Microsoft, Andersen in e-commerce JV

Andersen Consulting and Microsoft have entered a joint venture valued at $US1 billion to form a separate company to deliver software applications for electronic business, and will also create a Microsoft-dedicated unit within Andersen and embark on joint marketing.

"The alliance that we're announcing ... really is the last critical piece for us to put in place to address a topic (of) how does Microsoft really pursue the biggest opportunity in the enterprise and the e-commerce marketplace," said Steve Ballmer, Microsoft's president and chief executive officer.

Designed with large corporate customers in mind, the joint venture centres around the formation of Avanade, as the new Seattle-based, jointly-owned company will be called. Avanade will mainly focus on delivering Internet-specific and other corporate software services based on Microsoft's Windows 2000 operating system, according to the companies.

Under the terms of an agreement, Microsoft will make a cash investment of $385 million to support the formation of Avanade, as well as provide development support and other intellectual capital, while Andersen Consulting, in turn, will mainly contribute with training, resources, development and services staff, the companies said.

From the start, Avanade will have 1,000 employees, recruited from within Andersen and Microsoft, and within three years the company will employ 5,000, according to Mitchell Hill, a 20-year Andersen veteran who will head up the new company. Avanade is not prohibited from working with non-Microsoft products, but its core competence will be Windows 2000, Hill said. The goal is for Avanade to be a $1 billion company in three years, he said. Avanade will be based in Seattle and, within 18 months, will open offices in San Francisco, Dallas, New York, Paris, London, Frankfurt, Sydney, Sao Paulo and Singapore, the companies said.

Andersen will also create a new internal unit, called Microsoft Solutions Organisation, dedicated to designing and building business software and services based on Microsoft's enterprise platform, according to Joe Forehand, Andersen's CEO. Around 25,000 Andersen consultants -- one-third of the Andersen workforce -- will receive training on Microsoft's corporate software offerings, including Windows 2000, SQL Server, Exchange Server, Windows DNA 2000, Visual Studio-based tools and electronic commerce technologies, Forehand said.

A hypothetical example of an ERP implementation in the 1990s highlights the difference between Avanade and Andersen's Microsoft Solutions Organisation, Microsoft's Ballmer said. A company moving to ERP might call Andersen to model and customise the ERP software, but the system vendor would then do the actual implementation, Ballmer said. With Avanade and Microsoft Solutions Organization on the scene, Avanade would take the implementation role, he said.

"I view it as part of how we take Windows 2000, Windows 2000 data centre" to the e-commerce world, Ballmer said.

Andersen and Microsoft will also launch joint programs for marketing, business development and delivery of services targeted at a broad range of corporate customers from Fortune 500 companies to new-market entrants and Internet startups, the companies said.

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