Microsoft, MCI Reshape Services

P> MCI Communications Corp., Washington, D.C., took a giant step forward in the systems integration world last month when it formed a marketing alliance with Microsoft Corp., Redmond, Wash. Plans outlined by MCI CEO Bert Roberts and Microsoft CEO Bill Gates follow logically from MCI's September purchase of SHL Systemhouse, a big Canadian integrator.

Some analysts, however, are saying this joint venture will not mean systems integration as usual. MCI, through this alliance, will offer business-to-business and business-to-consumer services for which they will charge a fee.

The idea is to create a sort of menu of systems integration services, delivered at a fraction of the cost and time of traditional systems integration.

Think of it as systems integration on demand; just as market forces have lowered prices and compressed sales and marketing cycles for computer products, these same forces have affected the delivery of information technology and systems integration services.

This could be the beginning of a trend -- the commoditization of systems integration services.

"This is not the traditional way information technology services have been delivered to the market," said Christopher Leuchtenberg, director of computing strategy at Forrester Research Inc., Cambridge, Mass. Other companies, such as IBM Corp., Armonk, N.Y., and EDS Corp., Plano, Texas, are moving in the same direction, said Leuchtenberg.

However, he said, MCI is in the driver's seat for these kinds of services, and consumers and small businesses are ready for them. "Computers are already in people's homes. The network has been created. What is remaining is to introduce the applications and market them," he said.

The MCI-Microsoft alliance is designed to provide integrated computer and communications services to businesses and individuals, which is easier and faster through the Internet.

In fact, the possibilities of the Internet completely change the so-called value-added network business, said Leuchtenberg.

Specifically, MCI will distribute the Microsoft Network, or MSN, as its Internet service, calling it "MSN from MCI." MCI also will promote the Microsoft Internet Explorer browser and include it as part of its Internet package.

In turn, Microsoft will market MCI services, including conferencing and ISDN to Microsoft Windows customers. ISDN, or integrated services digital network, is a digital switched network that provides fast transmission (compared with traditional telephone lines) of voice, data and images over a single phone line.

MCI, through its SHL subsidiary, will jointly sell MCI network services, Microsoft software and give consulting advice.

In addition, MCI will market turnkey services for distributed applications through Microsoft Exchange servers, which support Internet mail, faxing and messaging. These services will be targeted to small businesses and branch offices.

MCI estimates the market for consulting, design and management of network and computing systems at $40 billion and growing 20 percent annually. SHL was a great takeover, said MCI, because business, government and individuals are demanding one-stop shopping for those areas of expertise.

The alliance may be thought of as a coup for MCI because Microsoft is currently enjoying top status in the computer world, but the deal may be as important for the Redmond company.

That's because of the Netscape browser's enormous popularity. "Microsoft, for the first time, has found itself at a disadvantage as regards to distribution channels. Netscape changed the rules by distributing across the Internet," said Leuchtenberg.

SHL, which has long worked with Microsoft, was also a draw to the deal. "We're pleased to strengthen our relationship with Systemhouse," said Gates in the conference call.

That part of the partnership can be considered already underway, said Roberts. "In the case of SHL Systemhouse, there is active participation in Microsoft NT," he said.

One reason the alliance looks as if it will work so well, pointed out Leuchtenberg, is that SHL is one of the only systems integrators that doesn't use Lotus Notes. "Early on, SHL looked at Lotus Notes and said 'we like the story Microsoft is telling us,'" Leuchtenberg said.

A company that might not be ecstatic about the MCI-Microsoft deal is Rupert Murdoch's News Corp. Roberts, who has promised a $2 million investment in News Corp., admitted that the two on-line joint ventures might overlap. Although he was cryptic about News Corp.'s new role, it looks as if Microsoft is the current favorite. "MCI and News Corp. will be putting that venture into another venture, to be announced soon," said Roberts.

Regardless, as Gates pointed out, there will be many partnerships in the world of the Internet. Call it hedging your bets.