Microsoft, Nortel in Net services alliance

Gartner analyst Eric Goodness says it is encouraging that Microsoft and Nortel view product bundling as a necessary step for taking software and hardware to the telecommunications marketplace. see commentary

At the SuperComm 2001 telecommunications trade show in Atlanta, the software giant on Tuesday is announcing it will package its Windows 2000 operating system and e-business software with Nortel's networking equipment to give service providers the technology they need to offer new services to generate more revenue.

Nortel executives said the alliance is similar to a deal Nortel struck with IBM on Monday, in which Nortel is bundling its networking hardware with IBM's e-business software.

With service providers spending less during the economic downturn, Nortel--like competitors Cisco Systems, Lucent Technologies and others-- is hoping to spur sales of its networking gear by giving its service-provider customers the technology they need to offer new money-making services, such as storing corporate data or renting software over the Web.

Nortel and Microsoft also say their combined products can offer service providers the ability to easily build backup data centers in different parts of the country. Data centers are secure air-conditioned facilities where phone and Internet companies house their Web-hosting and other equipment. That way, customers can still access their Net services if the main data center in California suffers a blackout, executives said.

"This is a good strategy for Nortel," said analyst Laurie Gooding of Pioneer Consulting, in regards to the partnership. "They have the ability to deliver every flavor of communications services that businesses require."

For Microsoft, the partnership gives the software giant another avenue for selling its operating system and Internet-infrastructure software, a market where it competes with database-software maker Oracle, Sun Microsystems, IBM and others.

Analysts say the partnership is especially important for Microsoft to combat rival Oracle, which not only rents its software over the Web, but has partnered with many service providers that are renting Oracle's sales, financial and marketing software to businesses, schools and government entities.

"Oracle is strong there, so Microsoft will try to make any partnerships to get themselves in that market," said analyst Jeremy Duke of Synergy Research Group.

Microsoft and Nortel executives said the two companies have worked together on the alliance the past six to 12 months. The pair collaboarated to ensure their technology worked well together, and will jointly market and sell products, said Pieter Knook, vice president of Microsoft's network service provider group.

As part of the package, Nortel will sell its optical networking equipment, which ships Internet traffic at high-speeds; and Web switch equipment, which speeds Web content to people's desktop computers. Microsoft will sell its Windows operating system for data centers, along with e-business software that includes its SQL Server 2000 database, which stores and manages vast amounts of corporate or Web data; and Exchange Server 2000, which manages corporate e-mail and other messaging software.

In other SuperComm news, Microsoft on Tuesday will show off technology that allows Internet service providers to rent videos over the Web. Microsoft jointly developed the technology with French telecommunications-equipment maker Alcatel and Web content provider Intertainer.

Microsoft has a long history of teaming up with networking companies. In 1999, Microsoft and 3Com partnered to create Windows-based networking products to help carriers, businesses and consumers build networks that marry voice traffic with video and data. Cisco previously worked with Microsoft on its Windows 2000 operating system.