Microsoft Stakes Out .Net Market

In a pilot program, code-named The Atlanta Experiment, Microsoft is looking into taking minority ownerships in some of its partners starting in the Southeast region, sources confirmed. The vendor already owns a piece of Atlanta-based Extreme Logic, although it does not advertise that fact.

"Microsoft has traditionally taken stakes in technology companies to incent them to use its products and services," said Sheldon Laube, CEO of Centerbeam, a Santa Clara, Calif.-based Microsoft partner.

But other solution providers say any vendor ownership of partners is fraught with potential conflict. Customers talking to a solution provider about an IT problem should be able to get independent advice as to which vendors' products are the best fit, said one East Coast solution provider who requested anonymity.

"If there's any vendor ownership, it should be disclosed" for that reason, the solution provider said. "Being a Microsoft Gold-certified partner should not preclude you from using Oracle [products for a job if that's the right solution," he said.

Extreme Logic declined to comment, but Microsoft's Web site lists the solution provider as an investment as of last March and provides no further details. For its part, Extreme Logic's Web site prominently features a photograph of Microsoft CEO Steve Ballmer and Extreme Logic President Wain Kellum. The site also makes no mention of Microsoft ownership, despite trumpeting Extreme Logic's Microsoft Gold-certified status.

The Atlanta game plan is to gauge whether the company will better penetrate a given market with partners in which it has a stake vs. other partners, said a source close to Microsoft. E-commerce and .Net-centric partners are targeted, he said.

Microsoft declined to comment. However, the company's Web site says investments in systems integrators "augment Microsoft's own services capacity" and are important to its ability to "deliver unique and innovative solutions."

"I don't know Microsoft's investment strategy, but the company is always good at hedging its bets, and doing this is probably better than alienating its entire VAR channel by going completely direct," said Brad Kern, vice president of sales and channels at Mi8, a New York-based Microsoft ASP partner.

The experiment comes at a crucial time for Microsoft, which has been bulking up its internal consulting services while also pledging continued channel support.

Many solution providers say the company's channel strategy has been in tatters since Fusion last summer. Immediately after the annual partner confab, hosted by Ian Rogoff, vice president of the Worldwide Partner Group, Rogoff went on sabbatical and disappeared from view. In November, Microsoft said he was leaving that role. The company has yet to name a full channel replacement, although Rosa Garcia and other executives took over parts of his portfolio.

Some observers said to extend its dominance into the enterprise, Microsoft must field a world-class consulting group, whether it is internal or virtual.

"Microsoft is funding a services organization that, in its mature state, would look like IBM Global Services. Staffing it by acquisition is something [the company does well, and it would appear this is the goal," said Rob Enderle, an analyst at Giga Information Group.

Many solution providers are struggling in a tough economy and would likely welcome a cash infusion.

"It's not really a secret we invest in partners, but it's not something we blast out there because the floodgates would open," a source inside Microsoft said.