BEIJING, April 27-- Microsoft Corp. and SAP AG will jointly develope a new product, dubbed"Mendocino," to link their business software programs in the most significant leap forward in their 15-year partnership.

The two companies, the world's No. 1 and No. 3 software makers, announced April 26 the product would be available in 2006, with select customers getting access in the fourth quarter of this year.

"Mendocino" is designed to integrate SAP processes, such as time management, budget monitoring, travel and expense management, directly into Microsoft Office, which will help users change the way of accessing information and analyzing data.

As an example, the companies said, users would be able to synchronize information between Microsoft Exchange Server and SAP, retrieve SAP information in Microsoft Excel and submit data via Microsoft Office InfoPath forms.

As part of the deal, Microsoft and SAP have each agreed to resell the complete product, meaning SAP will resell Microsoft Office and Microsoft will resell licenses to SAP's business software.

Microsoft initiated merger talks with SAP last year, but called off the deal after deciding it would be too complex. Since then, the two companies have been approaching one another and decided to stick to the partnership instead.

The news will likely drive other enterprise software companies to collaborate and even merge, because they will have to take cover against an increasingly consolidating marketplace, some experts say.

(Agencies)