News

Partnerships: Eyes on the Enterprise

• By Lee Pender
• 01/26/2007

Microsoft and Hewlett Packard have deepened their long-standing relationship with a wide-ranging agreement that's likely to catch the attention of large, enterprise-focused consultants and service providers but should also provide opportunities for the channel as a whole.

The partners will jointly invest $300 million over the next three years to develop, service and market enterprise technology based on both companies' platforms, officials from both companies announced in December. HP also expects to expand the number of Microsoft-trained professionals in the company's services ranks from 22,000 to 30,000 over the next three years and develop a new, dedicated Microsoft services practice.

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 and its "On-Demand" business services model for large enterprises.

The deal involves development of joint applications in five areas:

• Messaging and Unified Communications
• Collaboration and Content Management
• Business Intelligence
• Business Process Integration
• Microsoft Core Infrastructure

In addition to HP's creation of 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.

Analysts call the deal significant and strategically wise for both companies, and noted that partners could profit from it despite HP's deep services integration with Microsoft.

"It makes perfect sense for the companies to do this," says Charles King, principal analyst with Pund-IT Inc., a Hayward, Calif.-based IT research firm. "HP has increasingly developed itself into a Microsoft-centric systems vendor."

"HP isn't known for a lot of marketing hype and hyperbole," notes Laura DiDio, a research fellow in the Enabling Technologies Enterprise group at Boston-based Yankee Group Research Inc. "But they're getting the job done. It's a very, very big deal for Microsoft."

IBM won't likely be the only competitor for the Microsoft-HP alliance. 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.

But both DiDio and King say that while some competition is inevitable, they expect Microsoft to incorporate current partners into its HP business rather than potentially alienating the channel.

"Microsoft has been treating its partners very well," DiDio says. "They have a lot of flexible deals. I don't think anybody is going to blink or think twice about an HP-Microsoft partnership being prohibitive to anybody. People will just join in."

Channel partners represent a major opportunity for both companies because they "understand the industries and the regions and the markets they focus on much better than a company like Microsoft or HP can," King says.

And both analysts say similar large deals are likely on the horizon for Redmond.

"This deal with HP is sizeable, but I don't think this will be the last similar sort of deal we'll be hearing from Microsoft," King says. "There's going to be plenty to go around."

Indeed, John Gantz, chief research officer at Framingham, Mass.-based research firm IDC, noted in Microsoft's press release for the agreement that "the software markets alone in [BI], collaboration, content management and infrastructure software running on Windows will be a $49 billion market in 2007. Add in communications, hardware and services [and] it's easily over $100 billion."

Meanwhile, Nick Parker, general manager for systems and services partners in Microsoft's Enterprise Partners Group, predicted that the new alliance would create new market opportunities rather than close existing ones, ultimately benefiting the channel as a whole.

"We truly believe this will grow the market," Parker said when the agreement was announced. "We think all our revenue will come from new opportunities and not from shifts from our partners."

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

"[The deal] is not exclusive," he said. "We open the door to any partner who wants to step up, make commitments and drive opportunities on this platform."

David Swatzell, director of HP's Worldwide Microsoft Solutions Practice, 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 market space," Swatzell said at the time of the announcement. "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."

In forging the agreement, HP and Microsoft identified strategies and technology platforms that they were using to successfully compete with IBM and used them to develop a joint offering, Parker said.

King, however, doesn't expect the HP-Microsoft alliance to have a major impact on IBM's hold on the services market.

"IBM is a very large partner of Microsoft," he says. "[IBM's] high-end server business easily blows anything that HP has out of the water. I don't see it having a huge impact on IBM customers."