Software Investment Drives Continued Growth in Local Economies

REDMOND, Wash., Oct. 4, 2009 — Despite global economic turmoil, technology remains a strong driver of growth and jobs, says a newly released report by IDC that focuses on the economic impact of IT, software, and Microsoft’s global partner ecosystem.

Pamela Passman, Corporate Vice President and Deputy General Counsel, Global Corporate Affairs, Microsoft

Released today, the study indicates that despite a drop in IT employment around the world, software-related employment figures grew by 4 percent. The Massachusetts-based consulting firm said it expects growth in IT and software spending to continue at a pace roughly three times that of the rest of the economy between now and 2013.

Pamela Passman, corporate vice president for Microsoft Global Corporate Affairs, says that software is a significant contributor that drives productivity and innovation in almost every sector of the economy.

“Software and technology innovation have a powerful impact on addressing real economic and societal challenges, such as healthcare, education and energy, at the local and global level,” says Passman. “Microsoft’s business relies on a vast array of partners to drive this important innovation locally and to extend value to our customers around the world.”

Fueling Growth Through Innovation and Partnership

Software and technological innovation can be key factors to helping companies manage the short and long tail of a downturn — driving down costs and improving operations in the short term, while helping fuel recovery in the long term. Microsoft’s partner ecosystem plays a crucial role in creating new business opportunities and jobs.

IDC predicts that between now and 2013, IT and software spending in the 52 countries it surveyed will help create nearly 5.8 million new jobs and 75,000 new IT companies.

The Microsoft ecosystem is a critical economic catalyst in every country where it operates. In fact, for every single dollar the company earns, its partners earn $8.70. IDC predicts that Microsoft’s partners worldwide will generate US$537 billion in revenues for themselves in 2009 alone.

Consider IDE, a Stockholm-based provider of software plus services. CEO Per Werngren started IDE in 1992 as an IT consultancy, but for the past five years the company has focused on providing clients with outsourcing services, such as hosted versions of Windows Server, Microsoft Small Business Server, and Microsoft Dynamics CRM 4.0.

Per Werngren, CEO, IDE

More recently, IDE made a big bet on cloud computing as part of its software-plus-services strategy. With this move IDE grew its customer base by more than half and increased its revenue by 80 percent this year alone. Werngren attributes his company’s success in part to adoption of cloud-based solutions, as well as to the predictability of the services it provides.

“Our customers can’t get rid of IT; they can spend a little bit less, but they’ve come to rely on the many benefits it brings. It’s like water, like electricity,” says Werngren. “What IDE provides is predictability in terms of service and related fees, so the CFO can anticipate the cost.”

Because IDE focuses on software plus services, serving its customers sometimes requires a partner with expertise in another area. Customers like to work with companies that are willing to collaborate with other companies, so having a global community of Microsoft partners at one’s fingertips is a great resource. In fact, Werngren says one of the big reasons IDE committed to Microsoft five years ago was because it was the only technology vendor with a functioning partner network.

Roughly 90 percent of IDE’s business originates within Sweden or one of the neighboring countries, but the remaining 10 percent stems from businesses as far afield as Nepal, Hong Kong and Singapore. When a local vendor is needed, it can easily identify a company with the right expertise, using resources such as the International Association of Microsoft Certified Partners (IAMCP).

Software Innovation, Entrepreneurship Drive Progress

IDC also estimates that one third of the nearly 75,000 new IT companies that will be created over the next four years will be small, locally owned companies.

One example is Eduify, a startup that developed a cloud-based application to help students improve the quality and speed of their writing, assist with research, and avoid plagiarism. After talking with nearly 700 students about the difficulties of writing, the company developed its product and released a beta version last spring at Microsoft’s MIX09.

Dan Merritts, Vice President of Marketing, Eduify

Dan Merritts, Eduify’s vice president of marketing, says the Eduify application is designed to help students through the writing and research phases of a project, then facilitate feedback from their peers and instructors. In addition, students may access a “marketplace” of grad students, retired teachers and others who have qualified as writing experts to receive tutoring and instructive proofreading and editing services online.

Merritts notes that such guidance is especially important in emerging markets where writing in English is a critical component for future growth.

“Spoken word is important, but the written word is becoming an essential skill for participating in the global economy, in terms of interacting with suppliers, getting a job or achieving the next level of education,” says Merritts.

Merritts points to the president of China’s recent edict that all school-aged children learn English. Currently, about 2 billion people are learning to speak English around the globe, of which about 250 or 300 million are in China.

Likewise, IDC projects that 32 percent of the world’s gross domestic product will come from the emerging markets this year, and its research suggests this number will increase over the course of the next four years.

Through Microsoft BizSpark, a program through which the company provides startups with access to tools, technologies and market support without any upfront costs, Eduify was introduced to a variety of developer resources, including Windows Azure. Merritts says that building on Windows Azure enabled Eduify’s off-shore development team to reduce their development time by 30 to 40 percent. And because of the scalability of Windows Azure, Eduify will be able to reach more students around the world faster.

Through BizSpark, Eduify also met members of Microsoft’s partner ecosystem around the world, which will help it adapt its application for specific regions of the world.

“Microsoft recognizes the importance of the global economy and it shows in how the company develops its strategies, in its commitment to localization and in the relationships it’s developed in almost every country around the world,” says Merritts. “This mindset and the value of Microsoft’s partner community have helped increase Eduify’s value, and through our partnership students in any part of the world can become better English writers.”

Investing in Local Economies

A partner’s value is especially apparent to the local economy, where partners perform services that accrue to the 8.7 multiplier. And the local economy is where the $537 billion in revenue forecast by IDC will help fuel growth and further innovation in the partner’s local community, in everything from paying taxes to supporting other local businesses.

For IDE, that meant expanding its business into serving enterprise customers, and hiring an additional 15 employees this year in the midst of the recession.

As Werngren puts it, “Sometimes people think that Microsoft is an American company, so all revenue goes to America. But Microsoft has many employees outside the United States that are hired locally, that pay taxes locally, and with that the local ecosystem really flourishes.”

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