Microsoft, USWeb/CKS expand application hosting services –

Growing interest in application hosting services has led two marquee vendors to strengthen their partnershiplast week in a market expected to explode over the next three years.

Microsoft pumped $90 million into its joint venture with USWeb/CKS to create a hosted application service targeted at enterprise customers deploying electronic commerce.

Microsoft and USWeb/CKS are trying to jump-start an effort called E-Services, which the two began earlier this year. USWeb/CKS renamed the effort Managed Services and is developing two offerings -- Internet Framework (iFrame) and Internet Appli-cation Management System (iAMsystem).

IAMsystem features integrated applications and services, such as messaging, electronic commerce, customer relationship management and Microsoft BackOffice, that run on the iFrame platform, which is based on Microsoft's Windows Distributed Internet Architecture (DNA) 2000.

Applications will be available over the Web through the iAMportal site, and eventually users will be linked into a Digital Value Network, a collection of businesses, partners and customers.

"USWeb and Microsoft are positioning themselves to be managed-services firms," says Meredith McCarty-Whalen, an analyst with International Data Corp., which expects that market to top $39 billion by 2003.

The market is being targeted by many companies, including Qwest, Intel and Oracle, which this week is expected to announce additional services and partners for its Business Online application service provider initiative.

Microsoft also is exploring other hosted application plans, including a hosted version of its productivity suite Office. Microsoft President Steve Ballmer in the last month has twice said the company would make such a move, but gave no timetable. There is speculation, however, that Microsoft will announce a hosting deal that includes Office with service provider Verio at this week's Fall Internet World '99 trade show.

Microsoft's investment will help USWeb/CKS pursue its stake in the market. However, USWeb/ CKS is also waiting for the software giant to deliver products.

DNA 2000, which was unveiled last month, is a collection of servers and services for building a platform and distributed Web-based applications. It relies heavily on XML.

Still missing, however, are most of the DNA 2000 components, including SQL Server 8.0; the XML-based BizTalk Server; a host-integration server, and Windows 2000 and Active Directory.

USWeb/CKS claims that iAMsystem applications should be available by year-end. Company officials say USWeb/ CKS is free to run Managed Services on another platform if DNA 2000 components are delayed, or if the architecture proves unscalable.

"This is a very important move for our company," says Robert Shaw, CEO of USWeb/ CKS. "Hosting is the most fundamental change in our business that you can imagine."

For its part, Microsoft is trying to fuel the acceptance of DNA 2000.

"The iFrame is significant for DNA 2000," says Bill Anderson, director of Web application services and market development for Microsoft. "It creates an applications services asset for us, and iFrame is a showcase."

Microsoft is investing $67.5 million over 12 months in the joint development of host technologies and electronic commerce applications. Microsoft will also spend nearly $8 million on sales, marketing and consultant training. It also has a commitment to buy $15 million worth of USWeb/CKS stock.

The two companies alsso are building a joint technology lab in Redmond, Wash., to open later this year. The lab will focus on integration of Active Directory and the iAMsystem.

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