KPMG Peat Marwick has become the second of the Big Six accounting and consulting firms to enter into an alliance with Microsoft Corp.

In a related sign of the companies' closeness, KPMG said it would be the first to standardize internally on Microsoft Exchange, a competitor of International Business Machines's Lotus Notes, for its 20,000 employees in the United States.

KPMG announced last week it was creating a 500-person consulting practice focused on Microsoft technologies. This would make it the largest integrator and reseller of Windows-based systems in the country. Eighty percent of the member consultants will be Microsoft-certified engineers or developers.

"We anticipate the consulting alliance will have a minimum of 500 people," said Roger Siboni, deputy chairman and chief operating officer of KPMG.

The consultancy, to be based in Palo Alto, Calif., will assist clients in seizing electronic commerce opportunities.

It will be launched in five key U.S. locations-New York, Atlanta, Chicago, San Francisco, and Dallas-and five in other countries.

"It's a big challenge for us to make sure there is expertise there," said Microsoft chairman Bill Gates at KPMG's annual partners meeting in Orlando. "It is unprecedented for a firm to put together something like that."

Ernst & Young is the other Big Six firm that works closely with Microsoft; the two set up a customer solutions center in Bellevue, Wash.

KPMG concurrently announced its intention to expand its network integration practice, KPMG Enterprise Integration Services, in conjunction with Microsoft and Cisco Systems. This practice will assist in deploying systems based on Cisco networking products and the Microsoft Windows NT Server for electronic commerce, on-line call centers, and sales automation. It will also help customers integrate and migrate to Microsoft's Active Directory, the next version of Windows NT Server directory services for managing resources throughout an organization.

Partnerships like this work because of vision, short-term business wins, long-term wins, and chemistry, said Cisco president and chief executive officer John Chambers. He said his company, KPMG, and Microsoft have the ingredients to make collaboration work.

Cisco's technical assistance centers are manned by 1,000 people and receive 700,000 calls a month.

"The future is all about seeing where the market is going and picking the right alliance partners," said Mr. Siboni. "Customers are looking for total solutions. It's one step beyond the next generation of outsourcing."

Rod McGeary will oversee the consultancy and the Enterprise Iintegration Services division. He expects the latter to start with 100 people and grow to 500 or 600 within three years.

"The health-care and financial services markets represent great opportunities for us," said Mr. McGeary. "If the market is as significant as we perceive it to be, 500 people in the NT consultancy and EIS is a minimum figure." The only limitation, he said, is availability of skilled programmers.

Electronic commerce and customer value management are already the fastest growing businesses within KPMG, growing at more than 100% a year.

"We expect the two ventures to scale up to 1,000 people and to become $300 million businesses by 2000," said Mr. Siboni.

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