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There are two significant results to Microsoft Corp's announcement on Wednesday that it has signed up Citigroup to .Net and its Passport technology ... results that signal both a compromise and the potential of huge gains for the software behemoth that wants to be "King of Web Services."

As part of the deal, customers on Passport-enabled Citigroup sites will first sign on to Passport, then authenticated by Citigroup using one of its own passwords. They will get a whole range of features incorporating the best of Web services, from .Net Alerts by phone, pager or email telling customers when they've reached their credit card limit or when a bill is due.

In return, Citigroup becomes Microsoft's preferred payments provider, with promotional presence throughout MSN, Microsoft's Internet provider arm.

"This will allow us to acquire new customers, increase usage of Citi Cards for online purchases and support our existing customers better,'' said Steven J. Freiberg, Citi Card president and chief executive officer.

Microsoft's stance since the inception of its .Net framework has been one of single user, single authentication. The announcement signals a seeming compromise in that thought process, according to one analyst, since the customer is also required to sign in at the Citigroup point of entry, or gateway.

Dana Gardner, an analyst for the Aberdeen Group, says this approach is more in line with the federated (or multiple) ID management standard endorsed by the Liberty Alliance, a standards body that feels a centralized gateway gives that provider too much power.

"The whole idea (at Microsoft) was of a single sign on that you would use to get on Passport and other applications," he said. "By having Citigroup authenticate their users, it gives them the opportunity to at least take partial ownership of this gateway relationship."

The compromise is an important one, however, since it nets (no pun intended) one of the largest credit card companies in the U.S. and will likely convince other companies managing sensitive data to take a chance in the fledgling Web services industry.

Sean Sundwall, .Net public relations manager, said even though Microsoft has sped up the time table for using federated ID management with its customers, it's not really a compromise.

"That's its a compromise is only partially correct," he said. "We don't expect any company to give up control of its sensitive data, we welcome any company that wants to have their own authentication process in place. At the end of the day, they are responsible for the data in their network."

Citigroup is the second major corporation to sign onto the .Net platform. Last year, Federal Express signed on to give its customers real-time management of their packages and accounts.