Microsoft and Andersen Consulting Announce Expanded Alliance

Microsoft President and CEO Steve Ballmer and Andersen Consulting Partner and CEO Joe Forehand today announced plans for the formation of a joint venture designed to address the needs of enterprise customers.

REDMOND, Wash., March 13, 2000 — Microsoft and Andersen Consulting today announced plans for the formation of a joint venture and expansion of their existing relationship that calls for the two companies to deliver innovative business solutions for the electronic economy based on Windows 2000. As part of the extended alliance, Andersen Consulting will form a dedicated Microsoft-focused consulting practice, the Microsoft Solutions Organization (MSO), within Andersen Consulting that will provide expertise in Windows 2000. Andersen Consulting and Microsoft will form a joint venture, named Avanade * , which will offer solutions and services based on Windows 2000.

To better understand this announcement, PressPass spoke with Geoff Nyheim, director of global partners for Microsoft, and Mitch Hill, who will be the CEO of Avanade and is currently a partner of Andersen Consulting.

PressPass: Can you give us more detail about the announcement?

Nyheim: Today, we’re announcing an expanded strategic relationship between Microsoft and Andersen Consulting. Our new relationship will extend our existing alliance, as well as result in the formation of a new joint venture company. In both cases, we plan to deliver innovative business solutions that will allow our customers to solve their most complex business challenges cost-effectively and efficiently.

PressPass: What prompted Microsoft and Andersen Consulting to make these moves?

Nyheim: Our customers. Increasingly, businesses worldwide are demanding robust, highly scalable solutions built upon the Microsoft platform, namely Windows 2000, SQL Server and Windows DNA. Thus, we need to work together to integrate Microsoft’s products and technologies with Andersen Consulting’s services and solutions.

PressPass: What types of customers do you see benefiting from this increased cooperation?

Nyheim: High-end enterprises, especially those requiring Internet-based and e-commerce solutions. These customers include worldwide leaders in such areas as financial services, energy, telecommunications, utilities, automotive, healthcare, insurance and utilities, as well as governments. We will work with the market leaders in these core areas.

Hill: Approximately 500 organizations worldwide represent a large majority of Andersen Consulting’s resource allocation and revenue. So the alliance will initially focus on these Global 500 clients. Moreover, we will focus on digital economy clients, which provide services, products and content through the Internet.

PressPass: What types of benefits do you expect your customers to realize from the alliance?

Hill: They will experience tremendous benefits. Some include greater product time-to-market, risk mitigation for complex products and solutions and global consistency in both engagement and delivery.

PressPass: Can you provide more detail on the types of solutions that will result from this alliance?

Hill: Andersen Consulting will offer a wide range of solutions for the Microsoft platform including applications targeted at a specific business need across a variety of horizontal and vertical markets.

Nyheim: Generally speaking, we will offer three classes of solutions. First, we will collaborate to deliver Andersen Consulting solutions for the Microsoft platform. Secondly, we will deliver
“market solution offerings.”
For this solution class, we will integrate solutions from key independent software vendors (ISVs), such as SAP, PeopleSoft, Siebel Systems, Commerce One and others. These are for customers who want to buy a solution. Some customers will want to build a solution from scratch. Microsoft and Andersen Consulting also will do that. Andersen Consulting will have an army of people with very deep skills in Microsoft technology and solution development that will create customized solutions for customers.

PressPass: Can you name specific types of solutions that Microsoft and Andersen Consulting might offer?

Nyheim: Certainly. Examples include claims processing for insurance, retail banking solutions, energy trading, supply chain management for large-scale manufacturing environments, and government-to-citizen and government-to-business portals. We will focus on many different types of solutions — particularly Internet-based solutions — that will make our key customers more competitive, efficient and profitable. We will deliver these solutions quickly and competently so that our customers reduce their own level of risk and realize a rapid return from their technology investments.

PressPass: Will the extended alliance affect Microsoft’s relationship with Andersen Consulting competitors?

Nyheim: The alliance does not change Microsoft’s existing partner strategy. Today, we have relationships with many competitors of Andersen Consulting and given our role as platform provider, we will continue to do so. The extended alliance between Microsoft and Andersen Consulting won’t preclude either party from working with competitors of the other. But Microsoft and Andersen Consulting will increasingly collaborate on behalf of our mutual customers.

PressPass: How will Andersen Consulting’s Microsoft Solutions Organization be different than just offering Microsoft-based services?

Hill: The MSO will be a dedicated Microsoft practice within Andersen Consulting, so it increases the level of commitment to the Microsoft platform. Within the MSO, Andersen Consulting will focus on developing Microsoft-based skills, so MSO technologists will have deep competency in developing and deploying solutions for the Microsoft platform.

PressPass: How will the extended relationship affect Andersen Consulting’s relationship with Microsoft competitors?

Hill: Andersen Consulting certainly will continue to work with other platforms and serve the needs of all of its clients. However, we believe that there is tremendous opportunity to build for Microsoft technologies, so we will accelerate our efforts to work with the Microsoft platform.

PressPass: Do you believe that the MSO will make Andersen Consulting more competitive in the Microsoft space?

Hill: Yes, Yes.. The MSO lets us focus Microsoft’s efforts for Windows 2000. Through the MSO, we will build a repository of skills within Andersen Consulting. This will increase our core competency in the platform, which will allow us to quickly develop and implement innovative business solutions for our mutual customers.

PressPass: What is the specific mission of Avanade?

Hill: The mission is to design, develop and implement high-end e-commerce and enterprise platforms more quickly and more competently than anyone else.

PressPass: Why are you forming a joint venture, as opposed to other possible business arrangements?

Hill: With a joint venture, customers get the best of both companies. Avanade will attract very talented people from both Microsoft and Andersen Consulting. Avanade employees then can work together easily in a single organization for the maximum benefit of the customer.

PressPass: Is Avanade a 50-50 joint venture?

Hill: No. Ownership will be split 49% Microsoft and 51% Andersen Consulting.

PressPass: What are some types of services that the joint venture will deliver?

Hill: Avanade will focus on e-commerce services–both business-to-business and business-to-consumer. Examples include knowledge management, customer data warehousing, data center operations, e-commerce systems, middleware and business intelligence. We will use highly scalable Microsoft platforms to build complex systems that can support thousands of users.

PressPass: What types of customers will Avanade target?

Hill: Avanade will target the world’s largest organizations. We will focus on about 2,500 accounts globally.

PressPass: What types of benefits will customers realize from Avanade?

Hill: We will implement high-end e-commerce systems very quickly, so the primary benefit will be speed. Avanade will build out reference platforms — almost like starter kits. When a customer needs a solution, we will roll in quickly with most of the solution — say 70 or 80 percent — already designed and ready to implement. Then Avanade will build out the remaining 20 or 30 percent on site. So, we will be able to build and implement the solution far faster and more efficiently than organizations can from scratch.

PressPass: Does the joint venture begin with today’s announcement?

Hill: Avanade will be open for business as soon as it obtains pending regulatory approval.

PressPass: Where will Avanade be based?

Hill: We will be based in Seattle. We expect to have regional offices in San Francisco, Dallas, Chicago, New York, London, Frankfurt, Sydney, Paris, Sao Paulo and Singapore.

PressPass: From an end user’s perspective, how is the mission of Avanade different from Andersen Consulting’s new Microsoft Solutions Organization?

Hill: The joint venture will focus exclusively on the Windows data center, on high-volume e-commerce, on knowledge management, and on customer data warehousing. That’s our scope. The MSO will have a much broader scope. The MSO is based on building specific customer solutions for key industries, such as financial services, automotive, insurance, etc., so the MSO is more industry-focused.

PressPass: Recently, there has been some criticism of joint ventures among technology companies. How do you plan to avoid the mistakes of other joint ventures and ensure the success of Avanade?

Hill: Andersen Consulting has a great deal of experience in joint ventures, so we’re applying the lessons of the past to the formation of Avanade. For instance, we know that a joint venture needs a clearly defined mission. And we have learned that it requires a commitment of resources and a commitment of time. Moreover, a joint venture must be allowed to run without the undue interference of its parent companies. From our analysis, we have found that many joint ventures have failed because the parents have tried to control their operations and their destiny. This will not happen with Avanade, which truly will be an independent company.

Also, cultures have clashed in other joint ventures. For Avanade, we’ve defined a distinct corporate culture, and we will hire people who understand and fit into that culture. That culture will be highly customer-focused, so we’re recruiting people who are both technically skilled and customer-focused.

PressPass: I understand that you are recruiting for Avanade largely from Andersen Consulting and Microsoft. Will that recruitment effort affect Andersen Consulting’s capabilities in any way?

Hill: No. Andersen Consulting has an employee base of about 65,000 people and hires about 10,000 people per year. So, overall, Avanade will not have a significant affect on Andersen Consulting.

PressPass: And will Avanade affect the capabilities of Microsoft?

Nyheim: No. We will move several dozen people into Avanade. Those people will fill key management roles, along with their Andersen Consulting counterparts. We also will assign several hundred technologists to Avanade. They will work for Avanade on a long-term contractual basis, but they will remain full-time employees of Microsoft.

* Note: The plans to launch Avanade are subject to regulatory approval, including review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

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