Mumbai: The world’s largest software products company Microsoft Corp. wants India to be among its top five revenue generators globally within the next three-five years.
At the current revenue rate, India comes after Canada—Microsoft’s 6th largest market from where it generates around $1.2 billion (Rs 5,516.4 crore) in annual sales. The US, followed by Japan, the UK, France and Germany, in that order, are the top five revenue generators for Microsoft currently.
India generates around Rs 3,755 crore or about $810 million, in annual revenue for Microsoft, according to technology magazine Dataquest, which tracks the India revenues of multinational companies.
The foundation for steady and robust growth has already been put in place in India, said Jon Roskill, head of Wordwide Partner Group, who leads Microsoft’s global sales and marketing team of around 5,000 employees and nearly 640,000 sales partners that drives 95% of Microsoft’s $62 billion annual revenue.
During the economic slowdown, Microsoft expanded its reach in India from around 13 cities to at least 300 cities, through a network of nearly 7,500 partners—“seeds for future growth”, as Ruskill puts it.
“We are most excited about the raw growth that is going on here in India, especially in the small and medium sized enterprises,” Ruskill said in an interview. “We’ve gone from 13 cities to 300 cities, over a period of the last two years. It is really helping us get that geographic coverage. Our partners are seeing that business is coming.”
India as a geography grew the fastest for Microsoft globally, Dataquest says, and its revenue in the country during the April 2009 to March 2010 period were more than the combined India revenues of enterprise software makers SAP AG and Oracle Corp.
One of the challenges that a company like Microsoft faces in India is piracy—unauthorized or illegal copying of software—that deprives the company of legal sales.
The Indian chapter of anti-piracy group Business Software Alliance—of which Microsoft is a member—estimates that nearly 65% of all software used in India is pirated, with the revenue loss being pegged at around $2 billion in 2009. Microsoft is betting on increasing adoption of the cloud computing model coming to its rescue in beating piracy. In the cloud model, as the software is sold or offered as a service over a network, rather than physically installed on client premises, there is little room for illegally copying it.
“We want to have about 20% of our sales to be generated through cloud model, in the next five years,” said Ruskill.
Currently in the US, which according to Ruskill is a year ahead of India in terms of cloud adoption, Microsoft generates some 5% of the enterprise email software Microsoft Exchange through the cloud model. “Going at the current run rate, by the end of the year, it should be closer to 8% or so.”
Companies such as fast food chain McDonald’s Corp., soft drink maker Coca-Cola Co. and pharmaceutical company Glaxosmithkline Plc are among those migrating to the new paradigm, Ruskill claimed.
Further, feedback from its channel partners across India suggest increasing use of so-called software asset management tools among enterprises—an indication that companies, both small and large, are trying to ensure they are licensed to use all the software installed on premises.
The so-called cloud computing market in India will grow to around $1 billion in the next five years, from about $110 million currently, says technology market researcher Zinnov Management Consulting.
Software-as-a-service, or SaaS—a part of the overall cloud computing market—will touch around $650 million in revenues by 2015, Zinnov estimates.
“In absolute terms, tier-1 cities are still driving sales volumes for MNC software product companies, but there are very real opportunities in tier-II cities,” said Sanchit Vir Gogia, associate research manager at the Indian arm of Singapore-based Springboard Research. “That said, selling software in smaller cities is not the same and involves building relationships besides training the channel partners in products and selling associated services.”
“While companies like Oracle, Microsoft or SAP are on the right track in expanding their geographic reach to smaller cities, making it work like in the larger cities might still be some ways away,” he added.