Business India, July 19-August 1, 2004
Microsoft is rolling out an ambitious and carefully worked out grand plan for India
On 10 June, 2004 Microsoft India organized a retreat for its customers, executives, and partners in a hotel on the edge of the picturesque Powai lake.After two days of techie talk, the Microsoft Executive Summit 2004 ended with a presentation by chairman Ravi Venkatesan. It is after all customary for the chief honcho of the hosts to conclude such get-togethers, so what was so special about this one? First, this was the first time Venkatesan faced the various stakeholders in his strategy for India. Second, though the topic of the summit was ‘Realising Potential’, the current ad-line of Microsoft (M S), he carefully titled his talk, ‘Realising potential with India’. And third, he was able to sweep the audience with a rousing presentation that chalked out the six-pronged grand plan for India. In fact the A.R. Rahman Vande Mataram rock video, thrown in for good measure at the end, seemed like overkill.
The first prong is contributing to the success of Indian IT. Microsoft has been at it for nearly 14 years since it first set up shop in the country with Rajiv Nair, who was later succeeded by Sanjay Mirchandani and then Rajiv Kaul. They not only set up the channels to sell M S products like Windows, Office, and Server with various hardware vendors and manufacturers, but also started a training programme. According to Mirchandani, currently president for Asia and the Pacific, this programme of training software professionals in collaboration with NIIT, Aptech, and SSI was a large commitment by Microsoft to Indian IT, since it also meant a subsidy of nearly $25 million over the years. The programme trained over 100,000 programmers as Microsoft Certified Engineers, a globally recognized qualification. Suddenly, India became a country with the second-highest pool of such professionals after the US. Quickly other software companies like
Novell, Oracle, and S A P followed with their own certification programmes. The qualification brought a certain standard and respect for Indian programmers worldwide, which the Indian I T industry amply exploited when the Y 2 K problem presented them with the first big opportunity.
“Over the past 13 years we have established a strong partnership with India through the support of our investments with the government and our relationships with many strategic Indian companies. As a centre of innovation in the global IT industry, we are confident that the commitment the company made when we first started working in India will continue to provide increasing value to customers and make a positive difference toward future innovation and opportunity within India and to customers and partners around the world.”—Bill Gates
Gates’ way to India
The public image of Bill Gates has moved from icon of rebellious new entrepreneurship that disrupted old ways of doing business, to a mixture of envy towards his enormous wealth and cries of dominance and monopoly. However, in India he has had an enviable reception the three times he has visited the country.
Gates was treated like a rock star by the business community in 1997; as we commented in our cover story then, the only other person who got similar response was Michael Jackson, who also visited India the same year. By August 2000, during his second visit, the Internet bubble was still growing and software stocks had astronomical valuations. Every politician in India was more than ready to take credit for the stock market boom, as well as booming software service exports. And then Gates decided to meet the chief ministers. What a melée that was!
This writer was witness to the jockeying that went on among various chief ministers to be seated next to Bill Gates. The late Dewang Mehta, who was being consulted by Microsoft on how to handle the luncheon, had to use all of his considerable charm to assuage the feelings of those who ‘lost out’.
The mystique of Bill Gates has, however decreased over the years for Indian public, as is natural. During his third visit, when he announced a considerable sum of money from his private trust for the Aids campaign and new educational initiatives by Microsoft, there were some who were already derisive. They linked his generosity to the threat of Linux, marketing Windows, and so on.
But Gates seems to have had a balanced strategic interest in India right from the beginning. In fact, all the new initiatives we have described in the main story that make Microsoft finally relevant to India – be it the largest product development centre outside Redmond, or the Indian language software initiative, or digital inclusion, and so on, – were all initiated seven years ago, during his 1997 visit.
The seriousness with which he views India and the respect he has for Indian techies was again reiterated when he gave the keynote address at the golden jubilee celebration of IITs in San Jose, California, on 17 January 2003. Though he gets many invitations to talk at college and alumni functions, which he rejects, he made it a point to address this one. In his speech he acknowledged the role played by IIT alumni within Microsoft, and also raised indirectly issues about giving back to India and participating in its development.
Moreover, its relationships with Indian IT companies TCS, Infosys, Wipro, Satyam, and others also blossomed as Microsoft realised that they could be the best vehicles to promote M S technology by architecting their solutions worldwide on M S products like Windows, Server, SQ L, and so on. These companies in turn set up special labs to learn new MS technologies and implement and test various solutions on them.
The software honchos that Bussiness India spoke to were unanimous about their high appraisal of the relationship with Microsoft. “TCS has a strategic relationship with Microsoft, both as a artner and as a customer. We build solutions on M S technologies to meet the needs of our global customers, ensuring quality and superior service value at all levels,” says S. Ramadorai, CEO of TCS.
“Today we share a multifaceted relationship with Microsoft. A key component of this relationship is our strategic global partnership for developing, promoting, and delivering a comprehensive portfolio of Infosys business solutions and enterprise services on the Microsoft .net platform. We are also a large and key customer for M S technologies. And finally, Microsoft is a very important client for our IT services,” gushes Infosys CEO Nandan Nilekani.
“We have a unique engagement model with Microsoft which best leverages our individual strengths to deliver the best-of-breed technology solutions and services to end customers globally,” says Wipro chairman Azim Premji.
Microsoft has strong relationships with other software companies too. In fact the largest installation of M S’ s technology in a global bank is in Shinsei Bank, Japan, whose systems were built by Indian companies like Nucleus, i-flex, and Polaris.
Microsoft’s other concern is business development among Indian companies, banks, and the government. Not leaving anything to chance, its consultants are helping various corporations and organisations in India to build their systems based on M S technology. Be they ICICI Bank or HDFC Bank or L&T or Titan or Dr Reddy’s Laboratories or Bharat Petroleum, these and others are more than ready to come forward with customer satisfaction certificates for Microsoft.
In fact, Reliance Industries chairman Mukesh Ambani went as far to say, “There is a latent potential for India to strategically use IT as a differentiator and make a mark in the world economy, particularly in the emerging economies, where IT penetration is low. A key parameter for achieving this success is the rate at which IT is used to create an affordable value proposition that has a positive impact on the life of the end consumer. This common vision underlines our partnership with Microsoft, as we align our resources to provide rich, IT-based services for Indian consumers.”
Despite heavy piracy in the home and small business segment, Microsoft’s sales have gone up at a steady clip of about 40 per cent compounded annually. Trade sources estimated its sales in 2002–3 as Rs788 crore and market share (in volume terms) at 60 per cent in the server market, 41 per cent in the database SQL Server, 60 per cent in mail messaging through M S Exchange, 65 per cent in development tools like V S.net and Visual Basic, and of course, an overwhelming 90 per cent in Office and 95 per cent in Windows on desktops.
As for new avenues, Ravi Venkatesan is clear that the small and medium businesses are a targeted segment. “The big growth is going to come from, and jobs are going to be created in, not large corporations but nearly 100,000 small and medium enterprises (SMEs). Of course, having said that, one knows that the road ahead is not easy. The level of IT penetration among them is really low.” Interestingly, Venkatesan is not an IT engineer but a mechanical engineer who was chairman of diesel-engine maker Cummins in India for over 17 years. “When I was at Cummins there were a lot of suppliers who were small, and who were at infancy when it came to IT. Information technology can help them in a big way in terms of market access — letting the world beyond India know about them and so on. In 1997 Telco pushed every vendor to get IT-enabled. It is a big play and a market opportunity. We are quietly going about doing it. We spent $2 billion to acquire two market leaders in ERP for SMEs.”
In fact Microsoft is using a multipronged strategy in this respect. Rajiv Kaul, M D of Microsoft India, heads the SME section of Nasscom, bringing him face-to-face with the problems of SMEs. Meanwhile Rajesh Jain (the most successful dot. commer of India) is collaborating with them in creating new solutions for the special problems SMEs face.
The third prong of the strategy is ‘digital inclusion’, a word with positive connotations coined by Microsoft. It means enabling more and more people to use computers and IT in their daily lives. Of course, cynics would say that ‘digital inclusion’ is little more than a grandiloquent expression for market development. It may be. But none can doubt the benefits of such inclusion, no matter who initiates it.
But as Ravi explains, such a lofty goal requires several components in place, especially when one sees the low levels of PC penetration and even lower levels of Internet penetration. “We have to look at affordability, education, language, and localisation. Affordability is where we come in for a lot of criticism. There are things to be done there, but we have also not communicated what we are already doing. In Windows, our strategy is to add more and more functionality without raising the price. As a result our customers are thrilled, but not our competitors, who are wrongly calling it a monopolistic practice. If the customer is thrilled then it is not anti-consumer, which is the main element of a monopolistic policy.” Moreover, for segments where affordability is an acute issue like government or educational institutions, M S is offering special prices. Plus, like the car manufacturers, there are stripped-down versions without A C, without power steering or power windows, etc. “We are looking at good, better, and the best products increasingly for both O S and Office. It has been successful in some places and not successful in other places. We are now testing it in India,” adds Venkatesan.
Having come in from another industry, Venkatesan is bringing in a lot of lateral thinking into the implementation of the strategy. “Look at the cell phone industry. The median price is Rs6,000. Very few people can afford it but because of monthly instalments or prepaid S I M cards and so on, handsets are proliferating. We are doing some pilot studies on these payment models.”
The final leg is financing. A tool that has clearly worked for white goods, cell phone, and two-wheeler penetration in India. Will Microsoft offer its software along with hardware vendors on monthly installments? One will soon see.
As for education, the company is in a exciting phase. “There is Shiksha, in which we partner state governments and set up teacher training academies. Bring in teachers from government schools and teach them a very good I T curriculum. We have already opened up in Uttaranchal and
Andhra Pradesh and we are in talks with several other states to have more. We plan to have 10 in all. We are going to spend about Rs100 crore in the next five years,” says Kaul, who has won several internal awards within Microsoft for best practices. M S has a plan to train 100,000 teachers and 3.5 million students in the next five years through this programme. It is working with engineering colleges and IITs at the higher end, but not ignoring the more basic phases of education. It offers free software for any old PCs donated to schools by any individual or company, and is also working with the government to facilitate the import of used PCs from developed countries for exclusive use by schools.
Besides, to encourage budding computer geniuses, the company has started a competition for college students called Imagine Cup. “Thousands of students are participating in designing imaginative projects based on MS technologies and winning global recognition,” says Homi Bharda, who mentored two such teams at Vivekananda College, Mumbai. Microsoft is also partnering NGOs like Digital Alternatives, led by Ashok Khosla, to help them bring the benefits of IT to underprivileged communities.
But the most impressive work it has done so far in India is to localise MS products in Indian languages. When Gates announced such an initiative several years ago, none – this writer included – believed it. After all, for a global giant like Microsoft, Korea or Japan or China are much bigger markets than India was then. So, following market logic, why would it spend money to bring out its products in Hindi or other Indian languages? Well, Microsoft has finally proved the sceptics wrong.
Windows XP now supports over 14 Indian languages, MS Office has been produced in Hindi, and there is work in progress for other languages. The journey, however, has not been easy in this respect. To begin with, no standards were being followed by small companies engaged in developing Indian-language fonts and applications. C-D A C was working on an I S C I standard and contributed enormously to the explosion of Indian-language publishing using D T P. But there were lots of small developers who created their own coding standards and sold their packages to customers. These developers were not forced to adopt I S C I. As a result there are even now users whose data cannot be communicated to others due to lack of standardisation.
“In 1997–98, when we got into localisation, before we got into products we decided to adopt Unicode, since that is the only Web standard. To promote the standard (Unicode) we wrote to the Central and state governments and spoke to everyone everywhere to adopt Unicode. We also got a partner, Web Duniya, to create an engine to map non-Unicode into Unicode,” says an enthusiastic Raveesh Gupta. One has to stop this tireless evangelist to understand first of all what Unicode is.
Microsoft has to reinvent itself to face the challenge from open-source software
Since the mid-1940s, which saw the birth of digital computing at the fag end of World War II, the use of computers has increased in expanding concentric circles to include more and more people who are not necessarily computer engineers. Initially there was no distinction between hardware and software. The engineers who built the computers also knew how to program them. Obviously this number was minuscule. The development of programming languages like Fortran, Basic, and Cobol, which looked like English but were used in laying out the logic of the particular calculation or process to the computing machinery, led to the fast spread of computer usage among engineers and scientists, and programmers who were not necessarily computer engineers. But this was still a small number, probably a few thousands in the 1960s. The quantum jump in computer usage into millions, and eventually hundreds of millions, came with the development of personal computers in the late 1970s and early ’80s.
One of the factors that drove the development of personal computers was the need for interactivity. That is, if you sent a query to the computer you wanted the answer then and there, and not on the next day, as was the case with the old computers.
Bill Gates recalls in his book The Road A h e a d the exhilaration he felt as a 16-yearold, high-school student at Lakeside School, Seattle, where he and Paul Allen were allowed to play with a terminal which was connected to a large computer. Gates was lucky. The Mothers Club at Lakeside had raised some money through a sale and with great foresight used it to install a timesharing terminal in the school, connected to a large computer nearby running a version of Basic. Gates says that it is interactivity that hooked him to computers.
But what led to the P C revolution was not just affordability and interactivity of personal computers but also the development of packaged software or what is called ‘plug and play’ by computer geeks. Now one needn’t know any programming language to use a computer. The computer just provided different functions like letter-writing and communication like email, or writing and publishing, as in word-processing and desktop publishing (D T P), or keeping your accounts in what accountants call a spreadsheet, or storing phone numbers and addresses in an ‘address book’ or ‘databases’ in computerese, and so on.
All this was made possible with the development of packaged software. However, one had to pay a small price for this packaged software. But when the number of users grew exponentially, the small fees for software led to enormous wealth for package developers like Microsoft, whose Office suite is the most widely used package in the world. Bill Gates played a stellar role in the spread of personal computing with his ‘operating system’ M S-D O S and later Windows.
What is an operating system? It is a piece of software that comes into play soon after you ‘boot’ the P C into wakefulness. Nobody communicates directly with a computer like the pioneers of computing in the ’40s. Instead, you communicate with a computer via an operating system. The more user-friendly the operating system the easier it is for people to use the computer. An operating system is a bunch of programs that function as a harmonious whole, acting as a language translator and hard-disk manager with a provision to amend the data and programs on the disk, sending results to the display or printer, etc. Without an operating system a computer is not much more than a lump of plastic and silicon.
In the 1970s Bill Gates and Paul Allen and similar geeks and hackers (amateur computer enthusiasts) were part of an underground movement in computing. Today the spread of personal computing to hundreds of millions has made them multibillionaires and part of the Establishment, and easy targets for today’s geeks and business rivals alike.
As more and more people want to be included in the digital society with less and less money in their pockets, what appeared at one stage to be a small and reasonable fee for packaged software appears prohibitive. Thus, various operating systems and packages that have been developed by software hobbyists in their free time and distributed free on the Internet, which are called freeware or shareware, are becoming the new underground. Moreover, some of the evangelists of the new underground, like Linux creator Linus Torvalds, have put the entire ‘source code’ – that is, the innards of a program – on the Internet for comments and co-development with other enthusiasts. This open source movement has become a ‘new, new thing’ in the technology underground. Companies like IBM, HP, and Novell are developing plans to benefit from the open source movement and create new paradigms in software business where some parts are free but others are sold for a fee.
This new consortium consisting of the muscle of these corporations, along with the talents of thousands of programmers who work freely in the open source movement, pose a big challenge to Microsoft. Some are going to the extent of even predicting the demise of proprietary software companies like Microsoft. However, Novell vice-chairman Chris Stone, considered the architect of its new Linux-based strategy, disagrees. “The history of technology shows that no single technology wipes out other competing technologies. Eventually they coexist with varying proliferation depending on what they bring to the table for users. Moreover, while the Linux operating system is free, the applications developed on it need not be free. At times proprietary applications may be released to the open source community, allowed to evolve there, and then again turned into new proprietary applications, and so on. And with the robustness of open-source software, an application developed on it may command a premium over other products. We are still in the early days of the game.” Bottom line: there’s no free lunch!
While this evolution of business models continues, there is another corner from which a serious push is coming to Linux in opposition to Microsoft and all other proprietary products, and that is security. This has nothing to do with the issue of whether Windows versions are more or less secure than Linux. The contending parties have diametrically opposite claims. There are a number of third-party research reports on the secure nature of Linux and an equal number praising Microsoft Windows. While there are several Websites on the Net extolling the virtues of open-source software, Microsoft too has set up a Website called www.getthefacts.com, which has several reports extolling the virtues of Windows while running down Linux. We leave the judgment to posterity.
But a serious concern towards proprietary software is being expressed by people like President Abdul Kalam, from another angle. If we want our data, especially in the government and defence, to be secure, then the software has to have its own secret security algorithms built by the user. The user can play with the operating system and build these algorithms only if he has the source code. This has led Kalam to promote the development of software skills in Linux in particular and open-source software in general. Every Linux expert and open source guru in the world is making beeline for Rashtrapati Bhavan to share the President’s concerns. Bill Gates made a vain attempt to allay the President’s fears when he visited India in 2002. Abdul Kalam recounted the meeting in a speech in Pune on 28 May 2003. In his own words, “I would like to narrate an event that took place in Rashtrapati Bhavan a few months back when I met Bill Gates, the CEO of Microsoft. While walking in Mughal Garden we were discussing the future challenges in information technology, including issues related to software security.
I made a point that we look for open source codes so that we can easily introduce user-built security algorithms. Our discussions became difficult since our views were different. The most unfortunate thing is that India still seems to believe in proprietary solutions. Further spread of IT, which is influencing the daily life of individuals, would have a devastating effect on the lives of society due to any small shift in business practice involving these proprietary solutions. It is precisely for these reasons that open-source software needs to be built, which would be cost-effective for the entire society. In India, open-source code software will have to come and stay in a big way for the benefit of our billion people.”
Similar concerns are being expressed by the Chinese government as well, which has encouraged the development of a Linux company called Red Flag. Governments in Europe too are raising this issue. Microsoft is obviously concerned about this challenge from the governments (even though Indian government has no official stand on it yet) and has offered to share selected parts of the Windows code with governments under strict confidentiality agreements.
Kalam, in his speeches to the youth round the country, exhorts them to think differently. This, in more than equal measure, applies to Microsoft too.
“Unicode is like an MTNL directory. Every character of every language in the world is represented by an address in Unicode, so when a software or a hardware developer uses this directory to make calls to a character he simply cannot go wrong. If I were using a different directory from others we could never communicate,” Gupta explains.
To achieve a dialogue Gupta & Co set up a portal called Bhasha.com, which has became a showcase of success for Microsoft in its India strategy. In the process they discovered more than 300 companies working on Indian-language software. They conducted several training camps to make the community aware of issues like standards. Now thousands of developers are communicating through Bhasha.com. In fact, Microsoft worldwide is recognizing Bhasha as a great success to be replicated elsewhere. “We are working with many I S Vs — Modulo, Samtech, Web Duniya, Vishwa Kannada, etc. We made sure we get local language expertise from the real experts.”
Microsoft is also doing basic research in Indian languages at the high end to produce software in optical character recognition, translation, digital ink recognition, and so on. Several universities are partnering it in this endeavour, including Banasthali University, Rajasthan and University of Mysore. TCS and CMC have projects in computer-aided functional literacy packages with great potential and Microsoft is collaborating with them as well. “The story not told is how much work is being done in languages today. Other than government and public institutions, mobile service providers, banks and hospitals are getting into language services,” says Gupta.
Microsoft India is collaborating with the government at various levels to bring IT to governance. Over 150 applications – like the celebrated Bhoomi in Karnataka, which provides great relief to farmers by digitising land records – run on MS platforms. “One of the things we are extremely excited about is the rural kiosks developed by Nlogue, e-chaupal, and Drishti. These can catalyse development in rural India. They are innovative, but have not found a sustainable economic model. Out of 1,000 kiosks not many have reached an income of Rs3,000 a month for the operator. Most of them are on the Windows platform. What role can we play? Not a commercial one. In some cases it is technology, and in some cases it is transferring best practices. But we are working with all of them,” says Venkatesan.
Globally the most significant thing Microsoft has started is the development centre in Hyderabad headed by Srini Koppulu. He is an M S veteran of 15 years, who has worked in several basic technologies including Windows and Office. Today the Hyderabad centre, with about 350 engineers, is the only one of its kind outside Microsoft headquarters in Redmond, Washington.
It has come out with several products for M S and Koppulu and Venkatesan have an ambitious plan to do much more to realise its full potential. “Clearly we are not in a numbers game. Obviously there are several MNCs who have set up development centres in India. And other than one or two I wonder who is actually developing their core products here,” says Koppulu.
It has not been easy for Koppulu. Though the suggestion to set up such a centre came from Gates on his 1997 visit, Microsoft had an entrenched view that the centralised way of doing product development in one place, and that too on the Redmond campus, was the only way. Of course this had suited the company for so long, and nobody wanted to fix something that wasn’t broken.
But now five years and several products later, it has earned its spurs and is aiming higher. When Venkatesan says that Hyderabad could probably become the centre of excellence for products aimed at emerging markets, it appears like déjà vu. After all, management gurus like C.K. Prahalad have been popularising this concept of aiming at the bottom of the pyramid with world-class technology. Will Redmond take this seriously? One has to wait and see.
“How do we get different parts of business to work cohesively and how do we get Redmond to understand the opportunity that we have and throw its support in terms of technology and resources behind it? How do we become a benchmark for market innovation for developing economies? We have hired great people, but like the IITs we leave them to sink or swim. Most of them swim because they are good people, but going forward how do we develop them and become a net supplier of talent to Microsoft?” These are some of the questions bothering Venkatesan at the moment as he prepares his presentation for Bill Gates, Steve Ballmer, and other honchos in Redmond.
Bill Gates started his talk at the golden jubilee celebrations of the IITs in Silicon Valley on 17 January 2003 with a remarkable insight into the difference between the IITs and other institutions of technology around the world. He said, “I was careful to do research for this speech, so I went to the IIT Website and browsed around, and then I went to the MIT Website. On the MIT site the hot news was that the coffee house was closing down because people weren’t spending enough money there. On the IIT Bombay site, things were far more interesting. They said they had caught a leopard on the campus recently. And that’s something these US universities just can’t offer in terms of an experience.” This drew a lot of guffaws.
It is only fitting that Ravi Venkatesan, who is an IIT Bombay alumnus, and other Microsoft executives who met in Powai for the summit recently, are acutely aware of other leopards like Linux prowling around the outskirts of Powai and gear themselves up to execute the grand vision they put forward in the safety of the hotel.