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Andersen Consulting and Microsoft Corp. on Monday said they had agreed to a $1 billion pact to form a joint venture and an expansion of their existing relationship to offer companies a range of services an technologies based on the Windows 2000 operating system.

Under the pact, New York-based Andersen and Redmond, Wash.-based Microsoft would create the joint venture, called Avanade, to offer Internet-specific and other services based on Windows 2000, the companies said.

The pact also calls for the two to create a new organisation within Andersen Consulting dedicated to designing and building fast and reliable business products, the companies said.

The new venture would target large Fortune 500 companies, new market entrants and Internet start-ups.

Under the deal, Microsoft will contribute $385 million in cash to support Avanade, as well technological development support and other intellectual capital. Andersen Consulting will provide intellectual capital, training, resources, solutions development and other services.

Avanade, which may be publicly traded in the future, will be headquartered in the Seattle area. Further offices are planned in San Francisco, Dallas, New York, Paris, London, Sydney, Sao Paulo and Singapore in the next 18 months.

Formation of the joint venture is subject to regulatory approval.

It plans to hire within the first two years more than 3,000 technologists with expertise in Microsoft's products.

Andersen Consulting said it conservatively estimates that the customer segment for the services offered by Avanade could reach $15 billion by 2002.

Mitchell Hill, an Andersen Consulting partner, will be Avanade's chief executive. Both organisations will be represented on the board. Its members will include Jack Wilson, managing general partner of AC Ventures, John Connors, Microsoft chief financial officer and Paul Maritz, group vice president, Developer Group at Microsoft.

Andersen Consulting and Microsoft also will provide other technologies based on products of key Independent Software Vendors, including Commerce One Inc., PeopleSoft Inc., Siebel Systems Inc. and SAP AG.