Microsoft India's Venkatesan: Adapting Redmond to India's needs

12,500 kilometres away from its spiritual home in Redmond, Washington, USA, Microsoft Corporation is settling into its second home in Hyderabad. But behind the swank exteriors of the new India Development Centre building, questions are being asked about the world's richest company. When senior executives describe India as "unique", they are not being facetious (indeed, facetiousness is the last thing anyone could accuse Microsoft's managers of). India is unique for Microsoft because it poses unique challenges for the company. The way the company deals with these challenges may well define its future legacy. In India. And in the world. That could explain why, in the span of a month, two of the company's most senior managers have come visiting. First, in the week starting October 17 came Craig Mundie, Chief Technical Officer (CTO) and the man once described by The Economist as Microsoft's Secretary of State, along with 25 other executives. Then, between November 14 and 17, it was the turn of CEO Steve Ballmer.

To understand Microsoft in India, one has to understand how the company functions here. There is no 'one' Microsoft India, but four divisions: Microsoft Sales and Marketing India (the 'owner' of the Microsoft India tag) based out of Gurgaon; Microsoft India Development Centre (IDC) in Hyderabad, which actually develops all or part of some Microsoft products; Microsoft Global Development Centre India (GDC) also based out of Hyderabad, which makes Microsoft's internal development tools; and the Microsoft Global Support Centre based in Bangalore, which does high-end technical customer support. Each division has a separate organisational and reporting structure. And although Microsoft does not disclose the financial performance of its units in India, market estimates put its revenues (for sales and marketing) at around Rs 850 crore. Then, it isn't the money India promises that makes it so important for Microsoft (although no company can afford to turn a blind eye to this). Rather, it is the challenges.

Microsoft was born in an era when personal computers (PCs) were a novelty; the only other computing devices available in the market were calculators. Since then, the company has grown into a $36.5-billion or Rs 1,64,250 crore (2003-04 revenues) behemoth. However, for a majority of Indians the first computing device is unlikely to be a computer, even one at a cyber-café; it is more likely to be a mobile phone. And a mobile phone could well be the interface through which most Indians first access the internet.

There are almost 50 million mobile phone subscribers in India today, and this number is expected to touch 100 million by either 2007 or 2008 (depending on who you choose to believe). Of course, Microsoft also wants to be on the phone, but though these products are available (think, a range of Smartphones such as the i-mate and O2), at rather steep prices, they are outsold handily.

The problem in India is manifold. To attribute India's 0.9-per cent computer penetration on affordability alone would be incorrect; after all, there are more registered cars in India. "There are lots of people who can afford to buy computers who choose not to, because they do not see any value in it, primarily because of language limitations," explains Rajiv Kaul, Managing Director, Microsoft India. The irony, according to Microsoft, is that India's standing as an information technology (IT) superpower has almost no backing up. "It is terribly difficult to project yourself as a superpower when you have no defences at home," says Kaul.

Microsoft India MD Rajiv Kaul: Language is the key

Bridging The Digital Divide

Language is a problem, a big problem. Most software is available in English, a language that according to some estimates a mere 5 per cent of India's population is able to read, write and speak fluently. "To do well in India we have to be relevant locally," admits Ravi Venkatesan, Chairman, Microsoft India. That said, Microsoft has been aggressively working to crack the language barrier. For instance, support for Hindi and most Dravidian languages is already available on Microsoft Office. Then there is also the strategy to launch the "Windows Starter Edition" early next year, a move that will make a Hindi-language enabled version of Windows available for the first time.

But will it work? "Indian consumers are not as cost conscious as some people like to believe; they chase value, and we expect this product to deliver that value," says Kaul. Not everyone is convinced. "Consumers would want the real deal and I do not think that this starter edition is the real deal," says an executive at an Indian it firm. "If the real deal comes with the pc, great, but consumers know that otherwise they can always buy it for Rs 200 somewhere outside." Kaul is aware that the starter edition isn't for evolved users (it is a more functional piece of software). "It may not be the perfect piece of software for people who have used computers for a few years. You must remember that since this product is targeted at users who have never used a pc before in their lives, this is how to drive penetration." The software, claims Microsoft, passes the 'grandmother' test and when it starts up for the first time, it teaches a user how to work with a mouse. It is like a "bicycle with training wheels", elaborates Kaul.

Unfortunately, India is not a homogeneous country, and a multitude of languages makes life more difficult for companies such as Microsoft. In fact, when he unveiled the starter edition of Windows, Dayanidhi Maran, Union Minister for Telecom and it, asked Microsoft to work quickly towards a Tamil version (he represents Tamil regional party, DMK). "It is impossible to justify keeping one language in and one out," says Kaul. The only solution is to ensure that Windows is available in 14 different linguistic flavours, a lofty ambition that is part of Microsoft India's Project Bhasha.

However, does such an idea make any commercial sense? Even Microsoft insiders admit there is little or no monetary logic behind the project, at least in the short term. "However, if we are to make a difference in India, these things are crucial," says Venkatesan. "After all, our corporate mission is to help people and businesses achieve their full potential." The money, presumably, will come later. "The language project started because Bill (Gates) wanted it to, and in his own words it really isn't about the money," reiterates Kaul.

Microsoft, then, is trying to be a global local company, and as one senior executive puts it: "We are doing far more for Indian information technology than some of the so-called Indian it 'majors'." The executive then goes on to take some claim (on the company's behalf) for helping Indian it services firms grow rapidly in the late 1990s by offering its Microsoft-certified it professionals programme. She isn't far off the mark: today, there are some 3,50,000 Microsoft-certified it professionals in the country.

While low pc penetration (0.9 per cent in 2004) is something that hamstrings the company, the real problem, according to CTO Mundie, also the company's executive sponsor for India, is connectivity. "Connectivity is the single-highest price component in pc ownership today," he says. "With pc prices falling, we are continuously trying to drive penetration. And we are associating ourselves with hardware manufacturers, and crucially with broadband connectivity providers to offer a pc on instalment package," adds Venkatesan. Even though the scheme has been in place for only a short time, he calls it an integral part of Microsoft's 'digital inclusion' mindset, an effort to 'include' the masses in the digital revolution.

"THE BAR IS HIGHER FOR MICROSOFT"

Microsoft CEO Steve Ballmer was in Hyderabad to inaugurate the company's India Development Centre. He spoke with BT's Kushan Mitra. Excerpts: You're here for the inauguration of Microsoft's new India Development Centre (IDC) campus. How does IDC fit into Microsoft globally? We are doing some important engineering work here. I am excited about what we are doing with Windows Longhorn, the work we are doing with Windows Mobile, and things we are doing with msn and business solutions. Do you think that one day Hyderabad can be a parallel development centre to Redmond (Washington, USA) in terms of high-level technical work? I would say that it already is. We have more engineers in Redmond, and therefore, we are doing more work in Redmond than we do in Hyderabad. The majority of software is targeted at 'richer' people, especially in developing countries such as India. As software filters down towards the lower socio-economic strata of society, how will it change? I think the first key question to ask in terms of digital inclusion and broader penetration of this kind is: 'What is going to happen to the hardware; what is the hardware going to look like?'. (For instance), will it look like PCs? Will it be less expensive than PCs? Will software need to be less expensive and less functional? We're trying that. We are launching our starter edition of Windows here in January. It is conceivable that we will test ways to 'rent' software, so as to make it easier to consume in little bite-sized pieces. We will run some tests in India and China and other markets. We are working to ensure that not only software, but the entire information technology ecosystem-hardware and software-is affordable. Today if you look at it, the most expensive thing about a pc is not the hardware, not the software; it is the cost of broadband internet access. There is a video of yours floating around on the internet, where at an employee meet you said: 'Four Words. I love this company.' Why do you love this company? And at the same time, why do you think so many people do not love this company? I love Microsoft because we have great people. I love Microsoft because I think we work on important things and try to fulfil our mission of helping people and businesses around the world realise their full potential. Most people who use computers really do love our company and the products and services we provide. We have done well, and they expect us to deliver better and better and higher quality and more capable and more innovative products, and I think that comes with success. Do you think the media is wrong to give you a bad rap when it constantly talks about business practices and security flaws? No, I don't think anybody is wrong, I am just saying that the bar is higher for us. You can never tell your customers, 'No you're wrong. You are wrong to expect more, better, more, better, more, better...'. The search service that you have launched to take on Google is a major part of your future strategy. But, honestly, don't you think it's a bit late? Google was late. Google is what, the third big search phenomenon. Yahoo was once big. Now Google is hot and Google can get cold too. Google didn't invent search. Now, while we are giving them the respect, it does not mean that we cannot change the game again, just like they changed the game on the guys who came before them. You can argue that Microsoft has been hot for quite some time. Well, in some things we have been hot for ever and ever. In some things we start cold and go hot. Luckily, we have not had too many things where we started hot and then went cold. For the complete interview log on to www.business-today.com

The future on this front will be even more exciting, says Venkatesan. "There are teams working on projects to adapt hardware and software to the needs of a country like India. The way we deliver software will have to change because the next billion pc consumers will be totally different."

That Annoying Challenger

Then, there is a very pesky penguin, Linux. Technical people from Microsoft go out of their way to highlight the inconsistencies in Linux-"It is not safer," says Mundie-and one executive complains that low-cost PCs that are shipped out with Linux actually end up running pirated versions of Windows, often offered as a nudge-nudge-wink-wink add-on at the time of installation.

But Linux as an operating system (OS) for individual users is very different from Linux as an OS of choice for enterprises. Companies have traditionally been weaned on UNIX, the mother of all OS from which Linux is derived. "You can give arguments about total costs of ownership and the security inconsistencies of Linux, but there are people who feel comfortable with Linux because it reminds them of UNIX," says Srini Koppolu, Managing Director, IDC. Koppolu's team in Hyderabad is working to change this; it is UNIX Services for Windows (USW).

"Enterprises recognise the value of Windows at the back-end, because most front-end machines also run the operating system," says Koppolu. "This piece of software is a unique proposition because it allows us to tell an enterprise customer that he can use UNIX and Windows side by side." According to Michael Ferris, Member (Product Development Team), Red Hat, a Linux reseller, Linux provides the ideal platform for long-time UNIX users. "Linux is the perfect platform for enterprises wanting to switch over from UNIX, because the operating environments are so similar and Linux is more capable than the competition," he says. The competition he refers to is, of course, Windows.

India is thus developing some of the software that will play a crucial role in Microsoft's future, but the going for IDC has been relatively low-key. CEO Ballmer talks about the quality of talent at the Hyderabad campus and the work on USW, Longhorn (the codename for the next version of Windows) and msn that is taking place in India. The problem for Koppolu has been "good engineers are extremely difficult to find". "India churns out 2.3 million (engineering) graduates every year, but the number of 'good' graduates among this is very few," says Venkatesan. "There is almost no investment in fundamental science here; last year there were only 34 computer science doctorates awarded (in the country)."

The headcount at IDC and GDC in Hyderabad currently stands at around 700. As the company moves from its old offices at Hyderabad's Cyber Towers to a swank new building of its own in the Cyberabad district, Koppolu plans to more that double that.

Yet, IDC isn't Redmond. "You have to remember that the IDC is still very young, and the requisite skill sets are still not in place, but in the long run I do believe that a lot of critical core development work will increasingly start to come from Hyderabad, but that will not start happening tomorrow or even next year," says Mundie.

This is something Koppolu, who has more than 10 us patents to his credit, agrees with, but his vision for IDC is clear: to make it an integral part of Microsoft's development operations. "This is not a body shop where engineers write useless code. This is a place where we want to attract the brightest and the best to develop software that will make a difference to people's lives." And, equally importantly, to Microsoft.