Banyan bows before mighty Microsoft

On the surface, last week's alliance between Banyan Systems and Microsoft is about delivering tools and services that will allow their products to interoperate better. But the real deal, experts say, is that Banyan has conceded its share of the network operating system (NOS) and directory services markets to Microsoft. Microsoft will invest $US10 million in Banyan's growing network services business with an option to buy a 7.5% stake in its former NOS rival. Banyan will use the money to train at least 500 network engineers in designing, deploying and Windows NT/2000 and Exchange.

On the surface, last week's alliance between Banyan Systems and Microsoft is about delivering tools and services that will allow their products to interoperate better. But the real deal, experts say, is that Banyan has conceded its share of the network operating system (NOS) and directory services markets to Microsoft.

Under the terms of the deal, Microsoft will invest $US10 million in Banyan's growing network services business and holds the option to buy a 7.5% stake in its former NOS rival. Banyan will use the money to train at least 500 network engineers in designing, deploying and maintaining Microsoft products -- namely Windows NT/2000 and Exchange -- at large, enterprise customer sites.

Banyan has maintained a loyal high-end customer base with its reliable and scalable VINES NOS and StreetTalk Directory Services. But Banyan has been plagued by recurring financial woes, weak marketing and waning market share.

New corporate directions

The company has been steadily moving away from its software development roots toward network services and support since CEO William Ferry took over the Westborough, Massachusetts, company two years ago.

Ferry says the overwhelming majority -- as many as 90% -- of Banyan's customers are already using Microsoft products. "And they are telling us to support Windows NT as a future direction," Ferry says, adding that Banyan will move its network to NT as well.

The two companies will first collaborate on connectivity tools that offer better ties between Banyan VINES and NT Server machines. They also will work to integrate StreetTalk with NT 4.0 domains and the yet-to-be-released Windows 2000-based Active Directory. This will be done by enhancing StreetTalk's support for the Lightweight Directory Access Protocol and building a directory synchronization tool. Those products will ship later this year.

Additionally, Banyan will build tools that eventually will help users migrate from VINES and StreetTalk to Windows 2000 and Active Directory. Officials refused to say when Banyan will discontinue development of VINES and StreetTalk.

Users were not surprised by Banyan's Microsoft allegiance.

"The end of VINES and StreetTalk was going to be a given once Microsoft was able to get Windows 2000 out there and established as a stable product," says Ted Kull, a network manager with longtime Banyan user Educational Testing Services (ETS) in Princeton, New Jersey.

While Banyan gets a much-needed cash infusion, Kull asserts that Microsoft is also benefiting from the deal. "Microsoft gets a leg up on migrating Banyan's existing client base to its own products. Everyone thinks of Banyan as a nonplayer, but when you look at the quality of its customer base, you can see the company has a very attractive customer list," he says.

Bailing out Active Directory?

Industry observers say Microsoft is looking for more from Banyan than integration tools.

"This raises a red flag about the readiness of Active Directory," says Jon Olsten, an analyst with the Cambridge, Mass., consultancy Forrester Research Group. "It looks to me like Microsoft has found a quick and cheap way to get its hands on whatever pieces of StreetTalk it needs to get Active Directory out the door."

Microsoft officials say the deal does not include a technology exchange, but note they would not rule that out in the future.

Banyan: +1 (508) 898-1000

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