Microsoft Unveils $300M Expansion in Russia

Praising the government for its "amazing work" fighting the crisis, Microsoft CEO Steve Ballmer announced Monday that his company would invest 10 billion rubles ($300 million) in Russia over the next three years. The U.S. company will expand the free services it offers students and startups across Russia and will also help fuel innovation in sectors that are not directly software related, Ballmer said at a news conference in Moscow. At the news conference, Microsoft's Russia president, Nikolai Pryanishnikov, signed an agreement with the Space Research Institute to create an institution dedicated to the study of global climate change. The three-year project will be based at the space institute and provide research for government services such as the Natural Resources and Agriculture ministries. "Climate change is not a software problem -- it's an opportunity," Ballmer said following the signing. "Energy science, environmental science, medical science -- those are all fields of innovation. And yet software will be a key part of the way in which people develop non-IT industries." In addition to assisting the government in creating a "more efficient health care system" and supporting the 2014 Winter Olympics in Sochi, Ballmer said Microsoft would create new innovation and research facilities "designed to help Russia respond to the current economic crisis" and continue long-term growth. The innovation initiative will be coupled with a computer-literacy skills project intended to provide up to 300,000 people with enough IT training to "enhance their current job prospects," he said. Ballmer said he had met with First Deputy Prime Minister Igor Shuvalov and praised the state's handling of the crisis. "We're very appreciative of the amazing work the Russian government is doing in fighting the economic crisis and the measures it has taken still with a view toward long-term growth through innovation and productivity," he said. A spokesman for Shuvalov confirmed that the meeting had taken place but declined to elaborate further on the discussions. Ballmer also echoed the importance of providing support to small businesses during the downturn -- a popular platform of the government. During a recession, most private-sector job creation occurs in small business, Ballmer said. To encourage this, he added, Microsoft will offer free software licensing for its products to more than 1,000 Russian startups between now and 2012. Microsoft currently has more than 7,500 partner companies in the country and will soon open Eastern Europe's first Microsoft technology center here, Ballmer said. The company will also widen its student outreach through expanding its Dream Spark program, an initiative that provides the company's "cutting-edge software" to university students, soon to high school and elementary school students. This year, Microsoft plans to invest more than $9 billion in research and development worldwide, Ballmer said, and will continue the expansion of its IDEA (Information Dissemination and Equal Access) centers and innovation centers -- hubs for Microsoft to work with universities, startups and larger firms to develop new technologies. The company has thus far opened 10 innovation centers in Russia and hopes to open one more by the end of the year. While there are current 60 IDEA centers in 40 Russian regions, the company plans to expand that number to more than 100 to reach all areas of the country. Microsoft's new plans to penetrate the Russian market are not so different from other Western IT companies such as Google, said David Ferguson, an analyst at Renaissance Capital. "The Russian IT market is still pretty much dominated by local players, and it's all about trying to strengthen your position in the market," he said. The company's current strategy would likely open ways for the company to both expand its Internet services and defend the market share of its Microsoft Office products during a push for open software here, Ferguson said. Both initiatives require the support of the state, he said. "There's massive opportunity in this market, but probably both [software and the Internet] are relatively politically sensitive. You probably have to give to receive, and investments of this kind are probably a way toward building a bridge," Ferguson said. Acknowledging the crisis, Ballmer said he remained optimistic about the future, noting that although some of the past 10 years' growth had been built on debt, the majority of it had been built on "innovation and productivity." This, he said, is precisely why Microsoft is forging ahead with its investments. "The economy is challenging -- our company is certainly not immune to the challenge. ... But even while we cut in some areas, we are going to invest in other areas. And I think Russia has one of the brightest futures both as a market and as a source of new technology development," he said.