Gartner predicts that the software giant will spend $15 billion to acquire up to five information-technology professional services companies, including one large, globally recognized firm, by the end of 2005. "You can't just buy it in small pieces," Bittman said. "They need a big brand name because they aren't known as a services company." If Gartner's prediction about Microsoft is correct, it would signal a big strategy shift for the software company, since CEO Steve Ballmer told CNET News.com in January that generating revenue from services is not a priority. Nevertheless, Microsoft hired Mike Sinneck, a former IBM executive, in January to run its worldwide services organisation, a sign that the company is putting more emphasis in that area. The Microsoft Consulting Services organisation, which employs 4,500 people, generates about $800 million in revenue annually, according to Microsoft. The group also has some strategic partners: Accenture, Compaq Computer and EDS among them. "Although it is likely that growing enterprise consulting as a business is not a Microsoft goal today, it will likely be forced to grow its consulting business to satisfy its growing number of enterprise clients, to directly influence the industry toward .Net," said David Smith, vice president and research director for Gartner. Kiarash also sees services as a natural extension for Microsoft. "They need to offer a higher level of services to medium and large clients," he said. In the workload management category, Gartner predicts that Microsoft will spend $500 million to $1 billion to acquire or build its own management tools by the end of 2004. Bittman said Windows has a "glaring issue," notably the "inability to efficiently and manageably run multiple workloads." Media technology is also a large hole that needs to be filled, according to Gartner. By the end of 2005, the firm forecasts, Microsoft will spend as much as $1 billion to further its goal of becoming a technology provider to traditional media companies. "Their track record in that area is mixed, and intentions are unclear," said Kiarash, noting that Microsoft has made several investments in cable companies AT&T and Comcast. Storage, security are possibilities Storage management and security are much more likely targets, according to Kiarash. Microsoft has already dipped into storage this year with its Storage Application Kit, which allows for Windows-based storage. "Storage is definitely something they will focus on," Kiarash said. Indeed, Microsoft "caused a stir" at the Storage Networking World conference last week, according to Brendan Barnicle, an analyst at investment bank Pacific Crest Securities. The company laid out plans to expand into the market with new features for .Net and new versions of Windows that will improve storage capabilities. Microsoft is slowly edging its way into the market, starting at the low end and working its way up, "just like it has in the database market and enterprise storage market," Barnicle said in an April 8 research note. Security would also be high on Microsoft's shopping list, analysts say. The company has recently been criticized for vulnerabilities in its Windows NT and Windows 2000 operating systems. "But you could also raise a list of reasons they wouldn't want to get into the security business," said McDonald's Williams, who saw such predictions as futile. "This isn't like 10 years ago when they saw that they needed a presentation-graphics program so they went out and bought PowerPoint," Williams said. "There were identifiable holes in their product lines in those days. Now, even if there are, Microsoft is large enough to develop their own products from scratch." Besides the possibility that the company may develop its own products to move into new categories, analysts say predictions about purchases could be moot for another reason. "If they found something interesting, they would have gone out and bought it already," Kiarash said. "But there's still such slow IT spending. They have to get through that first, not legal issues." News.com's Mike Ricciuti contributed to this report.
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