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Microsoft to invest $10 million in Corio

The investment allows the application service provider access to Microsoft's sales channel, and the companies say they will develop a joint research lab in Silicon Valley.

Jonathan Lee Application service provider Corio today announced that Microsoft has invested $10 million in the company.

Microsoft's investment will be accompanied by a plan to develop a joint research lab in Silicon Valley.

As part of today's deal, Corio, which hosts business applications for customers so they don't have to manage the software themselves, will gain access to Microsoft's sales channel. Corio's customers include Siebel Systems, Broadvision, Commerce One, PeopleSoft and Cognos. Corio will host software from its partners Commerce One and Siebel Systems for customers on the Microsoft Windows DNA platform, including Windows 2000 Server and SQL Server.

Microsoft's investment in Redwood City, Calif.-based Corio comes at the heels of its recent $67.5 million investment in Internet services firm USWeb/CKS. Under the USWeb deal, Microsoft said it will invest in the company over the next year to fund the development and marketing of new application services and technologies for their joint customers.

Corio competes in the ASP market against rivals USinternetworking and FutureLink, along with a growing crop of others including traditional software developers such as Oracle and J.D. Edwards.

Jonathan Lee, who founded Corio in September 1998 and now serves as chief strategy officer, said he expects the ASP market to grow tremendously this year.

"1999 was the year for proving that the ASP model is a compelling one," Lee said in an interview. "(Now) every major player has embraced it...from IT players, big software publishers, data center companies...even the Intels of the world.

Corio and other ASPs argue that mid-sized companies can avoid management headaches and save 70 percent in up-front costs by renting all software applications rather than buying them. Customers access rented applications via a browser or leased line.

To date, companies that have already taken an equity stake in privately held Corio include PeopleSoft, Siebel, Concentric Networks, and Sun Microsystems. Last November, the privately held company closed a $30-million round of funding led by Lehman Brothers Venture Partners.

Lee said he expects to take the company public some time this year.