Mumbai/New Delhi: When Satya Nadella was named to head Microsoft Corp. on 4 February last year, there were expectations that he would boost its already strong enterprise business and research and development units in Hyderabad and Bengaluru, given his Indian roots and engineering background.
A year down the line, Nadella has made Microsoft, primarily known for its proprietary software, more open, and sharpened its focus on cloud and mobility solutions.
In India, Microsoft under Nadella has made investments in data centres across the country and strengthened cloud services solutions for small- and medium-sized enterprises (SMEs). The company has also focused on selling more Lumia smartphones with the Windows operating system (OS).
“Microsoft’s decision to provide its commercial cloud services—Azure and Office 365—from local data centres in India by end of 2015 will drive public and hybrid cloud adoption. A locally-based data centre will help the company cater to customer’s demands of data residency, regulatory compliance and security issues effectively in the country," said Sanchit Gogia, chief executive of Greyhound Knowledge Group.
But the success of Azure cloud services will be contingent on multiple factors like pricing, compared with services offered by companies like Amazon Web Services (AWS), readiness of competitive local independent services vendors (ISVs) like Ramco Systems Ltd, “to host on Azure among other factors", he said.
According to Jaideep Mehta, managing director of International Data Corp. (IDC), India and South Asia, there has been a “radical departure from Microsoft of the past since Nadella took reins as the CEO".
He added that the base of the strategies was “cloud first, mobile first", which reflected Microsoft’s willingness to embrace a new technology paradigm “though it is yet to pay off".
Microsoft’s cloud product business has grown in India, he explained, but added that it will take some time for operations to realize gains, as the domestic data centres that were announced will take time to come on stream. “That will really drive the next wave of growth", said Mehta.
According to a 4 September study by market research and advisory firm Current Analysis, 68% of enterprises in India with 100-plus employees are using cloud-based services, while the remaining 32% plan to do so over the next 24 months.
Microsoft’s leading competitors in the cloud segment include International Business Machines Corp. (IBM), Hewlett-Packard Co., AWS, Google Inc., Salesforce.com, Oracle Corp. and SAP SE. However, it simultaneously has strategic partnerships with companies like SAP, Oracle and Salesforce, and recently even made Windows software available on Google Cloud.
Making Office 365 free for Apple Inc.’s iOS and Google’s Android was a good move by Nadella, according to analysts, because it helped Microsoft make consumers stick to Word, Excel and Power Point documents on different platform-based devices.
“While Microsoft is the incumbent vendor in the enterprise IT (information technology) space, the first mover’s advantage that Android-based players gained in the Indian enterprise market is not something that Microsoft is likely to dislodge any time soon," said Alok Shende, founder director and principal analyst at Ascentius Consulting. “Robust depth in the Android-based enterprise app developers and support from dominant SIs (system integrators) for the Android platform is translating into both extensive reach as well as cost economies for enterprises to evaluate Android more favourably."
According to Vishal Tripathi, principal research analyst at research and advisory firm Gartner Inc., there hasn’t been any major impact on the devices side of the business at Microsoft in the last one year, “though it looked at areas like XBox, Nokia handsets and other stuff like augmented reality and band wearables, since by DNA it isn’t a hardware company".
Another notable thing, added Tripathi, “was Windows 10 and its better app ecosystem".
According to Gogia, though, Microsoft’s acquisition of Nokia Oyj’s devices and services division under Nadella’s leadership has helped it gain a “significant" footprint in the mobile devices segment. The company has shipped 10.5 million Lumia phone units in the December quarter of 2014 as compared to 9.3 million units in the preceding quarter, a 12.4% sequential growth, he added.
“The cross device connectivity feature in Windows 10 OS will help Microsoft witness a further elevation in its device’s sales," he opined.
Microsoft does not break up India revenue figures. However, according to Dataquest, a Cyber Media (India) Ltd publication, Microsoft India’s revenue in the year to 31 March, 2014, touched ₹ 7,224 crore from ₹ 6,122 crore in the previous year.
According to the 6 August report, growth was boosted by the launch of Windows 8.1, Windows Azure, Microsoft Office 365, and the decision to give away Windows 8 free to India smartphone manufacturers.
With this decision, it has attempted to emulate Google that gives Android free to handset makers and makes money through search, ads and app sales. It will also result in eating into Android’s market share, say analysts.
IDC has forecast that Android’s global share will fall to around 76% in 2018, followed by Apple’s 14.4% while Windows Phone would almost double it share to 7%.
However, Microsoft cannot rest easy.
The Windows phone side will remain challenging for Microsoft as it needs app developers to create content for the Windows platform, according to Mehta.
Shende, too, says that while the launch of Windows 10 is likely to be the first steps in helping Microsoft extend the desktop apps to mobile apps, “until there is a large sale migration from Windows 7 to Windows 10 in Indian enterprises, the likelihood of turning technological advantage stemming from Windows 10 into a marketplace gain for Windows Tablet is likely to remain slim".