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Netscape loses KPMG to Microsoft

Big Six consultancy KPMG Peat Marwick, a staunch Netscape ally, will create a 500-person consulting group devoted to Microsoft technology and standards.

As Big Six consultancy KPMG Peat Marwick announced it would create a 500-person consulting group devoted to Microsoft (MSFT) standards and technology, it is easy to forget that the consulting partnership was, until recently, a staunch ally of Netscape Communications (NSCP).

KPMG, in fact, will be pulling out 18,000 Navigator seats and a SuiteSpot back-end system.

KPMG's decision to work more closely with Microsoft, which follows yesterday's surprise announcement that Microsoft would become an investor in Apple Computer, illustrates to some degree the financial and deal-making juggernaut faced by Netscape. Although Netscape has a wide range of adherents, Microsoft has historically had an ability for devising partnership programs within the industry that eventually allow it to dominate the adversary of the moment.

To wit, Microsoft's Apple investment, which made Internet Explorer the "default" browser for future versions of Macintosh operating systems, comes on the heels of last week's defections by Intuit and IBM subsidiary Lotus to IE with their respective software suites. Other Netscape setbacks this year include the move to Explorer by Chevron, which until March had been one of Netscape's biggest corporate customers with 25,000 desktops.

Bill Gates appeared at both the Apple and KPMG events. KPMG, said sources, is likely receiving some sort of compensation.

"Microsoft is building a delivery mechanism for its technology," said one computer integration executive whose company has received Microsoft training subsidies in the past. "Their pockets are deeper."

"They have been putting tons of money into the channel," said David Grossman, senior analyst at Montgomery Securities. "Is it building share for Windows NT? It is still too early to tell, but this is Microsoft's mode of building share."

KPMG was a fairly visible advocate for Netscape technology. The consulting firm used both Navigator and Communicator internally and had installed the company's technology in a number of corporate sites, according to sources. In January, the firm became a Netscape Preferred Global Systems Integrator. The firm also announced at the time that it planned to create an intranet called KWEB with Netscape technology that would connect 18,000 employees and 120 U.S. offices.

Under the Microsoft-KPMG alliance, the firm will form a 500-person consulting practice focused on developing solutions in two areas: electronic commerce and "customer value management" applications. Customer value management applications manage help desks and sales force systems. The firm's practice in that arena is growing at 100 percent per year.

The consultants staffing the new group will come from inside as well as outside the firm. Eventually, all of them virtually will get certified as Microsoft developers or engineers. Microsoft's own consulting group will also help in developing the group.

In addition, KPMG has agreed to adopt a Microsoft Exchange Messaging system to connect its employees, thereby supplanting the KWEB system.

"By building a 500-person consulting practice dedicated to Microsoft enterprise solutions, KPMG aims to meet the growing demand among organizations for integrated, end-to-end information technology," said KPMG deputy chairman Roger Siboni in a prepared statement.

"It's an about-face, big time," said one consultant who has worked on projects with KPMG recently. The consultant also added that it was likely that KPMG would continue working with Netscape as well.

Financial terms of the alliance were not discussed. However, several integration partners in the past have received subsidized training after setting up Microsoft practice groups. Many also received bonuses for hitting sales goals. Training has been a major budgetary issue for computer integrators and customers for some time. Full employee certification can run to several thousand dollars per employee.

Netscape has worked to reduce the cost of training by putting courses on the Web. Company executives, however, have said on a number of occasions that they will not subsidize training to the same degree.