So Close, Yet So Far

Having burnt its fingers with Windows Vista, with partners complaining of
several loopholes with the product and it taking huge bandwidth on a client
system, Microsoft brought in Windows 7 into the country in a more sedate
fashion. There were no fancy launch parties, no celebrities flashing the
product-instead there were series of engagement programs with partners and
customers about the products and the benefits it offers over its predecessors
and competing open source versions.

During the launch of Windows 7 in the Indian market, Ravi Venkatesan,
Chairman, Microsoft India had remarked, "Engagement and feedback of partners and
consumers was fundamental to the development of Windows 7. It enhances the user
experience by its sheer simplicity and caters to their connected lives across
work and play. We are delighted by the initial reviews from partners and the
technology community."

Coming from Microsoft, this was definitely one of the most underplayed
launches by the company in a long time. But this strategy seemed to have helped
it going by the initial excitement that is prevalent amongst the channel
community.

Needless to say, Microsoft is very enthused by this response, and company
officials have been giving sound bites on how Windows 7 would sharply trigger up
the sale of PCs in the consumer segment.

Will Win 7 buffet PC sales?

According to IDC, the Indian PC market grew by 5.2 percent during April-June
quarter, a decline of 15 percent compared to the same period last year. Windows
7 is expected to lend a bigger push to sales in the next few quarters.

Now that the product has made its entry into the Indian market, the next task
for Microsoft is to ensure maximum penetration of the new OS with much ease and
simplicity. On the adoption of Windows 7 in the Indian market, Vipul Sant,
Director-Original Software Initiative, Microsoft India said, "We are excited
about Windows 7, which has already received positive feedback from its users. We
are making great traction on important attributes that drive preference for our
customers. During the last nine months, our key focus has been to make the
ecosystem ready for Windows 7."

He added that some of the key readiness initiatives undertaken by Microsoft
included deep engagement with original equipment manufacturers (OEMs),
engagement with channel through its 16-city TechNet roadshow, engagement with
290 independent software vendors (40 depth + 250 breadth) towards launch
readiness and over 1,500 business customers already in the process of deploying
Windows 7.

After all these interactions and the feedback received therein, Microsoft
officials are confident that Windows will repeat the success of its predecessor
once-removed. Now, the company is thinking of more ways to promote the sales of
the operating systems amongst its OEM customers and channel partners alike.

OEM's Take

Vendors like HP, HCL, Samsung, Dell and Acer are already bucked up to get
their PCs and laptops embedded with the new OS. They have announced that their
upcoming machines would either have in-built windows 7 or would be compliant to
the new OS.

"The Indian market is already seeing early signs of revival and the launch of
Windows 7 will create more excitement among the end customers. By the end of
this year, we will have eight netbook and notebook models on this platform,"
informed Ranjit Singh Yadav, Director-IT and Telecom, Samsung India.

Dell is also queued up for its 80 models-spanning a wide range of home,
commercial and enterprise machines-will be powered with Windows 7.

Commenting on the impact that Windows 7 can create in the Indian market
considering the dipped market trend, Ravi Swaminathan, Former President-PSG, HP
India said, "With the new features and design incorporated in Windows 7, it
would help touch-based PC's market to grow in India. This would also help HP to
expand the portfolio of its touch-based products."

George Paul, Executive VP-Marketing, HCL Infosystems feels that Win7 will be
able to support the programs that were originally compliant to Windows XP
platform and this will trigger the adoption of PCs at a faster level across the
segments.

Several other vendors whose products are also on the fringe of the operating
system environment have issued alerts to their customers that their products are
compatible with Windows 7 or can be upgraded to it.

Talking about the expectation level of the channel partners about Windows 7
launch, Anil Sethi, Group Director-OEM, Microsoft said, "Our channel partners
were in fact waiting for the launch, so that they can get to know about its
features and upgradation options. Introduction of newer versions is a regular
exercise, but to what level it will be accepted, depends on the user's choice.
For instance, Vista could not do very well because Windows was always end
customers' favorite."

Sethi further mentioned that with the launch of new OS, sale is going to be
amplified, since XP is no longer available and the perception about Vista was
different; this would trigger the demand of the newly launched OS.

Channel Gives Thumbs Up

When Vista was launched in the market, software resellers were discontent,
as they had to face customer grievances regarding the performance and upgrade
issues. With the launch of Windows 7 in India, IT partners, especially those who
are involved in the maintenance and upkeep of their customer's machines, are
breathing easy.

More than that, they are gearing up for considerable opportunities in system
integration and distribution business, and are expecting that their sale would
northwards with Windows 7.

According to the channel and OEM partners' feedback, the new OS is more
attractive and responsive. This ensures a better experience than before for the
users. KK Jha, CEO of KK Software, also an associate distributor of Microsoft in
North India mentioned that Windows 7 is expected to create a revolution in the
market because of its features like remote access option and attractive options
in multimedia and graphics.

Sharing his thoughts on the issue of piracy, he said, "With this OS, it would
not be easy to copy and circulate pirated software in the market. It has got
inbuilt features that would reduce the possibilities of piracy."

Suresh Ramani of Tech Gyan who held a launch party for Windows 7 is also very
upbeat and has managed to transition an encouraging number of his clients to the
new platform. "I am sure that Windows 7 will wash away the bad memories of
Vista. My customers are already asking about upgrade options to Windows 7, based
on the feedback they are hearing and seeing from other users," he noted.

Tax confusion plays spoilsport

However, with the ongoing confusion over double taxation system of packaged
software as issued by the government, partners are pointing that charging of Tax
Deduction at Source (TDS) at all levels of transaction would lead to parallel
imports of Windows 7, which will eat into their expected revenues. The software
taxation is an issue that has the channel fraternity in a state of confusion for
almost a year even after the government announced abolition of custom duty and
imposition of service tax on packaged software in the last Budget.

Mentioning the consequences of tax structure levied by the government, PN
Prasad, Secretary, Confed-ITA mentioned that with the imposition of service tax
and VAT at the same time, TDS is bound to increase at all levels of transaction.
"TDS would increase the price of the software and partners will not be in a
position enjoy margins, which would consequently lead to rise in parallel import
or counterfeit software. Government needs to take the situation in its hands so
that the scenario does not get worse in the coming time," he added.

Hemant Chhabria, Regional Secretary-East, ISODA said, "Windows 7 is a very
good product in terms of its features, designs and presentation. However, at the
dealers' level, charging of TDS at the transaction level is not favourable as it
kills margin completely. We are seeking support from the tax department and are
talking to them in this regard."

Jha added that since the old inventory has been liquidated, the problem of
double taxation has been solved partially, because dealers are following the tax
structure as directed by the government and there is no conflict about it
anymore, as service tax and VAT is being implemented on packaged software.

Availability issues crop up

After the disappointing performance of Vista and phasing out of Windows XP,
the launch of Windows 7 was considered to be an important release from
Microsoft. However, despite creating a buzz in the market, there is confusion
regarding the availability of packaged software among the software resellers.
Also, with the mounting imposition of service tax and VAT on packaged software,
TDS at all levels of transaction is creating confusion at the distribution
level.

According to one of the distributors, Windows 7 is currently available for
its customers in India through OEMs. But customers who want to buy only the
software as a standalone unit will have to wait, as the stock keeping units are
still waiting for custom clearance. The reason for the delay in billing of the
stock is the issue of double taxation that is being levied on the packaged
software during the point of import.

Giving details about the delay in availability of Windows 7 in India, Alok
Gupta from Softmart Solutions explained, "As per the rules understood by
distributors, the Finance Minister had announced during the budget that with
effect from Sep 1, 2009, software importers will be given tax exemption,
provided they give assurance to the custom duty that they will charge service
tax. Since this is the first consignment in which Windows 7 in being imported in
such a manner, it is normal for custom department to take some time to
understand what all documents are required for the process so that they can be
the mandate henceforth. As the situation stands, the first lot of documents have
been provided and shipments will start soon."

Officials from Ingram Micro informed that the shipment has started but it
will take time to get a consolidated sales figure expected from the channel. "We
have started shipping Windows 7 as an OEM product. Invoicing is already taking
place and bookings have been logged. We have distributed the software across the
country in form of OEM products and licenses and we are getting

a good response from the customers," commented Aloysius Fernandes, Director,
Ingram Micro.

Giving a positive feedback about the sales of Windows 7 in South India,
Sudarsan Ranganathan, CEO, Veeras Infotek mentioned "The response to Windows 7
had been very good and we are very upbeat about selling it. Although at this
point the sales are not much but the interest level is quiet high."

Providing the status of the availability of Windows 7 in the western region,
Naresh Jain, Head-Marketing, Maxtone Electronics said, "We were provided with
the Windows 7 application on Oct 28 and we have already started selling some
products in the market. The feedback that the customers have shared with us has
been extremely good. Some of the major points that they highlighted about the
application are that it is very beneficial, easy to use, less requirement of
memory and hard disk, and they find it better than vista. Customers also boast
about the fact that Windows 7 does not have compatibility issues as compared to
Vista."

Haunted by piracy already?

Though much hype and subsequent excitement has been created about the
recently launched OS, however, the issue of piracy is still haunting the
software giant. According to a report available on the Internet, Indian software
industry loses nearly $2.8 billion every year because of piracy.

Pirated software is one of the biggest concerns for software developers in
countries like India, where customers are influenced to buy low cost or free
software. In fact, news of pirated versions

of Windows 7 raking in up to Rs 50 lakh within two weeks of its official launch
in India is already catching a lot of attention.

Putting forward his thoughts on the vulnerability of Windows 7 to piracy,
Sethi mentioned, "Piracy is still a pain for us and we are making efforts to
fight with it. XP was prone to piracy because it was in the market for a long
time, and people involved in such activities had developed skill for the same.
The newly launched OS is embedded with security features that would decrease the
chances of copying the software."

As per a recent report by KPMG, correlation coefficient between software
piracy rates and malware attacks is a strong 0.74, which means that consumers
using non-genuine software run a huge risk of malware attacks. Some direct
impacts can involve loss of data confidentiality and integrity which can turn
into a financial or reputation loss, as well as reduced operational
performance."

It is interesting to note that in the absence of the availability of Windows
7, the beta and trial versions are actually acting as honey pots to tempt
customers to purchase it. Microsoft has openly provided the beta version till
March 2010, and its 30-day trial version, called 'Rearm' can be run three times,
giving customers a total of 120 days to use the OS. "This strategy will enhance
the business of Microsoft from March-April 2010 onwards, as people who are using
the beta and trial version will get hooked to Windows 7 and they will want to
purchase it," stated Gupta.

Speaking on the cautious move of Microsoft to keep a check on the
availability of pirated Windows 7 software, Sant mentioned, "Over the last two
months, we have been tracking the sale of Windows 7 pirated CDs by collecting
samples from across the country.

12 percent of all the samples included Windows XP, Windows 98 and other
software development tools sold as Windows 7. Also, we found that 88 percent
samples were Windows 7 beta versions that had already expired on Aug 1, 2009.
Moreover, none of these samples of Windows 7 could get installed. We will
continue to keep a watch on the markets for non-beta versions of Windows 7,
collect samples and take action as appropriate."

Will Windows 7 be the messiah?

Windows 7 is considered to bring revival in the industry by boosting the
sale of PCs in the country and would further harness opportunities for the
solution provider community. In the recent update on the custom clear issues,
Central Board of Excise and Customs (CBEC) has directed all the six stock
keeping units (SKU) of Windows 7 software which were held with customs
department, will soon hit the Indian market. This would surely ease the task of
distributors and the resellers who were waiting for the stock to arrive to meet
the customer's demand of Windows 7.

Amrita Tejasvi

amritat@cybermedia.co.in