R-Comm announces IPTV svcs in alliance with Microsoft

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Q: Just one more channel from your perspective?

Puri: I think not. When we look at it from our point of view, if you want to expand the market, we want to bring down the cost of access; we want greater functionality from the phones, which will include security aspects. It completely changes my market dimension, it changes the ease with which people can deal and it substantially expands our geography. So, for us, it is a very major initiative. I think it will require far more collaboration between the telcos, which as Steve thinks, can become banks themselves. So, there is some amount of constructive tension there and the software companies. So, we very much want this. Will it be here tomorrow? Probably not. Does it have to be for inclusion? Absolutely.

Q: Steve you spent USD 240 million for a small stake in Facebook valuing it at over USD 15 billion. Community internet lots have been written about it, I am sure it connects in a very big way into your digital marketing plans, your advertising plans. Give us a sense of what you think the landscape will be like 5 years from now?

Ballmer: Certainly one of the things that is most interesting the history of the technology industry. The internet is the future of how to re-engineer the way people relate to one another. Their friends, their colleagues, their key business partners. In some sense this notion of this social grid is a big powerful idea that will affect not only just pure socialisation, but the way entertainment media works. The way financial services and marketing and commerce works.

It's a big-big deal. Who do I trust? What do I trust them with? With my health records? With my financial records? Who does these things on my behalf? So that notion is a very big and powerful one and Facebook has done some pioneering work and we absolutely wanted to participate in helping turn that into a digital marketing opportunity by selling all the advertising and we bought a little piece of the company as part of that enthusiasm.

Q: Again here the competitive landscape is interesting. In mobile, you will be dealing with a Nokia, with someone like Rupert Murdock who owns the largest community site My Space. How are you so many things in one company?

In an interview, while describing to a reporter your business, you said we are a horizontal software. We go to the market in four ways. Most companies in our business never go to the market in more than one way. IBM is an enterprise company. Google is an advertising company, Apple is a hardware company, the one trick ponies. Do you think being a many trick pony or a circus, so to speak, is what is going to define the technology leader 5 years down the line?

Ballmer: I think it's very important. I think it helps define and keeps us relevant technologically. It helps keep us involved in the most important parts of innovation and it lets us seize the synergies between them. When we sit and talk with an HDFC, we are not just sitting there talking about big enterprise computing in the backend. We talk about what's going on in the consumer environment. What's going on in the small and medium enterprise environment. How does our technology help bring HDFC and its customers closer together.

So I think we enhance our technological relevance and business relevance by participating in these multiple parts. So if it is a great strength that doesn't mean all technology companies have to look like Microsoft, but there is a reason why we are the biggest and there is a reason why we will stay the leader and it's because of this unique ability to participate and add value in multiple ways.

Q: You would subscribe to that view of a technology company 5-10 years down the line. Do you think that there is space for a technology conglomerate? Do you think that it will come down to companies that specialize in one space of technology or do you think we are all talking very traditional models here and software will be literally a service that you can pipe off the net and you won't really need to have packet software after a point?          

Gopalakrishnan: When you look at large companies and you know Microsoft is large company and when you look at how pervasive software is in society today, it runs banks, it runs Facebook. And then when you look at all things becoming digital and advertising becoming digital, software is the glue combining all these things. There will be companies in this space which will take advantage of all this things. Having the flexibility, adaptability and the comprehensive view of the entire space requires some sense. Now some companies will be able to do that.

Q: But you were also talking about how a large population of smaller enterprises world over might prefer to use - with the internet being so ubiquitous might prefer to have their software piped to them via the net as opposed to being expensive buyers of softwares or buying expensive software so to speak. You don't think if that model changes, what companies like Microsoft do, will also come under the scanner then?

Gopalakrishnan: Microsoft will offer software as a service and is offering software as a service. As economies like India, China become part of the global economy it requires more investment in IT. India is under invested in IT and this is the way for India to accelerate and adopt technology. This allows without making significant investments, small enterprises to get on to the technology bandwagon and take advantage of this. So this an option or a choice which consumers have now that was not there before.

Q: Technology conglomerate makes it easier for you to be able to buy different solutions from one company?

Puri: If you step back, if you follow Steve's argument - the issues are two fold. Firstly the net and the web is going to be very pervasive and you can't limit what you can do with it. I know what my customer wants. So I want him to be able to give the domain expertise. I need him to give the technology platform. I need him to give me my cost saving devices and I would very much think that would be a very viable model now, the only model but in a lot of cases. As this whole thing becomes pervasive it's a model that as a consumer I would happy with, because I can't run to six different places and say I have not reached the market in time because this guy didn't coordinate and that guy didn't coordinate. If I can get it at one place at the right price with a company that I trust, I would take it from them.

Q: Since you have acquired the worldwide rights for advertising on Facebook now, what does this do to traditional advertising in companies, media buying agencies? If companies like Microsoft are going to go out there and help banks like HDFC get on to sites like Facebook?

Ballmer: Every business that can both advertise and also accept or deliver its goods over the internet, media, advertising, telecommunications, financial services, everybody is going through a big transformation. Certainly the way advertising gets created and is bought and sold changes in a digital world and it will change eventually for what we think of is classic TV, in addition to what we think of today as Facebook. We want to be able to come in and say, here are tools that could help you buy advertising where you want it and we want to make sure the technology is an aid to that for big clients like HDFC.

Q: We have seen quite a bit of disruption here in the US right now, because of the subprime situation. A lot of talk about a possible recession, which may have been in some sense averted by the Fed cut. But in your assessment, what has the environment been like or will be for the next few years?

Ballmer: The environment for tech products always reflect two things. Number one, health of the economy, both on the business side and on the consumer side, and the health of the innovation cycle coming from the tech industry. A strong innovation cycle can help power through some of the challenges you might see in the economy and a strong economy will pull even a weak innovation cycle. I would say our company and our industry are frankly under a pretty strong part of the innovation cycle.

I think on the consumer side, that is likely to be strong enough at least in the US and continue to see a strong demand and more on the business side.

Q: How do you expect your revenue mix to change over the next 10 years and give me a sense of where Microsoft will be earning most of its money from?

Ballmer: We have four businesses that all look different, and they are all going to grow. It is like saying, which of your children is going to grow the fastest. And I guess I would say on a percent basis, it is the little guys, the advertising business, the hardware business. That will grow fastest on a percent basis.

On an absolute basis, it is probably our enterprise business, because despite the fact that we have got over USD 10 billion in revenue, we have just scratched the surface in terms of providing enterprise infrastructure in partnership with Infosys to people like HDFC. So, I see a huge opportunity. 

Q: Your assessment of tech spending worldwide right now?

Gopalakrishnan: In the short-term, there maybe some hiccups. But in the past even when there is a slowdown, the offshore outsourcing business, which is where we stand to gain as companies will outsource because that reduces cost. When we talk to our clients also, that is what they tell us that they will continue to spend with companies like Infosys. So, we have to wait and see. But right now, things look positive.

Q: What are some of the new drivers when it comes to technology spending? What are some of the things you are putting your technology outlay on?

Puri: Technology now is literally a large part of our business since we are going to be delivering on offline mode as well as remote channels. It forms an integral part of our business and we think that is going to grow as the age group changes. So, we are putting money behind knowledge based advertising, enterprise solutions, financial services off the shelf. Today, when you go to a bank, if you are a credit card holder, he doesn't know you are a car loan holder or what is your last query. The moment you walk in and you have a card, I want to give you a car loan across the shelf if you so desire. Now what this will require is, I need credit scoring models, I need a data warehouse, I need an enterprise solution. So, we will spend behind that.

I want to actually work from my Khandala house with virtual communication. So, we are spending money there. I do not want to outsource my IT infrastructure because I do not trust them enough at this point in time. And I want to have the choice, because if I tie-in with IBM, then I am hostage to them. But I would not pay as you serve.

So, we are re-architecting to a service oriented architecture to enterprise, to try and see where we can use the power of computing and technology to get it to deliver to the customer. And finally, to go to two-thirds of India, we think we will only be able to do it, with help from these guys, because I do not know whether they are going to invest or the government, but it is not us. We do need investment in broadband, data centres, server applications, which will completely change the market.

Q: You are here to talk about softwares and service. How does that impact the way you do business or the way you earn money?

Ballmer: Well it may impact the way we earn money, it doesn't impact that much the way we do business. If you are a small business in Chennai, you just want to be able to click, get started, probably have that all be financed, you do not want to think about it as a huge upfront, and then undoubtedly some partnership with financial services institutions, the software kind of configures itself, but you do not have the technology wherewithal in your own little company to manage that. So, instead of getting paid this way, and then nothing, maybe we get paid a little bit more over time and probably we have to run a data centre. So, you have a little bit more across the console. But the fact of the matter is, everything about the Internet, the softwares and service means we have an opportunity to add more value.