Microsoft and Andersen Consulting said they are creating a joint venture to promote and sell software and consulting services tied to Windows 2000 business software, giving Microsoft a leg up in consulting, where it has long played second fiddle to its biggest rivals.
Microsoft will contribute $385 million in cash to the project and provide technical expertise, analysts said. Anderson is to supply "sweat equity" such as training, services and intellectual property.
The venture, called Avanade (Av'-e-nod), could eventually issue its own stock and is forecast to generate $1 billion in annual revenue within three years, the companies said. The name is derived from combining "avenue" and "promenade," meant to suggest the company as a path to e-commerce and the Internet.
The company faces approval by the Securities and Exchange Commission but expects to open for business April 1.
The Seattle-based joint venture will hire more than 3,000 people, including 400 to 500 in the Seattle area, with expertise in Microsoft software in its first 24 months, the companies said. It plans to open offices in San Francisco; Dallas; New York; Paris; London; Sydney; Sao Paulo, Brazil; and Singapore within the next 18 months.
The deal plugs a hole in Microsoft's strategy to make Windows 2000, its latest software to run corporate computer networks and Internet sites, the preferred software for businesses. While the company does offer consulting, much of it is done on a smaller scale or through partnerships with computer retailers.
Consulting is seen as a growing part of the e-commerce game, and companies such as Sun Microsystems, IBM and database-software maker Oracle have cashed in on such services.
"We've never been able to form a partnership to serve this market super, super well," said Microsoft Chief Executive Steve Ballmer.
The pact gives Microsoft a powerful ally in its effort to sell Windows 2000 in the lucrative market of corporate computer networks, analysts said. Andersen is the world's No. 2 accounting and consulting firm.
For Andersen, the alliance comes as consulting firms are reporting more demand from companies seeking to develop Internet-based electronic commerce. About 25,000 Andersen consultants will receive training on Windows 2000 and other Microsoft business software, Andersen said.
Consulting firms also are competing for top recruits with technology start-up companies that can offer potentially lucrative stock options, and forming a company selling Internet services could help attract top talent, Andersen executives said.
"We think that being a pre-IPO (initial public offering) technology firm won't hurt" said Mitchell Hill, an Andersen partner who will be Avanade's chief executive.
Information from Bloomberg News, Reuters, The Associated Press and Seattle Times technology correspondent Paul Andrews is included in this report.