Microsoft ‘will be 5 times its size in India now’

For a man who claims to be a non techie, Ravi Venkatesan packs a lot of tech savvy. “But mine is a common sensical approach”, says the chief of Microsoft India, the biggest end-to-end presence of the World’s biggest software-maker outside of the US.

India clearly has a pivotal role in the future growth of Microsoft globally given the major role it has to play in the current.

He spoke to Chitti Pantulu on a host of subjects on the sidelines of the India is Innovation Summit in Bangalore on Monday. 

How important is Microsoft India where innovation at Microsoft at large is concerned?

Innovation at Microsoft has been about technology innovation all this while. That has been the lifeblood of the company which spends some $7 billion on R&D and product innovation every year.

Therefore in many areas we are the best in class particularly where we have had a long cycle of investment be it IPTV, where nobody had ventured, or the gaming area where we have become a strong number two.

The same is the case in mobile area where even though we entered late, we are outselling blackberry. There are some other areas like search where we are playing the catch up game. But the fact is that for a long time innovation was product and technology innovation for Microsoft.

But when you come to a place like India or China you have to think of two things. How do you apply those products and innovate around services?

Innovation at the end of the day has also to solve either societal or business problems. Secondly sitting here in India with the largest pool of people out of the US we have to look at how much of the product development is being driven out of here for the globe.

So the issue is about innovating for India and from India. We differentiate the two. We are doing exceptionally well on innovating from India. The exciting story about product development in Microsoft in India is that it has gone beyond doing just the features and owning development end-to-end.

The MIDC has graduated and now they have the RFID, DPM and mobile applications. Talking about the Microsoft Labs in Bangalore two years is hardly anything for a research unit.

We have a very high degree of confidence in this context.

The challenge is innovating for the Indian market as it also requires an ecosystem of players. No single players can make it work as it requires a passion for India from all of them to make it a success. There is a need for a shared commitment to the cause to make it work.

And important scenarios for this are in eGovenance, education, IT adoption and small businesses so that they are more productive. And for this we have unleashed all the right things in India. For instance we have seen this in our project Shiksha which we saw will not be a success without government role.

And then we went for good partners NIIT and Educomp. And we also realized it is for the long haul. Many companies do not stay with it for long. And ultimately anything like this has to have a sustainable model.

But how useful has innovation been in staving off competition?

The company has always had tough competition in several segments. First there was IBM with its OS2 and so on. And then in applications space we had Lotus, Wordperfect and Wordstar.

They were the innovators in the category and had a strangle hold for a long time but we took them on. Google was not the first in search but they had a business model that was first. That is always gonna be the case. In a given part of the business there will be an incredible competitor.

But the strength of Microsoft is that it is willing to take big risk and wait a long time for a pay off and stay with it till it is the market leader or a good number two. But the challenge now is that we have a very broad portfolio of products that nobody else has - desktop, enterprise software, gaming, you name it.

But the difference this time round is that Microsoft is being taken on in segments where it has been ruling the roost for a long time?

We see that competition is good for the customer and obviously it will challenge us and inspire us to do better. People are bringing disruptive models and the company will pause for a time to see if this disruption is for real. We embrace it and try and out-innovate it.

Look at the whole Software Plus Services space. In the applications space salesforce.com <http://salesforce.com> was the first and now we have guys like Google. We are responding with a fundamental shift in the company to this. We are setting up the largest datacentre in the world, we are re-architecting every product in the company so that it has a services component.

How important is Microsoft India in this exercise?

It is hugely important in two ways. Places like India will adopt the software plus services model much faster than the emerged markets. There are reasons for that. First is you are not hooked to legacy. You are not hooked to the existing business model.

The reason is the challenges peculiar to India like affordability. We are addressing that with a subscription based-ad funded model that will allow customers spread their payments. The other thing is the model also addresses piracy. We host the applications and charge a monthly rental.

For these reasons the adoption will be faster in India for software plus services model. Therefore it is important for us to show local innovation. Redmond will build the platform its adoption to the local non-traditional ecosystem and tying up with partners like telcos, ad agencies and others will be done here.

So the expectation is that India will show the way where the subscription model is concerned.

Going forward what percentage of revenues do you see coming from these services and how large will you be in India?

I am not allowed to give you a break up but let me say the opportunity is huge. But certainly in 10 years time we should be five times the size we are today. And this will not happen without the S+S model.

What is going to happen is that people who have not used IT will start using IT and they will not consume it in the traditional ways. They will consume it only if you give it to them in this way. 72% of the people do not pay for the software they use.

If you get them to pay for what they use it is a huge upside. Overall I would say our business needs to be five times of what it is today.

Most of the emerging markets, including India, are highly price sensitive. How do you plan to find that optimal pricing?

We will be doing some focused group exercises and look at the price elasticity and demand. That is where our pilots will play a big role for instance our project in Tirupur where we have set up the servers and provided hosted applications. In the traditional way it would have cost Rs 50 lakh for each company.

Now they pay only Rs 5,00 per month. Pricing is very key and the subscription model provides the flexibility. And then if you talk of education we have pilots going on in Pune and Bangalore. We call it the IQ PC that we announced in June. The markets exist everywhere. We have to innovate and tap it.

Talking of India which are the areas that will be the growth drives for Microsoft?

When you are living in this kind of a situation everything is. Today our enterprise business is the biggest part of the business, at lest half. If you look at the way Indian business is growing what will happen to it?

It will explode. They are going global and getting acquisitive. Barring some debacle there is no stopping Indian business now. And then you look at SMEs. There is no IT penetration. That is a huge upside.

And then there is the consumer business, the boom is anyway on. We are running pilots for all of them and we will tap all of them.

But then while you are working on the pilots the markets are racing ahead. Speed is of essence. What are you doing about it?

Our objective is to help the companies in the race to win the race. Not compete with them. Many other companies have that problem. They try to outrun their customers. We don’t.

Will Microsoft get acquisitive in India sometime?

Maybe we will. If you look at Microsoft we have been very acquisitive over the last 24 months. We have not looked at India till now as we had to put the foundation in place which we have predominantly done in the last three years. Now we might go out and look for some though I will not say we are out there scouting.

If at all which space do you think you will go after for these acquisitions?

Probably the consumer space if at all. That is where we don’t have a significant presence.

Typically when do you go for an acquisition?

When you don’t have the technology or when you don’t have customers. Technology will be built by Redmond. In the commercial space we don’t have a significant number of customers so that could be one area where we may look though I must say I am only speculating right now.