Nadella’s visit is seen as his deep commitment to the region as he continues to innovate and invest in India, in line with his company’s vision to empower people and organisations.
The opening of a new engineering hub in Noida, Uttar Pradesh, last week was a critical part of Microsoft’s strategy of building products and services for driving digital innovation, globally.
“This is a strategic investment for Microsoft and will play an important role in Microsoft India’s expansion and growth story. It will also create thousands of jobs for Indian engineers," said Sanchit Vir Gogia, founder and CEO Greyhound Research.
According to sources, Nadella will meet Uttar Pradesh chief minister Yogi Adityanath to help in the digital transformation of his government ecosystem.
In August last year, the software giant had organized a series of workshops in Lucknow to equip government officials in charge of IT across the country with critical Artificial Intelligence (AI) and intelligent cloud computing skills. The initiative aimed at training 5,000 personnel over a period of 12 months to help them leverage AI and secure cloud technology for efficient, transparent and productive governance.
In India, the Microsoft story is all about building partnerships with start-ups, government and the developer community.
"From a business point of view, Microsoft has been increasing its research activities in India and running a number of AI/deep tech pilots in India in areas like healthcare, " says Jayanth Kolla, partner, Convergence Catalyst, a deep tech research and advisory firm.
India is a top performing market for Microsoft as it focuses on increasing consumption of its Azure cloud services, added Gogia. More than half of the company’s revenue in India now comes from the cloud and cloud-based services, signaling its growth in a market where it competes with Amazon’s Amazon Web Services (AWS) and Google cloud.
Nadella has spent the last five years building up Microsoft’s cloud business, which lets customers avoid having to buy and run their own hardware and applications. The company rebranded Windows Azure as Microsoft Azure in 2014 and has turned it into one of the largest cloud computing infrastructure service, second only to Amazon.com's AWS.
In its 2020 second-quarter earnings report, Microsoft reported that its Intelligent Cloud business, which houses Azure, generated $11.9 billion in revenue in the quarter, a 27% increase year-on-year.
Many enterprises like InMobi and Myntra are moving to Microsoft Azure as their preferred cloud provider and the technology collaboration will help them accelerate growth.
Microsoft's relationship with the Indian government, built over decades, is stronger when compared with that of other global tech giants. But things are challenging as a single critical statement can upset the apple-cart.
"Nadella will want to assure the government of his and Microsoft's complete support for government projects and policy, irrespective of his personal views. A deeper engagement with the Bharatiya Janata Party's most key state and a meeting with CM Adityanath is part of that assurance and strategic engagement with both Center and state governments," says Prasanto K. Roy, tech and policy advisor.
It isn't just multi-national companies that have tense relationship with the government: IT majors have dialed down on bidding for key contracts due to non payment, and Wipro recently suspended services for Assam's NPR-related service.
Microsoft was empanelled as a public cloud service provider by the Ministry of Information Technology (MeitY) in late 2016. It continues to be a certified cloud provider for state governments in India.
Another challenge for Microsoft will be around data localisation policy and related regulation that is coming up in India, which necessitates companies to host data locally.
"This for a company like Microsoft that is running a cloud service like Azure and growing it would mean opening more and more data centres locally in India and at the state level too. This would increase the capex cost and the operational expenditure of the company," adds Jayanth Kolla, Partner, Convergence Catalyst, a deep tech research & advisory firm.
Much of the optimism around Microsoft’s prospects is tied to its cloud service Azure, where it competes with Amazon Web Services (AWS) and Google Cloud and with cloud wars heating up. In India, Microsoft still has much to prove before it can claim cloud dominance.
"Our CIO customers do often share with us their concerns with Azure outages and also support issues around costs and timeliness. Both are extremely important topics for organizations to ensure availability of resources in production," added Gogia.