Microsoft in India

India is proving to be fertile ground for the world’s numero uno software company. By Faiz Askari

India is amongst the fastest growing markets for Microsoft globally. The fact that India, which till last year was an APAC subsidiary reporting in to Singapore, is now reporting directly to Redmond, testifies to the importance of this market. While elaborating the status of Microsoft India, Neelam Dhawan, the Managing Director of Microsoft India said, “It is noteworthy that India is one of the few markets outside the US, where all six Microsoft entities are present. In India, we currently have over 5,000 employees located across 12 cities—New Delhi, Mumbai, Bangalore, Kolkata, Chennai, Hyderabad, Chandigarh, Ahmedabad, Indore, Kochi, Nagpur and Pune. Over the next four years, as committed by Bill Gates, we plan to increase the Indian headcount to 7,000.”

Sharing an analyst’s perspective, Dr. T R Madan Mohan, Director (Consulting), ICT Practice, Frost & Sullivan, South Asia & Middle East said, “India is a strategic market for Microsoft both from the development and the market perspective. Several new initiatives for Vista and interoperability emerge from the company’s Hyderabad and Bangalore labs. The primary drivers have been high adoption across verticals and the increasing penetration of small and medium businesses.”

Future direction

While giving a glimpse into the direction that the company is adopting for the near future, Ravi Venkatesan, Chairman for Microsoft India, added, “India is a market of strategic importance to Microsoft, and we are focused on enabling the best technology experiences for our customers here.”

However, Mohan of Frost & Sullivan also discussed some of the critical aspects of company’s business in India, they could be considered as challenges for Microsoft India’s business, Madan Mohan said, “Being a product focused company the challenges are many. Piracy of 73% in India affects the revenues, other major vendors such as IBM are also offering their services and India is [an important market] for them too.”

Venkatesan disclosed the company’s business plans for the Indian market over the next few months:

• Next wave of server innovation: “In conjunction with the global launch of Windows Server 2008 ‘Longhorn’, SQL Server 2008 ‘Katmai’ and Visual Studio 2008 ‘Orcas’, we will also be launching these products in India in the first half of 2008. The launch of the next wave of servers from Microsoft will provide enterprises with advanced virtualization, branch office automation, Business Intelligence and security capabilities, and will have a significant impact on their overall infrastructure and application platform deployments,” said Venkatesan.
• Addressing the needs of the SMB market: “SMBs are poised to be the growth drivers for the Indian economy and we believe that IT will help them address the challenges of an increasingly global environment. Microsoft will continue to offer them a slew of products, tailored solutions as well as new ways to access these products such as subscription IT, Hosted services etc.”
• Meeting the piracy challenge: Piracy continues to be a major impediment in India’s aim to be a global knowledge economy. He added, “We will undertake various initiatives focused on both educating customers on the pitfalls of pirated and the value of original software. We will also provide customers with greater access to original software and work with the channel to ensure a level playing field and drive understanding for the importance of genuine software.”
• Sustaining momentum on interoperability: As Indian business expand, and increase their investments in IT to streamline their business processes, their IT environments too will become increasingly heterogeneous, further underlining the need for interoperability. In addition to this, Ravi Venkatesan stated, “While at a global level we will continue to develop products that are interoperable by design, in India we will continue to work with the industry, the ecosystem and the academia to encourage research on open source and enable application development in this area.”
• Working on the Web: As businesses in India wake up to the potential of the Web in delivering customer outreach and loyalty, and the wider adoption of the Internet, the Web will change the way in which people view business and communication. “Microsoft has launched new tools and technologies that are designed to provide rich experiences across the Web and other clients, to ensure that the Indian enterprise is able to deliver a superior user experience to its consumers,” he stated.

Piracy: an unsolved crisis

Software piracy is a far-reaching and serious problem not only for India but also for other economies around the world. According to the BSA-IDC Fourth Global Software Piracy study, global piracy rates were as high as 35% and this amounted to losses of $40 billion, India itself lost $1,250 million in 2006 to software piracy, a substantial increase from $367 million in 2003.

However, in the past few years things have got better from the perspective of sales of original software. Dhawan said, “Through concerted efforts by the government, judiciary, software vendors and the channel, we have seen a steady growth in customers purchasing original software. It was rewarding to see a three percent reduction in piracy over the last three years and this will have a significant impact on India’s economy. On top of an already impressive growth rate, the drop in piracy will add 115,000 jobs, contribute $5.9 billion to GDP, add $386 million in taxes and $8.2 billion in revenues to local vendors.”

As an industry leader, Microsoft believes that it has a responsibility to protect consumers and businesses from the negative impact of software piracy. Microsoft, through its own efforts and in partnership with other industry groups, is committed to developing and implementing technology solutions to protect intellectual property. Further, Microsoft has broadened the scope of its efforts to go from just fighting piracy to the entire digital realm, including curbing spam, Internet fraud and hacking.

“We are working to ensure a level playing field for our honest partners by actively identifying and targeting those who compete unfairly by selling and distributing illegal software and components. Partners who must compete with pirates lose more than software revenue; they lose system sales and the opportunity to service those customers over the years.

“Piracy also hurts consumers who want to do the right thing and are cheated, often unknowingly. With non-genuine software, consumers are unable to receive valuable product updates and technical support. In addition, they put themselves at risk for faulty code, spyware, worms or viruses.”

Microsoft’s new ventures

Dr Madan Mohan of Frost & Sullivan said, “The significant ones [among Microsoft’s new ventures] are the SMB and ISV programs. The SMB segment witnessed the roll out of an SMB portal, licenses customized to the [needs of the] sector [as well as the appointing of] partners in Tier II and Tier III cities. Initiatives such as Bhasha have been successful in ensuring local language availability. On the SOHO side too, the E-home and other packages had a significant effort.

“On the products side, the SQL Server database witnessed smart gains because of SQL Express, strengthening of ISV applications especially in retail, insurance and banking. Sharepoint and Exchange servers also gained because of bundling.”

Increased support for Dynamics had a positive effect on the market with more SMBs preferring the solution. Madan Mohan said, “Unified communications has been a strategic move for which Microsoft is reaping the benefits. Early successes with Godrej, NIIT and others have placed Microsoft as an integrated enterprise player.”

Growing SBUs

• Microsoft Services

Companies are striving to improve their IT infrastructure and make optimal usage of the same from the perspectives of cost, risk, security and operational agility. For them, rather than mere automation of business processes, improving business agility through the productive use of technology is the top priority. It is not about just using technology, but about optimal and productive use of technology. Many CIOs we meet constantly evaluate if their use of technology is optimal and whether it drives a high ROI, is delivering impact and is ‘future ready’.

While elaborating about Microsoft India’s growing SBUs, Dhawan said, “Microsoft Enterprise Services can help organizations understand the current state of their IT infrastructure and give them a view of the journey towards optimization. To make the management and deployment of IT infrastructure in an organization more systematic, the Microsoft Enterprise Services division works towards making the entire lifecycle of implementing technology easier by collaborating with customers, partners, and teams across Microsoft to provide the greatest impact of solutions, services, and support.”

Microsoft Services offers three types of services:

I. Architecture and Planning

Microsoft Services’ Architecture & Planning offerings help CIOs align IT to organizational strategies and initiatives while empowering them to make IT decisions that can reduce risk and maximize value.

II. Technology Consulting

Microsoft Consulting Services (MCS) helps customers align IT to organizational strategies and initiatives. Determining what applications and infrastructure can best fill those needs efficiently and cost effectively can significantly reduce time to value.

III. Support

Microsoft’s Health and Support offerings provide customers who have significant investments in Microsoft technology customized and pre-packaged support that can provide proactive services to improve IT Health, reactive services when issues arise, and various levels of Support Account Management.

Dhawan added, “In India, Microsoft Services has been in existence for more than a decade now and has grown with the use of Microsoft platforms in the enterprise. Today we offer a complete portfolio of services in India ranging from IT architecture and planning, optimization, business applications, industry-specific services and premier support. Our client list includes the likes of Cognizant, VSNL, ICICI and Airports Authority of India.”

Getting SaaSy

For Microsoft, software as a service is all about software plus services—it’s not either/or, it’s about ‘and’. Dhawan said, “Some say that everything will be run out of the cloud (as a service) and that in the future we will not have to deal with infrastructure management issues. But we believe that the richest customer experience will come from a combination of software and services.

This is because there is a growing recognition that the best solutions tend to be integrated scenarios that bring the best of Internet and the best of client-server software. The best end user experiences are delivered on a through a combination of hosted and on-premise software on a multitude of devices.”

So software plus services will bring together a set of both on-premise and service-based IT capabilities, enabling IT Pro to optimize the portfolio of software and services across the infrastructure, ultimately enabling IT Pros to have the optimal portfolio of capabilities to meet the unique needs of each and every business. A simple example of this is how many enterprise workers access office mails over the Web, when out of office and not connected to the office network.

Microsoft believes this new world of software-based services delivered via the Internet is a fundamental shift in the way IT consumption is viewed today. “We aim to lead this shift with a compelling vision and strategy of continuous innovation that combine software and services to provide seamless, personally relevant experiences regardless of time, place or device.” Windows Live, Office Live, CRM Live and Hosted Exchange are all examples of this.

While explaining the scope for partners in such a business model, she added, “This not only offers a strong value proposition to the customer, but also to the partner community who are and will continue to remain a core part of Microsoft’s business model. The partner opportunity in the S plus S model is immense as they can now host platforms, customize, manage and resell hosted applications or leverage MarketPlace and Adcentre to drive further income.”

Hosted ERP roadmap

Microsoft recently announced the availability of its Dynamics suite of Enterprise Resource Planning (ERP) applications as a subscription service. This will allow businesses to use Microsoft Dynamics solutions without installing it within the company’s premises, dramatically reducing CAPEX and taking away the cumbersome task of having an IT team in place. Dhawan said, “The affordability of this solution is likely to have the maximum impact on Indian SMBs. Today, the ERP market size which stands at $128.4 million is predicted to double in the next five years as more organizations across businesses start adopting ERP solutions. With SMBs representing the next wave of growth in IT services in India and an estimated 7.6 million SMBs planning to spend in the region of $17.5 billion on IT there is clearly an entire universe out there waiting to be serviced. To this end, Microsoft plans to rapidly scale up the number of partners who can deliver hosted services to customers.”

The SaaS market in Asia will reach $1.16 billion by 2010, with a compound annual growth rate of 66%, to account for 15% of the enterprise software application market. The ERP market too is showing an upward movement, Microsoft hope to be at the crest of this change with its best-of-breed offering in the ERP space at affordable prices.

Latest initiatives

• Unified communications

With Unified Communications, Microsoft’s goal is to integrate all the touchpoints for communication using a single identity that spans phones, PCs and other devices. Venkatesan said, “We bring a unique software-led approach towards Unified Communications because we believe that software is the future of communication.” Research shows that on average, 89% of Information Workers cite e-mail is the most important tool for business communication, more than the phone (Harris Interactive Survey, 2007). E-mail comprises one-half of total business communication and consumes about 25% of a business worker’s workday.

According to Gartner, by 2010, 40% of companies would have completed the convergence of their entire voice and data networks onto a single network.

“In fact the strength and completeness of Microsoft’s software-led approach for Unified Communications has also been recognized by Gartner in their recently published Magic Quadrant 07—a competitive mapping of multiple vendors for Unified Communications—with Microsoft in the Leaders quadrant for the second year in a row.

“We have had an extremely successful OCS 2007 beta program resulting in more than 100,000 downloads worldwide of the beta. In India, NIIT Technologies and Marico industries have been the early adopters of Office Communications Server 2007 and they have reduced travel costs for their engineers and IT personnel,” said Venkatesan.

• Prepaid Office 2007

Office 2007 has seen a phenomenal uptake both in India and the rest of the world. Dhawan said, “While we cannot break the numbers region-wise, the retail launch of Office 2007 generated an additional $250 million (approximately) in 2007 compared to the same period the previous year. In addition, in November 07 alone we saw trial downloads for Microsoft Office 2007 hit the 10 million mark.”

The recently launched prepaid Office 2007 offering has also became a compelling offer for small businesses and consumers who require flexibility to pay over time and renew when they choose. “These customers typically include cash flow constrained retailers such as restaurants, clothing, services and project-oriented businesses such as consultants, contractors, etc who prefer purchasing productivity software with low upfront payments. Prepaid provides a way for customers to use Office with payments spread over time, as they use it, and therefore reduces the upfront capital investment for many consumers and small businesses. Students and educators will also see benefits in the periodic use of Office Prepaid,” she said.

The Microsoft India Ecosystem

While sharing his experience in having an association with Microsoft, Srikant Rao, CEO, Affordable Business Solutions (ABS) highlighted some of the advantages that he enjoyed. “Significant brand recognition and acceptance from the market and customers is one of the biggest advantages that I have. Apart from this, the ability to attract, train and retain employees has increased dramatically with Microsoft. Other than these two, exposure to global trends and roadmaps have helped us plan our strategies in advance. The company has focused programs that have enabled us to benchmark our business better. Lastly, I should say that this partnership has generated customer leads and that combined with joint marketing has helped increase our sales significantly.”

Gautam Hukku, Head Strategic Business Unit, Redington India said, “Microsoft has empowered us with knowledge which gets disseminated to partners to capitalize on business opportunities. This leads to added enthusiasm and self confidence amongst our resources.”

Expectations for 2008

Srikant Rao informed about his expectations for the 2008 time frame from Microsoft, He said, “We are extremely focused on the SME market as we are targeting this segment with a software plus services offering. We expect to work closely with Microsoft to target a few key SME clusters with industry vertical solutions on a per-user/ per-month subscription based model. We predict that the target customers in this segment will be keen to leverage the complete stack of solutions from Microsoft (from anti-virus software/ firewalls to Share Point Portal through Dynamics ERP and CRM solutions to Hosted Messaging and Collaboration).”

Novell speaks

Coming to any conclusion would be wrong without getting feedback from entire ecosystem including Microsoft’s competition. Sandeep Menon Country Manager, Novell said, “While representing a company like Novell, I always respect Microsoft as a competitor. However, in last one year or so, we have witnessed some new things happening. Microsoft’s acknowledgement of the rapidly growing market for open source software is a big development for the industry. Microsoft has also started giving due respect to open source products and they have also shown interest in interoperability.”

faiz.askari@expressindia.com