Microsoft-AT&T deal may impact big corporations

At first glance, Microsoft's $US5 billion investment in AT&T looks like it is solely aimed at the consumer market, but the deal will likely have broader ramifications for IT in the not-too-distant future, too. 'AT&T certainly will be becoming, over time, a major provider of hosted services,' says one US analyst. 'Microsoft at least will have a seat at the table to argue that a good percent of those services should be running on Windows 2000.'

At first glance, Microsoft's $US5 billion investment in AT&T looks like it is solely aimed at the consumer market, but the deal will likely have broader ramifications for IT in the not-too-distant future, too.

The agreement reached last week calls for the companies to work together to deploy broadband and Internet services to US households. For corporate customers always seeking smoother, faster bandwidth, the move could mean progress on two fronts: remote access and hosted applications, an area Microsoft reportedly is eyeing.

"AT&T certainly will [be] becoming, over time, a major provider of hosted services," said Dwight Davis, an analyst at Summit Strategies. "Microsoft at least will have a seat at the table to argue that a good percent of those services should be running on Windows 2000. There's also BackOffice server applications and the Office desktop suite, and some of these services are bandwidth-constrained."

"Microsoft certainly has broader designs on this relationship," Davis said.

Typically, rented applications are used by midsize businesses to reduce long and complex implementations and cut software maintenance costs. But large companies also are considering hosted applications.

The business benefits of high-speed access touch everything from customer-relationship management to improved supply-chain management.

"We track consumer broadband very closely for three reasons: impact on mobility of workforce; impact on consumers, [or] `how can we establish greater customer intimacy by bringing information services bundled with retail energy;' and supply-chain optimisation," said T.R. Web, technology advisor to the CIO at Shell Oil, in Houston.

While IT-related issues get worked out, though, Microsoft and AT&T will focus on the consumer broadband market.

The deal will mean "more set-top boxes sooner that will result in more choices for consumers, more real competition for local exchange carriers, more effective penetration of [broadband] markets," said AT&T Chairman Michael Armstrong.

AT&T also will see more growth in video, data, and voice markets, added Armstrong, who touted the arrangement with Microsoft as "a really strong endorsement by an outstanding company of the [AT&T] broadband strategy."

AT&T also has agreed to use other Microsoft software for e-mail and interactive television services.

The two companies plan to deploy the Microsoft software in two "showcase" cities by the second quarter of 2000, and AT&T also will use Microsoft software with another company's server software in a third city, officials said.

Executives also declined to name which other vendors will be involved in the deal, but they did say that the Microsoft-AT&T agreement is not exclusive. Armstrong pledged that AT&T will remain dedicated to open environments.

Microsoft Corp., in Redmond, Wash., is at www.microsoft.com. AT&T Corp., in Murray Hill, N.J., is at www.att.com.

(Nancy Weil, a Boston correspondent for the IDG News Service, an InfoWorld affiliate, and Marc Ferranti, IDG news editor, contributed to this article.)

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