Jan 15th 2000: Microsoft invested in ASPs Digex and Corio this week, while Bill Gates left his CEO role to concentrate full-time on developing new platform technologies for Internet-based software services.

Announcing his new role as Chairman and Chief Software Architect in a press conference Thursday (Jan 13th), Gates said the current transition to software services ranks alongside previous inflection points for the company such as the adoption of the graphical user interface, Windows NT and the Internet.

�The nature of software will be changing, software will be delivered in many cases as a service across the Internet instead of a packaged product,� he said.

"The nature of the platform, the way that it works, the way that people develop these applications, all of those we need to bring some breakthrough technologies to. I'll take on a new role that will allow me to spend almost 100% of my time on these new software technologies,� he added.

In a separate announcement on Thursday, Beltsville MD-based web and application hosting company Digex revealed a $100m investment from Microsoft and Compaq, split 50:50 between the two vendors. On Monday (Jan 10th), high-profile ASP startup Corio, based in Redwood City CA, announced a $10m Microsoft investment.

The purpose of these and earlier investments in ASPs is to strengthen Microsoft's understanding of the ASP market and accelerate adoption of its platforms by ASPs, according to Mark Chestnut, director of business development for ISPs and ASPs in the vendor�s network solutions group. The goal is �to make the Microsoft platform the best platform for hosted applications,� he told ASP News Review in an interview yesterday.

Microsoft aims to gain experience and feedback from key players in the ASP industry who can test its systems under fire - particularly its Windows DNA 2000 architecture - as well as developing new technologies that can further increase the value of its platform, he said.

Microsoft and Compaq each contributed $50m to Digex, in a deal that will focus on development of ASP solutions that deploy rapidly and scale easily. �We�re going to work on developing a standardised back end, and accelerate availability of the wealth of Windows applications,� Chestnut said.

Digex, a leading high-end hosting provider with more than 2,000 NT and Solaris servers in its data centres, said it will work with Microsoft on software interfaces that make it easy for developers to build "ASP ready" functionality such as online provisioning, billing and incident tracking into their Windows-based applications. It will also set up an optimisation and testing lab to certify ASP solutions.

In Corio�s case, Microsoft�s $10m investment buys it an inside track at one of the ASP industry�s most effective �glue factories,� as one Microsoft insider terms the company. The reference is to Corio�s strength in cross-application integration, which it has so far implemented across applications from PeopleSoft, Siebel Systems, Broadvision, Commerce One and Cognos.

Microsoft is to help Corio market its ASP services, and will set up a research lab near Corio�s facility to develop offerings based on the vendor's Windows DNA 2000 platform and associated products such as BizTalk Server, SQL Server and AppCenter Server. In return, Corio will host its Siebel Systems and Commerce One applications on Microsoft's Windows 2000 and SQL Server platforms. Until now, Corio has hosted exclusively on Unix servers, reflecting an early equity investment by Sun Microsystems and support from Oracle.

The Corio investment echoes Microsoft�s $67.5m investment in September in leading web solutions provider USWeb/CKS. Like Corio, USWeb/CKS has a proprietary integration framework, which it calls i-Frame, and as part of the deal Microsoft agreed to set up a research laboratory to develop the i-Frame platform, which is based on Windows DNA 2000.

Other Microsoft ASP investments include $5m in Arlington, TX-based hosting provider Data Return, announced November, and participation in an $800m investment in broadband communications provider Winstar, announced December. Both are participants in Microsoft's ASP trials of Office Online.

The investment by Compaq in Digex is the vendor's third ASP investment in recent months. In December it made a $2.2m investment in Futurelink, while in November, it committed $200m to help fund a new global ASP operation being built by leading international telco Cable & Wireless.

There is more than research and technological development at stake in Microsoft�s strategy, which also aims to maintain its competitive position against rivals in the ASP market. In the same week that Microsoft announced its investments in them, both Digex and Corio turned up on another list: Sun�s Jan 11th announcement of the first nine firms to achieve certification under its new SunTone scheme for application outsourcers. Another leading member of Sun's list was Nasdaq-listed ASP pioneer USinternetworking, also a Microsoft ASP partner.

Reporting by Paul DeGroot