Microsoft makes electronic commerce push in fed market

Microsoft Corp.'s federal operations last week launched an Internet server product designed for online commerce and laid out the company's strategy for the technology.

Site Server 3.0, Commerce Edition, brings together components customers need to set up and manage electronic commerce applications. The package includes Microsoft Market, for setting up and searching electronic catalogs; Microsoft Interchange Pipeline, for plugging in third-party applications, such as credit payment software; and underlying electronic transaction software.

Site Server is optimized to run on the Windows NT operating system and SQL Server database.

Site Server 3.0, Commerce Edition, is part of the company's strategy to focus heavily on electronic commerce. "[EC] is key to the future for Microsoft and the federal government," said Pete Hayes, general manager of Microsoft Federal Systems. Last month Microsoft Federal established an electronic commerce group, and the company's consulting group is coming up to speed to focus on EC, Hayes added.

The time is right to focus on EC, said Michael Pinckney, eCommerce Industry marketing manager at Microsoft Corp. "Commerce isn't new, but what is new is [that] PC prices are going down, [and] the Internet had created new dynamics," he said. "Everyone has access to EC solutions. What's changing is the availability to these solutions."

Microsoft's strategy is to provide the "quickest, most cost-effective way for every business and government agency to realize the potential of the Internet through commerce," Pinckney said. "What differentiates us is [that] our strategy is clear. We're building on our platform and tools expertise. Microsoft users can feel comfortable that a platform they use today will be around tomorrow."

In the federal space, Microsoft is focusing on working with partners and providing consulting services to help fuel EC deployments, Hayes said. "We're going to have more specialists and talk about our solutions and products.... We want to get the message out," he said.

Unlike other companies that offer services, Microsoft is not looking to make money on its consulting services, Pinckney said. "It's not there to produce revenue but to spur technology. It's a break-even business, whereas for our competitors it's a major area of business and growth," he said.

Although Microsoft has been investing heavily in EC, it has not done much to advertise this activity. In fact, 60 percent of the top Internet sites are based on Microsoft software, and the company is using the technology extensively in-house, Pinckney said.

For example, Microsoft plans to build an Internet site, code-named Nitro, that will enable users to search for a Microsoft product online and then place an order through a Microsoft reseller, which can offer a better price, he said.

Ralph Colavita, chief of the Electronic Commerce Office at the Defense Industrial Supply Center, said he used Site Server to set up a World Wide Web-based online ordering system called DMart to serve the 32,000 military customers that the center has worldwide. "We were starting with nothing," he said. "We already had an [electronic data interchange] mechanism...but we needed a new front end. The product fit our needs."

Site Server should help sales of Windows NT, said David Baltaxe, an analyst at Current Analysis Inc. "The driving force in Microsoft is to get Windows NT everywhere, and [the firm] is doing a good job of that," he said. "Site Server rides on the NT wave and also pushes the use of NT." But for those who do not use Windows NT, Site Server may be a drawback, he added.

Microsoft faces competition from IBM Corp. with its Net.Commerce Internet server, which is key to IBM's E-business campaign, Baltaxe said. He expects both firms to keep leveraging their existing technologies to enhance their core commerce applications, but their operations will diverge along traditional lines: Microsoft as a software developer extending its feature set and promoting Windows NT, and IBM consolidating around its existing infrastructure but scaling up into high-end service offerings.

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