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                                                             -Neelam Dhawan, managing director of Microsoft India

Neelam Dhawan, managing director of Microsoft India took over the reigns of the Richmond-based software giant in India in March last year. Nearly a year later, she speaks to Bhaswati Chakravorty of Dataquest about challenges for Microsoft in India-software piracy and Linux, Microsoft's focus segment for growth, and the contribution of the India Development Center to Microsoft's R&D initiatives.

SMBs have emerged as a big focus area for Microsoft. What is the company's strategy on that front in India?
SMB is one of the fastest growing segments today, with an estimated market size of around $1.8 mn. But, it still remains largely untapped, making it a very exciting proposition for us. The challenge, however, is to deliver consistent quality and streamline processes at the right price.

We are looking to extend our reach in the SMB segment to smaller towns and Tier-II cities because there is tremendous potential in these places. We have penetrated eight such cities so far. The target is to reach 18 cities by the quarter ending March, and 32 by the end of the year. Our strategy is just not just to target resellers and partners in these cities but to also conduct workshops to make prospective customers aware of our technology and solutions.  

We are also looking to position our technology in micro-verticals in case of SMEs. Auto ancillary, for example, has a lot of potential. We are also looking at increasing our partnership coverage to penetrate SMBs.

After being in India for over 15 years now, Microsoft has not been able to get its act together on software piracy. What has gone wrong and what do you propose to do from here?
I think the basic problem is the lack of awareness of the end user. Studies conducted by Microsoft have revealed that at least 50% of the people in India pirate unknowingly. So, the first and foremost step is awareness building. An informed user would always understand the advantage of using legal software and try and restrict usage of pirated copies. Customers need education. We are also talking to resellers to make them provide only legal software to customers. 

Pricing is another issue that we are trying to address to combat piracy. We have come up with a good-better-best strategy that would offer the best of the price-product combination to the customers. This redefined pricing strategy tries to segregate products according to a pyramid model that addresses starter, middle and expensive software separately. For the starter level, we launched the Windows XP Starter edition last year, in Hindi and Tamil. We tried to test the market with this launch. We are also planning to launch the English version by the end of the year.

What is Microsoft's endeavor to promote low-cost computing in India?
Microsoft is aggressively trying to promote low-cost computing as this would only help increase PC penetration in India. There's Windows XP Starter which is one of our most important initiatives in the low-cost computing front. Localization of Office is another important initiative. Today, Microsoft Office is available in Indian languages. We are also offering our small business server solution at attractive prices. In a nutshell, we are trying to provide the most cost-effective combination of operating system, Microsoft Office and service.

How big is the Linux threat to Microsoft in India? Microsoft has significant presence in the Government space globally. Why then is Linux ahead of Windows in that space in India?  
In the first place, we do not consider Linux to be a threat to Microsoft. If one does a serious cost-benefit analysis with respect to Linux vendors, it will work out to be far more expensive than Windows. This has been proved by a large number of independent studies conducted worldwide.

Secondly, it is a misconception that Microsoft has not been able to make significant headway in the government space in India. If you look at the top 10 e-Governance projects in the country, seven are on the Microsoft platform. The key to success in the government segment is to provide the best technology for a particular requirement. We provide the best technology with a commitment to provide the required support.

We are working with a number of state governments on a variety of e-Governance projects across the country. We are funding and administering Centers of Excellence for e-Governance applications. The centers showcase an array of Microsoft products and solutions and demonstrate the interoperability of Microsoft products with other platforms. These centers also facilitate the government to conduct technical training sessions for its officials to create a large pool of professionals well versed in software development for e-Governance projects.

There is also lot of excitement in the government with regard to the Windows Vista.

How important is the hardware business to the world's largest software company, especially post the X-Box?  
Hardware is an important part of our business, but we would essentially like to be identified as a software company. As an organization, we are profitable with software, not hardware.

Gaming, we believe, has huge potential in India. Unfortunately, we were not able to launch the X-Box in India because of serious issues with supply. We are hoping to launch the X-Box 360 in India in the next 12 months. 

What is the contribution of the India Development Center to Microsoft's global R&D work?
MIDC, Hyderabad is a strategic software development center for Microsoft with focus on strategic, IP sensitive, long term-oriented software development projects. Commenced in 1998 with two products and 20 people, MIDC has now grown to 900 people and 35 products. MIDC is well integrated into key product families at Microsoft, with teams at Hyderabad serving as true extensions to project teams at Redmond.

Recently, Microsoft launched Visual Studio 2005 (Team Suite), SQL Server 2005 and BizTalk 2006. The IDC contributed to significant components of these new products. For example, IDC owns end-to-end development of Visual Studio for Devices and SQL Mobile. Some of the other key development initiatives from MIDC include Data Protection Manager, RFID Platform Technologies, Office Mobile, Windows SFU, Features of Longhorn or Windows Vista, Office Live Meeting and Microsoft-CRM. The MIDC has also embarked on incubating new products and technologies-both for developed markets (eg.RFID) and for emerging markets. The MIDC filed 40 patents in FY05, and is on track to file 70 patents in FY06.

What will be the priority areas for Microsoft in the next six months?
We would be launching several new products in the next six months-the Microsoft server suite, Windows Vista and Office 12.

We would be also expanding our reach into smaller towns and cities. We expect to penetrate into over 20 such destinations by the end of June. As I have already mentioned, we are looking to reach 32 cities by the end of the year.

We would also be focusing extensively on the enterprise customer. Microsoft is going to deepen its engagement across verticals with a sharp focus on sectors like manufacturing, banking, and ITeS. We are also looking to consolidate the Microsoft Dynamics market with ERP solutions and services that would help organizations scale up better and faster. Consumers or the end users would also be our focus area for growth in the coming months.

We have also begun to work on our agenda of better engagement with ISVs. We have launched the ISV Empower Program to deepen this engagement.

Bhaswati Chakravorty
bhaswatic@cybermedia.co.in  

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