India holds opportunity for 'mobile only' apps and services: Bhaskar Pramanik
Microsoft may not look at manufacturing phones from India based just on duty structure changes, which it feels is an unsustainable strategy, and may consider sourcing locally for its devices instead. Microsoft India Chairman Bhaskar Pramanik told ET's Romit Guha and Gulveen Aulakh, that the company would want to increase the market share of its devices - which has come under pressure due to intense competition - and it sees value in putting its services across platforms and operating systems. A year after completing Nokia's devices buy, Microsoft will continue to invest in rebranding and will offer the Windows 10 upgrade for free to all, except for those whose operating systems are towards end of life or pirated. On IT, Pramanik said that the government's open source policy was incorrect, and the industry was still awaiting the government's response on the subject to various industry representations. He also supported removing H1-B visa caps. Edited excerpts:
Q: How does the empowerment strategy translate for India?
A: From an Indian perspective, we are No 1 in personal computers, and we are 50% on the Xbox but low market share in tablets and phones, and we're just getting started with the Internet of Things. We believe that in India, a lot of the applications and services will be 'mobile only.' That's the opportunity. The three data centers in India at the time of launch, which will be sometime in the last quarter of this calendar year, will have more server storage networks capacity than the entire central and state government put together.
Q. The recent global announcement give the impression of sending a contradictory signal in terms of vision for the devices business per se. Would you interpret that for us? Does it take to focus away from the devices business?
A. It's become much clearer. Devices are now under the engineering group under Terry Myerson, which is responsible for everything which comes under that. Previously the software and hardware was separated, now they all convert into one. It is the same thing for ASG (applications and services group) headed by Qi Lu who has Dynamics as part of the portfolio.
The cloud and enterprise group is under Scott Guthrie. The Nokia acquisition was really critical and important from an Indian perspective because it gave us distribution muscle, reach and customers. We will be investing a huge amount on rebranding. The new Microsoft Priority stores will offer everything including booking an Xbox, buying an HP OEM device or a tablet, besides smartphones. Similarly Nokia Care centers will become Microsoft Care.
Q. Windows OS market share and Microsoft smartphone shares, are small. What is a growth roadmap like?
A. Our smartphone share is small, but growing in a very fragmented market. From an operating system perspective we are No 2, we sell more units than Apple. But from a vendor perspective, there are a few companies in the twenties and thirties, (market share) and then everybody else is in the 5% or 6%. We are in the un-differentiated latter category, but it's an opportunity.
Q. It's been a year since the Nokia acquisition. Are you happy with the pace of growth of market share for the smartphone business?
A. Like any company we would like to have a higher market share but we are very clear that we are not an incumbent in this market. So we will have to do something differently.
One of the interesting things that Satya talks about from competition perspective is that competition is not a zero-sum game. Just because Android wins does not mean that Microsoft loses. Applying our current strategy that all our services available on all platforms is a very good example of that. We can all equally gain.
Q. Competitors seems to be gunning for below Rs 5000 4G phones. Will you too?
A. Our strength is in the mid segment, there are 2 or 3 price bands where we have 16 per cent to 17 per cent market share. We are looking at opportunities to extend to both sides (of Rs 5,000 price) but that I can't share details at this time.
Q. Will you relook at manufacturing in India given the fact that there is substantial difference now versus importing?
A. There is a value in terms of sourcing locally. Now whether you should source or manufacture locally is a decision that we haven't taken as yet. You need to do manufacturing in India only if it is strategically important and you can actually make profit or money. A function of duty differentiation can change overnight, leaving you with huge capital investment which you can't do anything about. Therefore, you have to be very clear about this.
Q. Is manufacturing at all under active consideration?
A. I don't think there's anything under active consideration for the moment for many different reasons including the overall volumes. Look at the Nokia factory, they took the decision for the right reasons but then somebody said what you have been doing for the last 5 years is wrong and you have to pay more. So it became unviable. So, a lot of things need to happen in this country to make it stable fiscal regime which you can take informed strategic decision, but sourcing is always a possibility.
Q. What is your take on how the government has performed?
A. I haven't been so bullish in my entire 40 years of working life from a country perspective. I think the intent are very clear there is a strategy and plan. Now really, is a question of execution and that's really what we are hoping for. I also think that the onus is equally on the private sector. We have taken the first step in the software business with the data centers which is a good indication of the confidence we feel on the government of India's strategies.
Q. Your comment the government almost mandating open source technologies for projects? Any response from the government to your communications?
A. I am a firm believer of open source. I feel it creates innovation and leads to lots of opportunities for new startups. But it's not the only solution and to believe that it is the only solution for India is, which the current policy seems to imply, I think is incorrect. My position is very clear - you go anywhere in the world the policy is all about technology neutrality.
I think the challenge is to make it mandatory for somebody to used open source. While the government is saying we have not made it mandatory under the optional, they have said very clearly that if you don't use open source, you have to justify. As far as the government is concerned, in this in this day and age, which government offices is going to say otherwise. There has been no formal response from the government so far.
Q. What kind of growth do you expect in the SMB partner space through your products?
A. There are about 1 million medium sized businesses and 49 million small sized businesses. This is a huge opportunity and now with the different kinds of devices that you have with the ability to provide, to use cloud based services, the opportunity only increases. Previously you had to buy a certain minimum while now you can pay for as much as you use. The expectation is that is small and medium businesses are going to have the highest growth rate in corporate industry. In the last couple of years we have seen that SMB growth rate approximately are double, of the other areas. We want to accelerate the trend because we're just touching this tip of the iceberg.
Q. Has your product adoption in a startup space been a concern?
A. Yes. I would like to see more of it. Five to six years back we dominated the software industry. Even today, we are the largest software provider in this country by miles. Not even IBM is close. Our accelerator in Bangalore has performed very well. One of them is with Deshpande, which is the foundation, and the other one is with Reliance Gen Next.
Between them it makes about 70 to 80 startups, of which 60% have got funding. We found that the new generation that are coming into our accelerator are starting to use the Azure platform, Visual Studio and other pieces of technology because it makes viable and economic sense for them. The startup economy of India is going to become huge and government also realises that. We have been getting multiple calls for partnership, so stay tuned. This is one area we will be investing huge.
Q. When is Windows 10 likely to be launched in India?
A. July 29th is the global launch. It will be first for computers and tablets, phones will be slightly later. There will be multiple devices which will be introduced by different vendors including Lumia phones. Xbox will get upgraded.
Q. Is piracy still an issue?
A. Every year was seen an improvement by 3 to 5 %. But there is still 65 to 70% in India. With Windows becoming a service that works on any platform, we think it will reduce.
Q. Before every US election, the issue of immigration, H1B visas comes up.
A. As a company we believe that the best talent should be available irrespective of locations. For me, it's not a burning issue but it is for the large software companies. We also need to invest in the country we're working to ensure that the talent is made available. We don't like restrictions and we don't support any of that (caps on visas) but we also understand the challenges that countries face.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.