'Piracy is not a price issue'

Q&A/ Kevin Johnson

Kevin Johnson

Microsoft has identified India as one of the major thrust areas for its worldwide strategy. The company is investing heavily in India in terms of software development centres and localising its software application tools.

As part of its commitment to India, a team of top executives headed by Kevin Johnson, group vice president, worldwide sales, marketing and services group for the company, was here to identify growth areas and chart out strategies.

Johnson spoke to Bipin Chandran about the company's strategy for India and its implications for the world's largest software company's. Excerpts:

Q. In the recent past India has been visited by several key Microsoft executives. Steve Balmer is slated to visit the country soon. Why this increased interest in India?

A: India is a key market to us. The Indian economy is booming and companies are making considerable investments here. We want to be part of this excitement.

With regard to my visit, I am part of a delegation of senior Microsoft executives from Redmond. The other key member of the delegation is Craig Mundie, senior vice president and chief technology officer.

During this four-day visit, we have travelled to New Delhi, Mumbai, Chennai and Bangalore and met a cross-section of leaders of the Indian government, industry, as well as academicians and independent economists to gain a detailed perspective on the unique opportunities and challenges presented by India.

Q. What are your immediate priorities in India?

A: One of the most important aspects of our strategy in India is to build relationships and partnerships with key Indian companies. We are committed to strengthening the connection between our customers and the sales force, and between the sales people and the product groups.

Inputs from a market like India is of great importance to us. On the other hand, the integrated approach in product innovation is key to our development strategy. But it's not just the innovation that we work on, it's the innovation that comes from our partners and how we integrate it to help the customer.

Q. What is your pricing strategy for a price-sensitive market like India?

A: We have localisation as well as pricing strategies for such markets. We are coming out with many Indian language applications. To address the affordability issue, we will launch Windows XP Starter Edition in early 2005, which is a low-cost, customised and localised technology solution for India.

This operating system offers an affordable and easy-to-use entry point to the Windows family of products that is tailored to local markets "" in local languages "" and is compatible with a wide range of Windows-based applications and devices.

Q. Is piracy a pricing issue?

A: Piracy is not a price issue. We have found that the cheapest and most readily available software programs are pirated as much as the most expensive ones. This can also be seen in the music industry and in Bollywood where there is infringement of copyright in audio cassettes, DVDs and CDs.

The cost of software products reflects the research and development required to develop the product for sale and does not take into consideration the CD that it is burnt onto. Prices also incorporate a component for intellectual property.

Also, consider the productivity enhancement that is enabled through software for individuals and companies. The solution to the problem lies in cultivating respect for intellectual property rights through education, empowerment and, in some cases, enforcement.

Q. You talked about the importance of a market like India in your overall strategy. How do you compare it with China?

A: Both India and China are similar and different in many ways. The two markets are similar in the opportunity they offer to any company and different in terms of the approach. India is an economy that is driven by information technology and services, while China is a strong manufacturing-driven economy.

With the kind of population that the two economies offer, no corporation can ignore these markets because they will be the driving force for most companies in the future.

Q. The Indian economy has been on a growth phase. How does a company like Microsoft see this opportunity?

A: It is true that the Indian economy is growing, while some other major economies in the world are not so good. For any global company, a growth like this is encouraging. And this is why the Indian economy is seeing higher investments now.

We would have been happier had the growth been more balanced, instead of being driven by one or two sectors. Growth is coming from the software services sector, which fuels various other sectors. Similar growth should come from other sectors like manufacturing.

If that happens, the Indian economy will see a higher rate of growth and more opportunities for global companies.

Q. India has seen major growth from the software services exports sector. Many have raised doubts about the strength of this business model. Do you agree?

A: The software services export model has worked well for the Indian economy. Many companies have built major businesses out of it. But the key question is: do they want to continue with it, or do they want to move up and start developing intellectual property, which will give them higher value? This is one area that Indian companies should explore.

Q. What has been your response to Linux's growing popularity in India? Different state governments as well as a set of programmers have adopted the Linux platform quite fast.

A: There has been a lot of talk around Microsoft and Linux, but the discussion has shifted now. We've seen the industry discussion evolve from emotion to technology to its current focus on how business and customer value is delivered.

The fact is that the true cost of software cannot be measured through what a company pays upfront. Money spent towards procurement, deployment, maintenance and even the usage of software long term is what constitutes the total cost of ownership "" and that is what companies and governments need to bear in mind.

Q. The issue of security has come to the fore in recent times with a series of virus attacks on various Microsoft platforms.

What has been the company's reaction to this? Is this a result of aggressive product pushing by the company?

A: Security is a priority. Our strategy is to deliver software that makes it easier for IT professionals to deploy and manage secure systems, enable developers to build secure applications and make it easier for information workers to use our software in a safe and secure manner.

We are constantly learning and exploring new ways to address this issue. Today, if you look at all the research and development we do in some groups security now claims as much as 40 per cent of overall spending, at least from the perspective of manpower and equipment.

In early 2002, we actually stopped development on Windows for about two months, spending about $100 million and decided to train every employee in the organisation on questions about security and trust.

At a more strategic level we are focusing on making our products secure by design, default and deployment and are trying to make IT systems more resilient over time.