Microsoft's burgeoning cloud business and the software major's focus on investing in it more, according to analysts, opens up a fresh avenue for Indian IT firms such as TCS, Wipro, Infosys and HCL Tech to bolster their earnings.

The Satya Nadella-led company announced its earnings for the quarter that ended on June 30, on Tuesday. The earnings were largely in line with estimates — the company had a revenue of $51.87 billion , while analysts predicted $52.44 billion, according to finance firm Refinitiv.

According to the company, Microsoft's cloud computing strength drove the quarter's results. “Commercial bookings for Microsoft Cloud grew 25 percent and the revenue was $25 billion, up 28 percent year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

According to Microsoft’s CEO Nadella, the Seattle-based firm is looking to score lucrative Azure deals of $100 million-plus and $1 billion-plus for the next quarter and Indian IT firms may get a lion's share given their dominance in services in the sector.

What does Microsoft’s good revenue in cloud business mean for Indian IT?

“Particularly in India, our major IT companies like TCS, Wipro, and Infosys, HCL tech are relying on delivering products and services for the modernization of businesses. In this context, Microsoft’s phenomenal growth in cloud revenue will be a boon for IT-related tech giants of India who are functioning in collaboration with Microsoft Azure technology,” said Bhavesh Goswami, Founder & CEO, CloudThat.

In simpler terms, Cloud is the Internet. It consists of the things you can access remotely over the Internet. When something is uploaded to the cloud, it means it's stored on Internet servers. Cloud computing involves providing a range of cloud services, including compute, analytics, storage and networking, such as on Microsoft's Azure public cloud computing platform. The Indian IT companies are service providers for cloud computing — they basically handle cloud computing for their clients.

TCS, Wipro and Infosys have tie-ups with Microsoft to provide Azure services to the clients. In India, the major market share of cloud computing is owned by Microsoft Azure and Amazon's AWS. While Azure is suited better for the enterprise side of the sector, AWS has strength in the e-commerce area of the cloud.

“Microsoft enjoys a dominant position in India's public cloud services market. Five years ago, Microsoft Azure's introduction to the Indian market stepped up the competition in the cloud market,” said Sharat Chandra, Blockchain Expert, IET Future Tech Panel.

Analyst Deven Choksey, Managing director of wealth management firm KR Choksey said that the increase in Microsoft’s cloud revenue means that more and more clients are trusting the platform and the demand for the cloud is increasing in the market which can lead to a boom in revenues for Indian IT companies.

Microsoft itself has been very focused on Indian IT companies by providing a cloud revolution. Many IT companies in India also have special large Microsoft-focused Business Units (BU) with tens of thousands of employees.

“Indian IT companies are the most important entity for Microsoft in driving Azure consumption. This is visible in the amount of attention they get from Microsoft in terms of partner programmes and skilling events. Microsoft also provides free certification vouchers to many of these companies to get their tech teams certified in Azure,” said Goswami.

Cloud computing services in India and the benefit for IT companies

Research firm International Data Corporation (IDC) in its report released in May 2022 estimated that the overall Indian public cloud services market is expected to reach $13.5 billion by 2026, growing at a compounded annual rate of 24 percent during 2021-26.

A NASSCOM report, released last year, mentioned that India currently ranks third with close to 6,08,000 cloud experts across all verticals and infrastructure as a service is the largest segment in the cloud services market.

The Economic Survey 2022 report stated that IT exports account for 18.4 percent of Indian services exports. Experts suggest that post-pandemic, IT exports are being propelled by digital transformation and rising cloud technology use.

“I would say Indian IT exporters have a significant role in the outstanding performance of the Microsoft Azure recently,” said Goswami.

Indian businesses are adopting a "cloud-first" strategy as their demand for agility, flexibility, and quicker access to digital technology grows. As a result, India's cloud computing industry is experiencing tremendous growth.

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First Published:Jul 27, 2022 7:44 PM IST