosecutors: “The part about arrests is a lie.”
Ukraine Vice Prime Minister Mykhailo Fedorov, one of the leading campaigners for a digital blockade, said Russia was already feeling the impact as some technology companies exit, such as developers of digital payment and web development tools. But he is pushing for a complete departure.
“We will keep trying until those companies have made the decision to leave Russia,” he said.
Fedorov’s team told Reuters last week that a “huge number” of Russian organizations have contracts for SAP’s software, including major banking and energy companies. Reuters could not independently confirm SAP’s customers in Russia, and SAP said it was in full compliance with sanctions.
Russia’s Ministry of Digital Development, Communications and Mass Media did not answer requests for comment on the impact of departures by Western technology companies, nor the extent of SAP’s footprint in the country.
Mirroring the Ukrainian government’s message, SAP’s five salespeople for Ukraine told regional managers on a call March 18 that the company must end support for remaining Russian clients, according to a person familiar with the discussion.
Fedorov said on Friday in a tweet, citing a conversation with SAP Chief Executive Christian Klein, that the company would “gradually stop supporting” products in Russia. A day earlier, SAP had said it was shutting its Russian cloud business, which two sources described as a small operation.
In a March 23 letter sent to customers in Russia, reviewed by Reuters, SAP asked cloud clients to advise whether their data in the Russian cloud should be deleted, handed back to them or moved outside the country.
SAP confirmed the content of the letter, and said that Fedorov and Klein spoke. It declined to comment further.
At IBM, hundreds of workers criticized the company’s response to Russia’s invasion, three people with knowledge of internal messages said.
CEO Arvind Krishna on a March 2 call with employees had taken no sides on the war, one of the sources said. In a now-public message to workers the previous day, IBM had referred to what it described as the “deteriorating situation involving Ukraine and Russia.”
One comment on an internal discussion forum, seen by Reuters, called on the CEO to read a book on IBM’s work during the Holocaust describing how https://ibmandtheholocaust.com the company designed punch-card machines that Nazi Germany used to track Jewish people: “Think carefully and do the right thing – pull IBM and IBMer’s in Russia out of Russia,” the employee wrote.
IBM declined to comment on the remark.
Responding to the outcry, Krishna announced in a March 3 post a suspension of sales in Russia and condemned “the Russian war in Ukraine.” On March 7, he went further, saying that IBM had suspended “all business” in Russia – without elaborating.
An IBM spokesperson told Reuters March 24 that the business suspension meant the company is no longer providing “goods, parts, software, services, consulting and technology” anywhere in the world to Russian clients.
Several Microsoft workers on internal chat tools have also demanded the company exit Russia altogether, with some even telling senior management they would quit otherwise, an employee said. Microsoft declined to comment.
Some workers told Reuters they have not joined the calls for full exits due to doubts over harming civilians and how strong an impact the companies’ withdrawal from Russia would have.
For instance, the United States on Feb. 24 sanctioned Russian Railways, a state-owned company operating passenger and freight trains. IBM that day placed the company on its “Denied Parties List” and stopped tech support, according to an IBM letter to Ukrainian minister Fedorov dated March 5, seen by Reuters.
Denied parties cannot access official replacement discs, adapters and memory for mainframes that a former IBM salesperson said need swapping every two years.
But a person familiar with operations at Russian Railways said it can run for years without aid.
Russian Railways did not respond to requests for comment. IBM declined to comment.
SAP also told Reuters that because some clients have its software installed on their machines they can keep using it regardless of the company’s decision not to provide support.
(Reporting by Paresh Dave in Oakland, Calif. and Jeffrey Dastin in Palo Alto, Calif.; Additional reporting by Nandita Bose in Washington, Foo Yun Chee in Brussels and Supantha Mukherjee in Stockholm; Editing by Kenneth Li and Daniel Flynn)