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Microsoft and HP To Take On IBM Together

Microsoft Corp. and Hewlett Packard Corp. on Wednesday afternoon announced a wide-ranging agreement that could cause shock waves among large, enterprise-focused consultants and service providers.

The long-time partners will invest $300 million together over the next three years in jointly developing, servicing and marketing enterprise technology based on both companies' platforms, officials from both firms said. HP will also build out its force of Microsoft-trained professionals in its services ranks from 22,000 to 30,000 over the next three years and develop a new, dedicated Microsoft services practice, officials said.

Rallying around Microsoft's "People-Ready Business" theme -- the new program is called Microsoft and HP Solutions for the People-Ready Business -- Microsoft and HP are taking aim at IBM Corp. and its "On-Demand"business services model for large enterprises. Nick Parker, general manager for systems and services partners in the Enterprise Partners Group at Microsoft, said that the companies identified strategies and technology platforms that they were using to successfully compete with IBM and used them to develop a joint offering.

"What we found is where we are winning today against IBM,"Parker said. "We're trying to do more of it in a more formal, predictable way worldwide. If you look at the scenarios that we've targeted on People-Ready Business and then look at HP services, right down to the client level you're finding the solutions are landing through the Office platform, through the SharePoint platform. On-Demand is a little more technology- or infrastructure-centric. Ours is more best-of-breed."

The specifics of the deal involve development of joint applications in five areas:   messaging and unified communications, collaboration and content management, business intelligence, business process integration and Microsoft core infrastructure. In addition to HP creating its Microsoft services organization -- called the Microsoft Services Practice -- the company will add 3,000 Microsoft consultants as part of a new training effort called the Solutions for People-Ready Business Training Program.

Although neither Microsoft CEO Steve Ballmer nor HP CEO Mark Hurd was present at Wednesday's press conference to announce the new offering -- merely a problem of scheduling, Microsoft officials said -- officials from both companies said that both CEOs drove the deal.

"The conversations that took place earlier this year between our executives prompted some wholesale rethinking of our investments in the marketplace,"said David Swatzell, director of the Worldwide Microsoft Solutions Practice at HP. "We [decided to] build a worldwide solutions practice specific to Microsoft, delivered globally by the HP services organization. In the past, we may have waited until there was a certain level of market momentum [before making a deal]. We believe the market is right. We're making one sooner and more significantly than ever before."

IBM won't likely be the only competitor for the new Microsoft-HP alliance, though. Large, enterprise-focused service providers and consultants -- many of which are already close partners with Microsoft -- could find themselves competing with a joint Microsoft-HP offering.

Parker, for his part, said that the new alliance will create new market opportunities rather than close other ones and ultimately benefit the channel as a whole.

"We truly believe this will grow the market,"Parker said. "We think all our revenue will come from new opportunities and not from shifts from our partners. [The new offering] will really cause the evidence or the credibility to help a lot of our other partners who pitch platforms to companies. We're growing the market into new areas such as unified communication. If you look at where the collaboration platform is going, we think this is market expanding. It's an upside for anyone, and this should give a spearhead for any of our partners bidding our platform."

Beyond that, Parker said that Microsoft will continue to work with other enterprise partners as it has before, and that partners will have the opportunity to add services to the new offering.

"[The deal] is not exclusive,"he said. "We're both platform companies and we'll continue to drive channel and service and solution partners. We open the door to any partner who wants to step up, make commitments and drive opportunities on this platform."

Swatzell agreed, saying that both companies are open to collaborating with partners offering services that complement the HP-Microsoft alliance.

"There's plenty of opportunity for everyone in the marketspace,"Swatzell said. "We'd like to think that we've got every single piece of the value proposition covered, but there's going to be niche areas where there could be value added. We'd certainly welcome that opportunity to work with providers."

Microsoft Consulting Services, Microsoft's own services organization, will also collaborate heavily with HP's services organization, he said.

"The objective here is to ensure that customers optimally benefit,"Swatzell said. "To the extent where we can create blended teams where we understand our technologies and were others can contribute, that's a win-win."

About the Author

Lee Pender is the executive features editor of Redmond magazine. You can reach him at lpender@redmondmag.com or follow him on Twitter.

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