MICROSOFT CORPORATION

(INDIA) PVT. LTD.

A Project Report for International Business II Course

Abstract
The document describes how and when Microsoft Corporation entered India and opened its
subsidiary. It also highlights internationalization challenges that it faced while operating in India,
strategies it formed and recommends solutions to overcome some of these challenges using the
learnings from the course of International Business II. In this report we will also look at different
strategies that Microsoft India adopted at different points in time and how it shifted its strategy
from International strategy to Multi-domestic strategy and finally to Transnational strategy


1 About Microsoft India
Microsoft India Private Limited headquartered in Hyderabad, India is a subsidiary of US software giant
Microsoft Corporation. The company first entered the Indian market in 1990 and has since worked closely
with the Indian government, the IT industry, academia and the local developer community to usher in
some of the early successes in the IT market. Microsoft currently has offices in the 9 cities of
Ahmedabad, Bangalore, Chennai, Hyderabad, Kochi, Kolkata, Mumbai, New Delhi, and Pune.
Increasingly, the company has become a key IT partner of the Indian government and industry,
supporting and fueling the growth of the local IT industry through its partner enablement programs. Since
its entry into India, Microsoft has focused on three key objectives:
To become a key IT partner of the Indian government and the local IT industry
To support and fuel growth of the local IT industry through its partner enablement programs
To use the Microsoft Unlimited Potential program to enhance education, jobs and opportunities
and foster innovation through relevant, affordable access to computing.
1.1 Business Units
Microsoft in India has over 6000 employees and is the second largest employee base for Microsoft
outside of U.S. Microsoft India runs six major business units representing their entire product cycle
starting from basic research to product development, to architecture and applications and finally sales and
support.
Microsoft Research India (MSR India) - RESEARCH
Microsoft India Development Center (MSIDC) PRODUCT DEVELOPMENT
Microsoft IT India (MSIT) ENTERPRISE APPLICATION
Microsoft Services Global Delivery (MSGD) ARCHITECTURE AND DESIGN
Microsoft Corporation India Pvt. Ltd. (MCIPL) SALES AND MARKETING
Microsoft India Global Technology Support Center (IGTSC)- SUPPORT
Microsoft has over the years partnered with Indian government, academia, the IT industry and businesses
in making India a hub for innovation, supporting a digitally inclusive society, strengthening the local
knowledge economy and growing competitiveness of the Indian industry.

1.2 Vision of Microsoft India
Use our talent and innovation to unleash every Indians true potential
PEOPLE - Offer an environment for individuals to grow, exceed their aspirations & impact billions of
lives
COUNTRY - Be a responsible corporate citizen, and fuel Indias socio economic growth
PARTNERS - Create profitable, innovative & scalable opportunities for their growth
CUSTOMERS - Deliver an unmatched competitive advantage and profitable growth
USERS - Delight them with transformative experiences
COMPANY - Be the fastest growing large subsidiary and a source for talent & innovation
Under its mission of Realizing India's Potential", the company has commenced strategic initiatives
towards creating a digitally inclusive society in India, forged local partnerships for building a vibrant
domestic IT ecosystem, and empowering the Indian developer community and working towards
innovating in India, with India and for India.
1.3 Microsoft Growth In India
In the two decades since its entry into the Indian market, Microsoft has made significant gains in market
share, with over 95 per cent of the PC-installed base in India using Microsoft platforms. Microsoft Indias
revenues have grown five-fold in 200411, as the country became one of the fastest growing geographies
for the software firm. Microsofts operations in India generated annual revenues of around USD1 billion3.
Moreover, the company is steadfast in its aim to ensure that India remains among its top five revenue
generators globally by 201315. It has already laid the groundwork for this by increasing its reach in
India from around 13 cities to at least 300 cities, through nearly 7,500 partners, The companys network
now stands at 1.2 million developers, over 1,000 independent software vendors, and more than 2,000
system integrators.

2 Microsoft India Strategy Entry Mode
2.1 Why India
Microsoft Corporation was leader in domestic market and India offered a great potential to increase their
Market size. Being a leader in OS business, they wanted to take first mover advantage by entering new
markets like India before competitors do maintain their competitive advantage.

Entry to India was backed by liberalization of IT industries in late 1990s by Govt. of India. India offers
huge potential as the technology adoption in the country is lower than several of its emerging market
competitors; mobile phone penetration rate is still around 51 per cent, while PC penetration rate is
estimated to be in single digits. This reflects significant scope for growth in Indian market.

2.2 Challenges
Low Purchasing Power of Indian population
People were Enthusiastic but inexperienced when it comes to technology
Non-PC Users Usually havent used PC before
Infrastructure and Traditional Practices used in small and medium Businesses
Piracy - With pirated OS and Office products eating into sales, pricing remains a sore point with
the company. To combat piracy, Microsoft India launched the "Genuine Windows" campaign and
introduced the "How to Tell" website that distinguishes between counterfeit and genuine
software.
Gaming is PC oriented rather than game console oriented.
2.3 Value Creation
When Microsoft entered India in 1990 it felt low pressure for cost reduction and local responsiveness and
followed the international Strategy of value creation. They only opened Sales and Marketing division in
India which was under tight control of the headquarters in U.S. The product development was happening
in Redmond, U.S. There were very few customizations of the product offering and market strategy.


As soon as Microsoft entered India, it realized that the customers in India are very different then the
customers elsewhere where Microsoft had operations. A simple application of CAGE could make
Cultural, Administrative and Economic differences between North America and India more visible and
help in assessing and comparing markets taking into account the impact of distance.
India in 1990
Cultural People in India are enthusiastic but inexperienced when it comes to technology
Traditionalism High percentage of Non PC Users
Considered PCs and applications as additional cost to their business rather than an
asset to increase business efficiency
Reluctant to say they will purchase new products in next year
Immature users
Different languages and cultures in different states of India
Administrative Weak institutions
Corruption/Weak legal institutions
Illiteracy in India Majority did not know how to use computers
Piracy in software/Operating systems
Very Less IT spend by companies in India
FDI inflows in India recently started and hence people were inexperienced on how to
deal with foreign MNCs in India
Geographic Difference in climate and disease environments

Difference in time zones
Economic Low per capita income
Low level of monetization
Price sensitive society Price remained barrier
Limited infrastructure very low broadband penetration

Very soon, Microsoft realized that to gain success in India it needs to act local and followed the strategy of think
globally and act locally. As local responsive pressures increased Microsoft changed its strategy from International
strategy to localization or Multi-domestic strategy. Microsoft developed strategies aimed at garnering long-term
business growth and a firm market share in India.

Microsoft launched Project Bhasha program aimed at accelerating local language computing in India
wherein Microsoft focuses on product localization. Microsoft Windows and Office interfaces to be made
available in 12 Indian languages. Microsoft began work on this way back on 2003. Today, Microsoft has
localized Windows and Office (provided localized User Interface as well as User Assistance) in 12 Indian
languages that include Assamese, Bengali, Gujarati, Hindi, Kannada, Konkani, Malayalam, Marathi, Oriya,
Punjabi, Tamil and Telugu. Microsoft also provides Indian languages' support throughout the platform and
across the range of products. www.bhashaindia.com is an Online Community portal is India's leading
community for Indian language computing.
Apart from Project Bhasha Microsoft initiated multiple projects aimed and stronger Govt. collaboration,
academia/developer integration and building local language IT ecosystem through community/industry
participation.

In 2006, Microsoft and Hughes announced their commitment to roll out 5,000 broadband-enabled ICT
kiosks across the country. Part of "Project Saksham" that aims to set-up connected PC kiosks in at least
200,000 villages, the ICT kiosks will be deployed across 200 small towns and rural regions across India
and will be operated on a franchisee-based model offering entrepreneurs a chance to use technology for e-
commerce, education and e-governance.
Microsoft works closely with the central and state governments as a technology provider and consultant for
e-governance, helping develop technology blueprints for roll-out of citizen-centric services. Microsoft has
MoUs with 12 state governments with more than 150 e-governance applications deployed on the Windows
platform
Microsoft launched an array of academic programs to increase IT awareness among people, thereby
increasing the market potential.
o Partners-in-Learning Initiative: This program is geared to deliver comprehensive IT curriculum
development and training for teachers and students in addition to greater access to the latest
computer technologies. Project Shiksha aims to accelerate computer literacy in the country to
over 80,000 school teachers and 3.5 million students across schools over the next 3 years. In
addition, Microsoft provides scholarships to students and teachers. For this, the company has
partnered with state governments, NGOs and other organizations.
o Microsoft training and certification initiatives: The program was launched to train high quality
professionals who implement Microsoft technologies. About 150,000 are certified as Microsoft
Certified Professionals, the second highest in the world.
o Microsoft Academic Developer Program: The program targets technical and engineering colleges
and aims at creating a future-ready, skilled developer community.
o Microsoft University Relations Program: The Indian Institute of Information Technology (IIIT),
Hyderabad was established in collaboration with Microsoft Corporation and has recently received
a grant of US$ 250,000 from the parent company
2.4 Leveraging the India Advantage

Microsoft followed the Adaptation strategy for local responsiveness initially and as it evolved and made
growth in Indian markets it planned to add Arbitrage strategy as well into its globalization strategy.
After opening sales and marketing offices across India, Microsoft opened its largest development center
outside US, at Hyderabad, India in 1998. Microsoft decided to expand its operations in Indian market for
following reasons
First, the country has an abundant supply of engineering talent. Every year, Indian universities
graduate some 400,000 engineers

Second, labor costs in India have historically been low. Cheap labor costs provided a low cost
advantage to Microsoft.
Third, many Indians are fluent in English, which makes coordination between Western firms and
India easier.
Fourth, due to time differences Indians can work while Americans sleep.



In 2005, Microsoft opened its Global Delivery center in India, MSGD (formerly known as Microsoft
Global Services India, MGSI) which was a consulting division providing low cost consulting services
globally to the Microsoft customers using Microsoft products. Also to reduce its R&D costs, Microsoft
opened its R&D center in India in 2010-11.
Moreover, the wholly-owned subsidiary is now an independent "strategic business hub" - no longer
clubbed with the Asia Pacific business zone - like China, Taiwan and Hong Kong; Microsoft India now
reports directly to headquarters in Redmond. The implication is clear: Microsoft India is now on the
global radar.
3 Competition, Challenges and Changing Trends (3 Cs)


As the technology trends in the world are changing, so is the Microsoft global Strategy. From a product
company Microsoft is transforming itself to devices and Services Company. Microsoft is fully
acknowledging that the model that powered the company for more than 3 decades and made it one of the
most powerful and richest companies in the world--sales of software--is effectively dead.
With the emergence of smartphones, tablets, cloud services and social networking the people are
changing the way they use technology. India is no far behind. People in India are now more technology
savvy and internet penetration in India, esp. in urban areas, has empowered Indian consumers to make
more informed decisions. Also, Microsoft is facing stiff competition in devices segment in India because
of other cheaper alternatives available to consumers. E.g. Android based smartphones (Samsung,
Micromax, Lava etc.) have penetrated in the market owing to its low price.
Moreover, entry of other foreign multination companies like Google, Amazon etc. coupled with changing
trends has negated the early mover advantage in India. Microsoft is already late in game to adopt device
and services strategy but its picking up quite fast. It has made certain strategic decisions globally, like
acquiring mobile phone division of Nokia and gaining control on both hardware and software of mobile
phones which is helping in developing low cost mobile phones.
In the tablets segment, Microsoft has not been able to launch its own Surface tablet because it has failed
to develop the strategy to beat the competition in Indian market. Microsoft fears that it may not be able to
sell its Surface tablet because of its high price and it may have to come up with its low cost version.
Microsoft is now beginning to shift its focus from large enterprises to small and medium business
segments (SMBs). Today technology adoption by SMBs is very low because of its complexity. But the
cloud technology has removed that barrier and they can use cloud services (SaaS) or Office 365 delivered
as service at your desktop, on your mobile, tablet or any other device. CEO, Satya Nadella believes that
India has the opportunity to leapfrog to cloud-based technologies, especially in the SMB to take
advantage of the huge cost reduction. Azure is Microsoft's offering in this space, providing software and
infrastructure as a service and also a platform to develop new applications on a pay-per-use model.
Microsoft has always made its products available to users in the traditional license model, and Azure
would be a paradigm shift not only in terms of technology but also in terms of the business model - from
a one-time license fee and periodical maintenance contracts to a pay-as-you-use flexible model.
To meet the competition, firms aim to reduce costs, transfer core competencies while paying attention to
pressures for local responsiveness. In the process Microsoft has now shifted its focus from Multidomestic
or localization strategy to Transnational Strategy.


4 Recommendations
GTM strategy Small and Medium Enterprises in India have a lot of potential and currently has
very low technology adoption. With the emergence of cloud computing, SaaS and IaaS can
definitely offer a low-cost substitute to this market segment. Additionally, changing business
model from licensing to pay as you use model is being adopted throughout enterprises now.
Microsoft should start targeting this segment before anyone else does.

Needs Product Strategy

o Surface (Tablet) launch Partner with Datawind, manufacturers of Akash tablets a.k.a
Ubislate, cheapest and best android tablet in India. Microsoft should partner with
Datawind to manufacture low cost windows based tablets targeted at Indian Students. Till
now Microsoft has not been able to launch Surface in India because of its high price and
fear that it may not sell in Indian market.

o Smartphones - Now that Microsoft has completely acquired Nokia Mobile division it
has control over the pricing strategy of windows OS based Nokia phones. It can provide
features and apps that are more relevant in Indian context e.g. making weather forecast
app available to Indian villager (farmer) at free of cost in local language or an app to
educate him to boost his crop production.


Govt. Partnerships Microsoft should engage with govt. institutes to enable them to enforce
various societal changes and increase productivity in govt. offices and streamlining/simplifying
govt. processes impacting local/general people of India e.g. RTA/RTO functions, Railways
functions, Govt. hospitals, Govt. schools etc.

5 Appendix

Figure 1 Microsoft India - timeline



Figure 2 IT Spending in India


Figure 3 Growth of IT Spending in India


Figure 4 Microsoft Initiative - YouthSpark


Figure 5 - Microsoft India - Infographic