Win 2K to Be E-Biz OS at Services Startup

FRAMINGHAM (03/20/2000) - Microsoft Corp.'s $1 billion services venture with New York-based Andersen Consulting Inc., announced last week, is a gutsy move and not without risk, say users and analysts. While the venture, called Avanade, may help Microsoft catch up in the e-commerce arena, it could also alienate systems integrators the vendor relies on in other areas, they said.

Avanade will provide professional services around Windows 2000. For Andersen, it provides an early leap into Windows 2000-based solutions, said Dwight Davis, an analyst at Summit Strategies Inc. in Boston.

"I'm surprised by the level of commitment this represents from the part of Microsoft to try to position its platforms for e-business and e-commerce applications," said David Cearley, an analyst at market research firm Meta Group Inc. in Stamford, Connecticut. "They need to do this because they are behind in [electronic business]."

In particular, the creation of Avanade may help Microsoft grab a larger piece of the emerging market for business-to-business exchanges, said Carl Lenz, a research analyst at Gartner Group Inc. in Stamford. "This allows Andersen to use Microsoft infrastructure to create [online] marketplaces," said Lenz.

So far, Microsoft's own consulting efforts have been limited to advising large customers about the rollout of specific Microsoft products; it has chosen to partner with leading integrators for everything else. Departing from this approach may alienate key integrators such as KPMG Consulting LLC, with which it announced an electronic-business alliance only last month, Cearley said.

"Microsoft is in no position to make waves with these other vendors," said Albert Nekimken, an analyst at Input in Vienna, Virginia.

Cearley also questioned the approach of forming a new company exclusively around Microsoft products.

"Things are moving more toward openness and heterogeneity," said Cearley. He said Avanade will need to integrate technologies from multiple vendors to be successful.

If it does, that would be good news to Darren MarElia, director of Windows NT architecture and planning at San Francisco-based Charles Schwab & Co. "The area where I think Andersen can probably add the most value over Microsoft Consultancy Services is in heterogeneous environments, where a Microsoft solution must coexist with other platforms and architectures," said MarElia.

"I think it's a very smart move from Microsoft," said Deb Mukherjee, vice president and chief technology officer at Los Angeles-based Farmers Insurance Group of Companies. "They needed to do something dramatic and provocative."

Mukherjee said he is unlikely to call on the services of Avanade. But he said the fact that Microsoft is backing up its enterprise ambitions gives him more confidence in Windows 2000 as an enterprise platform.