Integrators Size Up HP-Microsoft Services Alliance

Microsoft is funding about half of the marketing and development of the services alliance, which names HP as a worldwide prime integrator for .Net. HP will use .Net as its preferred platform and is dedicating an army of 5,000 consultants to .Net solutions.

While the pact is seen as a positive step toward commercial adoption of .Net, some integrators are already moving to avoid being overshadowed by the new partnership.

BearingPoint (formerly KPMG Consulting) and Cap Gemini Ernst and Young are both exploring expanding their alliances with Microsoft to earn worldwide prime integrator status, executives at those companies said. "HP is committing quite a bit of resources. The prime integrator status matters, as does access to Microsoft marketing dollars," said John Parkinson, CTO for the Americas at Cap Gemini Ernst and Young.

Both integrators have been in Microsoft's circle for several years. Avanade, the two-year-old services company jointly owned by Microsoft and Accenture, would not comment for this story, and Accenture could not be reached.

Some partners question whether the new venture will elbow them out. "I'm glad to see HP has put a stake in the ground and said they're dedicated to the Microsoft market space, because that's been up in the air quite a bit," said Mark Feverston, vice president of enterprise servers at Unisys, Blue Bell, Pa. "But what does the pact mean? Will HP do something different than what we're doing with .Net? We're all gearing up for .Net."

Microsoft has said that HP's worldwide prime integrator status will not be exclusive and will not harm other partners.

Still, some solution providers fear that the huge new player could energize another competitor in the market. Some also question the impact on potential subcontracting deals and market-development funds.

HP said it plans to create an internal group of .Net solution architects and establish a worldwide sales force of systems engineers and enterprise sales professionals to sell .Net solutions. HP also is said to be eyeing acquisitions to increase its .Net workforce.

Bob Lord, CTO of Razorfish, New York, said the deal makes sense because it gives Microsoft a strong partner with a sizable installed base in the enterprise to combat IBM in the Web services market, and gives HP a technical strategy that drives services growth. "In addition to large systems integrators who should be scared, I think middle-market services companies should also be worried," Lord said. "But it may present an opportunity for companies like ours to roll up into HP as a way to instantly give them these abilities. . . . In this lousy economy, it might be a good idea to consider."

While Microsoft is committed to investing $500 million in the channel for .Net training and channel development, some are envious of the software giant's injection of cash into HP at a time when the whole services industry is hurting.

"I'm jealous," said Oli Thordarson, president of Alvaka Networks, Huntington Beach, Calif., hinting that Microsoft wants to ensure that Compaq Global Services remains strong under the HP umbrella. "Some things are not so good at HP, and Microsoft is throwing them a bone," he said.

Industry observers said the pact fulfills Microsoft's promise to move to a more partner-centric model, rather than develop its own services arm.

While the impact on systems integrators has yet to be determined, analysts said major .Net partnerships are critical to Microsoft's future. The pact is also significant for HP, which has struggled to define its market position following its acquisition of Compaq and IBM's purchase of PwC Consulting.

"It'll be interesting to see how this plays against an EDS or a KPMG, as the real play for .Net is services," said Rob Enderle, research fellow at Giga Information Group. "This may also keep IBM up at night and be a wake up call to Dell that HP isn't done yet."