updated 12/7/2005 11:16:39 AM ET 2005-12-07T16:16:39

Microsoft Corp. plans to invest $1.7 billion in India and add 3,000 jobs in the country over the next four years, nearly doubling the world’s largest software company’s work force here, Chairman Bill Gates said Wednesday.

Microsoft has long viewed India, a country of 1 billion people with a robust economy, as a potentially huge market, and the investment would be one of the single largest by an information technology company in India.

Much of the money would go toward improving the software giant’s research and development capabilities, including the creation of a new facility in the southern city of Bangalore, India’s technology hub, Microsoft said in a statement. “We are keen to grow Microsoft activities in India,” Gates told reporters.

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The company also said it plans to release an edition of its Windows operating system designed specifically for India and available in nine Indian languages — a move that could be aimed at fending off challenges from cheaper open-source operating systems, like Linux.

Indian Information Technology Minister Dayanidhi Maran said the planned investment was “an indicator of the value that Microsoft attaches to its development and R&D activities in the country.”

Gates’ announcement was the latest in a string of recently announced investments in India by American technology firms.

On Monday, chip-maker Intel Corp., based in Santa Clara, Calif., said it planned to invest more than $1 billion in the next five years to expand its operations in India and invest in local technology companies.

Cisco Systems Inc., based in San Jose, Calif., said in October that it plans to spend $1.1 billion in India over the next three years.

Meanwhile, the technology research firm Gartner Inc. said Wednesday it expects Indian businesses to spend $25.12 billion on information technology in 2006, an increase of 23.7 percent over the current year. Despite a low installed base of just 17 million computers, India’s technology adoption is gaining momentum thanks to a booming software export industry and a growing domestic market.

Gartner, based in Stamford, Conn, said India can expect a growth of 20.8 percent for the next four years in business spending on computer hardware, software and communication products.

Gates had been expected to make a major announcement during his fourth trip to India, and the Microsoft chairman hinted earlier Wednesday at bigger things to come when he said the company would add 3,000 jobs over the next three to four years to its existing work force of 4,000 in India.

“The growth in employment for Microsoft will be more in India than the United States,” he told reporters.

Earlier this year, the company opened a research center in the southern city of Hyderabad, the fourth such Microsoft facility worldwide. The Bangalore center is to be opened next month.

Gates said the company’s efforts in India were aimed at narrowing the digital divide by creating products that are not only affordable for the poor, but also address their needs.

“India is a place where breakthroughs like these are necessary and will take place,” Gates told business leaders earlier in the day.

Although scores of Western companies have tapped India’s large pool of technical workers for software-related work, many in the country have no access to computers.

More than 35 percent of the country’s population can’t read or write and nearly 400 million people earn less than a dollar a day.

Still, a 300 million strong middle class and the country’s booming economy make India a big market for Western companies, including Microsoft.

The company also said Wednesday it plans to put aside funds for computer education and training, including adopting 100 schools, and support an Indian program to offer computers and training at 100,000 centers across the country.

Gates’ visit comes at a time when many Indian companies are increasingly turning toward open-source operating systems, particularly Linux, as a low-cost alternative to Windows.

Open source operating systems allow users to copy, distribute and modify the program’s code, and are relatively cheap compared to proprietary systems like Windows, which does not allow users to modify its secret code.

While exact figures are hard to come by, a survey of Indian companies by Network Magazine released in June found that nearly 40 percent use Linux to run their servers. The magazine polled 340 companies, and offered no margin of error.

However, Microsoft insists its market share in server operating systems grew from 57 percent in early 2004 to 65 percent in late 2005. During his previous visits, Gates has downplayed the Linux threat.

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