‘Ease of doing business in India is still a challenge’

Microsoft recently launched three new data centres in the country with an investment of ₹1,500 crore. The company is now working with the government to provide low-cost Internet using free TV airwaves with a technology called WhiteFi. Microsoft India Chairman Bhaskar Pramanik spoke to BusinessLine on the company’s plans to work on an extension of UID to create digital identity for all Indians and also shared his views on challenges in doing business in India. Excerpts from the interview:

How is the government’s push towards open source software impacting Microsoft?

Our Azure cloud platform is completely open and flexible. I think is not a debate between open source vs commercial software. I think the discussions should really focus on government procurement policy and technology neutrality.

But to use open source as a means for procurement is actually vitiating the whole purpose because you need technology neutrality, you want people to use best technology. That may not be open source. The previous procurement policy was pretty okay. But the current policy while it says it prefers it is open source, it says you have to give a reason why it is not open source. Which government servant is going to do that!

How has your growth been in India so far?

Our growth rates have been much above the market. In cloud itself, our growth is over 100 per cent. If you look at the cloud business, the overall market they say in 2015 is going to be about $840 million in a $50-billion market. So it is still very small. So for me, it is very small of my business but it is growing at 100 per cent.

My overall business is still growing higher than the market. Market growth rate for software is around 12-14 per cent. We are much higher than that.

I am not in a market share business. I am the big guy in the software. I am not that a big guy in the cloud market from a potential perspective. Now I’m bigger than Amazon and Google but they are very tiny in India. What we are looking at is how to expand the market. If I start looking at what’s going to happen, I don’t think even the Gartner figure of $844 million becoming $2 billion by 2018 is correct. I think it’s going to be much more. In fact Zinnov says it could be between $5 billion and $7 billion.

Given the myriad of business challenges in the country, what kind of investments are you planning to make here?

We are here for the long term. The intent is clear. The challenge is how to get it done. We are bullish, we are making investments ahead of time. The investment we have done in the cloud data centre is really something which I think is in that line.

I like Digital India, I like the focus on the citizens rather than on the government. I think they understand the challenges and they want private and public participation. So I'm willing to invest, like we've done. So we're not waiting for perfection and going ahead with what we have.

We believe for a software company, there are only two things that can be done for Make in India. First, to set up development centres — which we already have in India. And second is to set up cloud data centres because those are the factories where the data resides. We've done both as we've taken a leap of faith.

Do you believe things have improved from an ease-of-doing-business perspective?

The Government is getting pragmatic. They just need to make sure that it goes right down. Ease of doing business is not where it should be. All of us have tax issues in some forms or the other. But the IT industry is primarily transfer price related, especially for a software company. The complexity of taxes is still huge. Today, when you buy a software product, you actually pay two taxes — service tax and VAT. And the reason for that is because everyone wants to play it safe because they don't know who in what jurisdiction will interpret what as what.

Therefore, I think lack of clarity is an issue and if you go to the government, they say GST is coming, we'll take care of all of those issues. Ease of doing business is a challenge and that's something we need to focus on.

You’ve been testing WhiteFi technology in Andhra Pradesh. How have the pilots gone so far?

The pilots worked out pretty well. We set it up in a district called Srikakulam, connected four schools together. So far we believe this is the lowest cost access methodology. We have 2G, 3G, drones, balloons, but this is technology. This technology can be rapidly rolled out. The cost is very low. The whole pilot in four schools for 600 students in Andhra Pradesh cost us not more than ₹1 lakh.

What is Microsoft’s contribution to Digital India?

We are looking at various possibilities. We haven’t yet been able to come out with what the final thing will look like. The digital locker is perhaps one way of doing it because you need to have something that the citizen controls and not somebody else. So we are looking at the different possibilities and if that can be used and extended across financial, commercial and government services.

In your RoC statement, you said you'll be investing ₹1,500 crore in data centers. How much have you invested? How would local data centres benefit your business?

We are in the ball park of that. The only requirement that they (regulators) have from a BFSI perspective is that they said data should be resident in India and if you have to move data elsewhere, you have to take the government’s permission. The regulation never said you can’t do it. So we solved that problem by setting up the data centres here. It is a huge investment but I believe it is worth it.

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