Why do we need to thank Microsoft?

I know this might be a little surprising blog entry for most people who know about the famed history of Microsoft and the various trials (literally) and tribulations it has gone through since its inception in 1975.

Microsoft is generally considered as monopolistic uncompetitive software behemoth that rules the computer operating system and productivity software market with an iron fist and forces computer manufacturers, distributors and consumers with no other option than its Windows and Office products. The fact that Microsoft's software has historically been buggy and and plagued with countless security problems (remember Code Red) doesn't do it any good in scoring good points in the public image.

Yet, despite knowing all this I am saying that we should thank the Redmond, Washington based software giant. I go through my arguments in the following paragraphs.

Everyone in the technology and business community owe a big debt to Microsoft and its founder Bill Gates and CEO Steve Ballmer. These guys taking the concept of computing, revolutionized it and then made it ubiquitous.

It is generally considered 'hip' to criticize Microsoft for its failures (remember Microsoft Bob and Windows ME) especially on the consumer side of computing but even though they faced many failures ranging from bad marketing (Windows Vista), bad security (Windows 2000 and Windows XP pre-SP2) to simply a really poor products (Windows ME and Windows 98 First Edition) they have somehow managed the job of getting almost every consumer and every business on a single platform. Although the platform is still closed its ubiquity makes interoperability very easy.

While some argue that Apple has superior products (which is debatable) they don't realize that the recipe for such "proclaimed superiority" rides on the back of Apple's total control of the software and hardware platform of their products. This is true for all their products including Macs, iPhones, iPods and even the brand new iPad. Apple has this control whereas Microsoft does not. This same feature of Apple made it a niche product (even though it is superior in some aspects) and made Microsoft a ubiquitous product.

Since the boom of computing started in the 1980s Apple developed a certain monopoly not only over its products but also on its distribution channels. And just like any other monopoly in the world Apple kept the prices of its products considerably higher compared to cheap PCs with Windows. This situation made it a no-brainer for businesses to go for the Windows based PC rather than the more expensive Macintosh.

This eventually led to the increase in market share of the Windows platform which made it a no-brainer for software developers who obviously started to write programs for Windows as more and more people would be targeted through the Windows platform.

Meanwhile Microsoft made backward compatibility (the ability to run programs for older versions of Windows to run on newer versions of Windows) a key aspect of its software development. This inevitably led to code bloating and lessening of innovation but from a brighter perspective it made businesses rest assured that its mission critical applications would not break down on a newer version of Windows. This was not the case with Apple.

I must note here that this blog post is not meant as an attempt to bash Apple but is to make people realize that Microsoft is responsible for making computing ubiquitous and reachable and affordable to all.

Of course Apple has its bright side too. No one thought that Apple (a computer company) would revolutionize the music industry with its legendary iPods or the phone industry with its iPhone. The iPad too looks promising but we'll have to wait and watch how it turns out to be.

The only thing Microsoft needs to fear and work for is its gradually eroding innovation. They have shown in recent months with the launch of Windows 7 that they can innovate but they have their work cut out for them as now Apple is charging ahead with breakthroughs in technology and awe inspiring innovation.

But for the time being we should look at the brighter side and thank Microsoft....

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Mitul Choksi

February 10, 2010

2:32 PM Indian Standard Time

The trouble dealing with India's deficit

As we proceed closer and closer towards the Union Budget 2010-11 a question that is being commonly asked in the governmental as well as intellectual circles is that of India's bulging fiscal deficit.

The key points being discussed are whether the government will keep on upholding the various "stimulus" measures that it provided to the economy in the aftermath of "The Great Recession" (which to be fair was not so great in the case of India!).

But the question of fiscal deficit is not only being faced by India but rather by the finance ministries of all major and industrialized nations in the world including the US, UK and numerous nations of the Euro Zone.

According to the Finance Minister (FM), Mr. Pranab Mukherjee's own projections he sees India's fiscal deficit at 6.8% by the end of 2009-10. But there are signs already that the fiscal deficit may remain much higher and the FM misses his target. The Central Fiscal Deficit (CFD) stood at a whopping 7.9% in the first half of fiscal 2009-10 as compared to 4.4% for the corresponding period in the previous fiscal year.

The financial ministry is showing indications of curbing this stimulus and gradually removing it altogether in a gradual process but the road does indeed seem very tough and tricky for the FM to meet his target and reduce the deficit.

The key reasons why I believe that reducing the deficit is going to be tough for the FM are listed as follows:

1. Generally the activities for which the government provides various ministries with money take time to start and thus spending picks up gradually, only accelerating in the end of the financial year. Thus we haven't seen the real expenditure happening as of now and will only get a clear picture of the total expenditure towards the end of the FY that is still around 2 months or so away.
2. One of the other major reasons why the deficit won't budge is that the tax revenues of the government will not pick up this time unlike the previous years due to a sharp decrease in tax rates in various avenues, especially indirect taxes like CENVAT (Central Excise). Excise revenues of the government have declined nearly a quarter in the November-January period as compared to the previous year due to a sharp decrease in duty rates even though the industrial production has risen in the same period compared to the corresponding period in the previous year.
3. Direct tax collections have risen only marginally this year.
4. Customs and Service Tax collections are down significantly.
5. The Tax-GDP ratio which is a very important economic indicator has gone from 12% in the April-September period last year to 10.3% in the current fiscal year.
6. The government also has to provide for other expenditures like fuel subsidies, food subsidies, loan waivers to farmers and many other such expenses.
7. The government can't just forgo spending on the initiatives taken by it in the previous years which include many large social sector programs that require a lot of spending.
8. The government also needs to allocate sufficient funds to various ministries and departments in the upcoming fiscal so as to not hinder their working and ensure smooth working of these departments.
9. The 3G spectrum auctions which were earlier slated to be held this fiscal year are more or less likely to be held in the next fiscal (or even in the one after that) due to various bureaucratic hurdles. The auction was supposed to fetch the government anywhere between 30-50 thousand crore rupees which would have been a great help in covering the deficit

Looking at all these things, I think its safe to say that some sort of severe austerity drive and maybe even gradual tax increases are in store for us including monetary tightening by the Reserve Bank of India (RBI) to control credit growth (not to mention control the spiraling inflation).

I don't think the budget will have anything "stellar" in store for us although the government may concentrate on taking measures to ease tariffs and taxes for specific sectors who really do need its support in order to thrive or survive.

One thing is certain. The stimulus measures will go away fairly rapidly restoring the pre-recession tax regime in order for the government to facilitate an increase in its revenues. And anyway, we won't need the stimulus in a few months time as the economy will be almost back to the boom time growth rates.

As Union Finance Secretary Ashok Chawla recently said in a meeting of leading representative body of trade and industry "Too much stimulus when the body is getting healthy may not be a good thing. It can be injurious to health."

Let's wait for 28th February to find out what happens....

Mitul Choksi

4-Feb-2010

11:19 PM Indian Standard Time