MICROSOFT LEANS ON COOPERATION PARTNERS NEEDED FOR CORPORATE SYSTEMS
WARREN WILSON P-I Reporter
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01/28/98
Seattle Post-Intelligencer
FINAL
Page D1
(Copyright 1998)
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When Microsoft Corp. learned that Lockheed-Martin wanted new e-mail software for its 120,000 desktop computers, it knew it would never win the huge deal alone.
Its software was up to snuff, it believed, but it couldn't provide the services the aerospace giant needed to make the software work throughout its vast corporate network.
The solution? An alliance with services expert Digital Equipment Corp. - one of several deals Microsoft has struck in the past year or so in a bid to rev up a new engine of growth called Windows NT.
Windows NT is the technology Microsoft has developed over the past several years to crack the vast corporate computing market, where mainframe and Unix computers have long held center stage - and where Microsoft has played only a supporting role. A major upgrade known as Windows NT 5.0 is being readied for release.
"It's fair to say Microsoft has bet its future on Windows NT 5," Chairman Bill Gates told software developers last September in San Diego.
But it's more than simply a technological challenge. Corporate or "enterprise" systems are much more complex and require more service than individual computers. To meet those needs, Microsoft has had to build a much different strategy - one that relies on partners.
Long known as a ruthless competitor, Microsoft hasn't shown evidence of softening. But as it works to win acceptance in the enterprise software club, it is finding that well-chosen partners help boost its credibility, said Dan Kusnetzky, a research director at International Data Corp. in Framingham, Mass.
"I'm amazed at Microsoft's ability to take Windows NT from literally nowhere in 1992 to No. 1 in 1997" in terms of units shipped, Kusnetzky said.
Microsoft and Digital have a relationship that dates back to the early 1980s. Digital has a major engineering and enterprise solutions center in Bellevue just a mile from Microsoft's headquarters in Redmond, as well as 24 Microsoft support centers around the world.
The two companies find their alliance so fruitful that they plan to announce a new phase today. They haven't released details, but the agreement reportedly includes plans to use Digital's technology to run Windows NT on computers with as many as 32 processors - a major boost in computing power. Compaq Computer's plan to acquire Digital isn't expected to disrupt that deal.
Besides opening doors to key strategic markets, Microsoft's enterprise partnerships allow it to focus on its core business - high-volume software - and avoid building its own expertise in installing, customizing and maintaining the complex enterprise networks itself.
"We decided that there were great companies (already) in the marketplace to serve our enterprise customer base," Deborah Willingham, vice president in charge of Microsoft's enterprise customer unit, said in a recent interview.
"We made a conscious decision not to build service capabilities" and to rely on partners instead, she said.
If Microsoft sometimes has to step back and let a partner be the prime contractor, as it did in the Lockheed contract, that's just fine, she said.
Lockheed-Martin, "very much wanted to work with a single vendor," Willingham said. "If we hadn't had Digital as a partner, Microsoft alone could never have responded to that RFP (request for proposals) and won that business."
For the partner companies, Microsoft provides marketing prowess and a powerful brand name to help them nail down new contracts. In a typical deal, Dataquest analyst Jennifer Beck wrote in a recent report, the partner company may collect several times more revenue from its services as Microsoft does from licensing its software (though the service side also bears a larger share of the cost).
"It's a tremendous opportunity for our partners," said Ian Rogoff, the Microsoft senior manager who drives the enterprise partnerships.
Over the past year, Microsoft has forged or deepened alliances with three of the biggest and best-known accounting/consulting firms - KPMG Peat Marwick, Ernst & Young, and Arthur Anderson, and technology companies such as Vanstar, Unisys and Hewlett-Packard, as well as Digital.
The deals are designed to avoid overlap among the partners and to give Microsoft access to specific markets for Windows NT and its related BackOffice products.
Digital, besides its expertise in messaging, is skilled at systems integration - the art of making various types of computer systems work smoothly together.
That's of paramount importance in managing the huge, diverse networks many large corporations have cobbled together over the years.
KPMG has built world-renowned competence in sales-force automation and electronic commerce, Rogoff said, while Ernst & Young is skilled at integrating complex back-office systems, and Arthur Andersen has expertise in working with the R/3 business software made by the German firm SAP AG.
Unisys has several specialties, including airline-reservation systems, voice-mail systems, 911 systems and state driver's license registries, Rogoff said.
"We're working with them to move all those applications over to NT," Rogoff said.
Atlanta-based Vanstar, which specializes in network integration, seized a chance to get in early and made its first commitment to Microsoft and Windows NT back in 1994, president Jay Amato said.
"We took somewhat of a chance" by committing when NT was still a glimmer of unproven potential, Amato said.
But the move allowed Vanstar to build expertise in NT ahead of its competitors, and has paid off so well that it decided in September to expand its commitment and push NT as "mission critical" software for messaging and applications to customers with up to 50,000 "seats" or desktop computers.
"NT is really the center of what we're doing," Amato said.
The partnership agreements typically call for both companies to commit substantial manpower and other resources.
Unisys, which announced its alliance with Microsoft in October, agreed to train up to 2,000 people on Microsoft enterprise technology and to set up five application development centers dedicated to Microsoft solutions.
Ernst & Young set up a new entity called Entyron that opened a $6 million applications-development center last fall in Bellevue.
"A lot of organizations have pre-determined they want to work with Microsoft technology," said Doug Woodward, a former Microsoft executive who is now director of Entyron and a partner at Ernst & Young.
By investing early in NT and related Microsoft products, Entyron can show clients that it has a lot of the thinking already done, Woodward said.
"They say, 'We can probably get a solution in place faster, better and cheaper (through Entyron) than if we try to do it ourselves,' " he said.
Microsoft's commitment to enterprise partnerships reflects not only its ambitions for Windows NT but also the uphill battle it
faces.
Many insiders say NT isn't yet a match for the mainframe and Unix computers whose territory it aims to invade, even with the massive 5.0 upgrade Microsoft is preparing to release.
This week, Seattle-based RealNetworks announced it had teamed up with Microsoft archrival Sun Microsystems to develop markets for its Internet sound and video software. Analysts viewed the move as tacit criticism of Windows NT.
Others dislike Microsoft for imposing upgrades too often, International Data's Kusnetzky said.
"Microsoft forces people to get on the Microsoft carousel," he said. "You ride around and around, and every time you ride around you upgrade something, and every two times you upgrade the machine."
Despite such criticisms, no one disputes that Windows NT is building momentum and paying dividends for partners. Digital announced earlier this month that its quarterly Windows NT revenue was up 94 percent from the year before, compared with just 5 percent growth in revenue from Unix servers based on its Alpha microprocessor chip.
The result, Zona Research commented, "confirms our belief that the . . . NT juggernaut is an irresistible force."
P-I reporter Warren Wilson can be reached at 206-448-8032 or warrenwilson@seattle-pi.com |
