It's Advantage India For Satya Nadella and Microsoft

by Preeti S    Sep 29, 2014

Satya Nadella

In the past seven months as the CEO of Microsoft, Satya Nadella is busy identifying areas where Microsoft has the scope to expand and establish its base. Days after taking charge in February, Nadella made the right noise with the announcement of Word, Excel and PowerPoint apps for the iPad, which had been missing during his predecessor Steve Ballmer’s stint. Nadella being a Cloud computing expert has been making efforts to popularise Microsoft’s Azure platform among enterprise customers.

 Microsoft has said it will set up local data centres in India by 2015. “Last year, our cloud business in India grew over 100 per cent. Buoyed by that success we have now decided to offer cloud services from local data centres. This will help us make global infrastructure and make that available to local data centres,” Microsoft CEO Satya Nadella said here 

Microsoft  in 2014 reported revenues of $23.38 billion, an increase over $19.9 billion from the same period last year. But the challenge for Nadella has been the poor performance of Windows Phone platform.  As per data, 90% PCs run Windows, but less than 5% of smartphones and tablets run on the same.

 Unarguably, India with 900 million mobile subscribers is a critical market for Microsoft. According to IDC, Microsoft’s Windows Phone mobile operating system accounted for only 4% of all smartphones shipped globally in the second quarter, while Android accounted for 79% and Apple ’s iOS took up 13%.

Satya Nadella, who is visiting India, shoulders the responsibility of building the smartphone base in India, his home country. Nadella was born in Hyderabad  in India, in a Telugu family to an IAS officer, B. N. Yugandhar, who was a top bureaucrat in the rural development ministry when Narasimha Rao was the prime minister.  

In India days after the launch of Prime minister Narendra Modi’s ‘Make in India’ campaign, Nadella can possibly use this opportunity to promote his India-centric plans.

 “I would advise him (Nadella) to take a fresh look at mobile, or bring in some talent who really understands the space,” said David Smith, an analyst at tech research firm Gartner, in his blog, after Nadella’s appointment as Microsoft CEO.

Microsoft acquired Nokia’s mobile phone business for $7.2 billion this year. Nokia, once a global leader in mobile phone market, has been relegated to third position in India due to growing popularity of Android and iOS smartphones. Microsoft has faced a gradually decline in its PC-centric Windows and Office business and needs to challenge Apple and Google in the new realm of mobile computing, believe experts. 

India advantage

India, according to a recent finding by Strategy Analytics, would overtake the US, to become the second-largest smartphone market by 2019. In the first quarter of 2014, device vendors in India shipped 17.59 million smartphones as compared to 6.14 million shipments during the same Q1 of 2013, according to IDC.

That India is a cost-sensitive and value-driven market makes Nokia and Microsoft to exercise cautious optimistic strategies. They need to compete with brands like Samsung and other local brands such as Micromax, which are increasingly dominating the low-cost phone Indian market.

In that direction, Microsoft has indicated that it would lower prices of 4G and 3G mobile phones in India to leverage operators’ plans to launch high speed 4G services. The company has plans to launch its latest 4G enabled phone Lumia 830 priced at around Rs 26,000, as per sources.

 “We want to continue to push point lower and lower than anything we have today. That’s the statement for both 3G and LTE (4G) because that is the thing which gives us scale of the ecosystem,” Microsoft’s Mobile Device Sales, Corporate Vice President Chris Weber had told PTI.

Microsoft is said to be offering free Windows Phone license to Indian OEMs to bring down the cost of devices. It is reportedly in talks with Micromax to produce Windows phone for Indian market.

Manufacturing unit

Globally, Nokia has eight factories, two in China, one each in Brazil, Hungary, India, Mexico, Vietnam and South Korea. But while acquiring Nokia, Microsoft didn’t include Nokia’s manufacturing unit in India’s Chennai because of legal complications. Now, with India’s brisk promotion of the manufacturing industry, it could be the right time for Microsoft to reconsider the move.

India offers the benefits of cheap labour and low-cost infrastructure. It has also been said that China has begun to lose the competitive edge as many US, European and Japanese companies are shifting production from China to South East Asian countries.

Ajay Shankar, Member Secretary of India’s National Manufacturing Competitiveness Council, told India Today: “An estimated 100 million jobs will move out of China over the next few years in labour-intensive sectors.”

PM Narendra Modi’s invite for manufacturers to focus on India couldn’t have come at a more suitable time. “Trust is essential for investors to feel secure. Let us begin with trust; if there is an issue, Government can intervene. Trust too can be a transformative force. Development and growth-oriented employment is the government`s responsibility,” said Modi.

It is the same trust that Satya Nadella and Microsoft need to have on India. And, we can already see that coming.