When the shipwrecked Trinculo climbs under a blanket with Caliban in Shakespeare's The Tempest and utters his famous line about "strange bedfellows," he could well have been speaking for a lot of executives. The tempest of change that is blowing through industries is forcing all kinds of alliances, many of which would have seemed improbable just a year or two ago.

Indeed, the classic business decision can no longer be expressed simply as: make vs. buy. Today it's: make vs. buy vs. partner.

Driving all this has been a whirlwind of technology developments—especially the Internet—that are giving companies powerful new ways to establish partnerships by sharing information.

Meanwhile, the pace of change in the world of commerce is reaching gale force. As a result, taking the time to "make" a competency, or even a single product, can prove catastrophic. The "buying" alternative may be prohibitive—especially for on-line capabilities, given the enormous valuations assigned Internet-related businesses. Besides, both options are out of sync with today's fickle consumers and here-today, gone-tomorrow markets.

Partnerships provide some respite. Lightly binding, short-lived commitments, they can help companies experiment quickly and broadly with new ways of doing business. This is an immensely valuable capability, especially in electronic commerce, where nobody knows how markets will develop.

"You have to find the best idea, wherever it is,'' says Michael Corbett of Corbett & Associates, a consulting firm specializing in outsourcing and partnerships. "You do that through a full suite of outside relationships."

The numbers show the trend. Alliances have grown about 25% a year for most of the 1990s, says N. Venkatraman, a professor of management at Boston University School of Management. According to Corbett, roughly 35% of the average executive's budget is being spent on outside relationships, including outsourcing, strategic alliances, consultants, and joint ventures. That percentage doesn't include money spent on actual purchases from suppliers. He says many executives spend 80% or more of their budgets on partnership relationships.

"I can envision a world where managers devote more dollars to outside ventures than internal ones,'' Corbett says. "The shift has been that dramatic."

The growth in partnerships reflects broad changes in the way businesses view themselves. In the past, when bigger was better, a successful company added staff and departments to do something different. Today, businesses pride themselves on leanness. They focus on "core competencies" and outsource noncritical departments—such as computer centers, cafeterias, and mailrooms. In addition, companies now see themselves as global enterprises, and moving quickly into unfamiliar markets overseas often requires a local partner.

But the biggest driver of alliances is the spread of computers and networks. They make it far easier to form partnerships, and create opportunities for new and complex relationships that couldn't have existed before. Use the Internet to work with, say, a marketing firm, and the relationship may be so seamless that the firm appears to be a part of your company, even if it's on the other side of the continent. If two companies want to set up a partnership as a third, independent company, the Internet gives them the tools to set up a logo, a virtual headquarters, and communications channels without massive amounts of physical overhead. The Internet has sped partnership creation so much that Yahoo!, for one, can execute a new partnership agreement within an hour. [See Impact]

"We see more, different types of partnerships than ever before,'' Boston University's Venkatraman says.

SUPPLIER RELATIONSHIPS

Even the least-complicated business relationship—that of buyer and seller—is becoming more of a partnership. Consider the auto-parts industry. Instead of just buying lots of parts from different outside companies, car makers collaborate with suppliers on the engineering of vehicles and assemblies using electronic networks. Via those networks, parts makers like Dana can keep track of how many assemblies to make and when they need to be delivered.

Wal-Mart Stores has taken a similar approach to information for years. It simply gives some big suppliers financial targets, such as goals for sales growth for their products and for the number of times that Wal-Mart's inventory of its products should turn over every year. The supplier then gets to decide when to make shipments to Wal-Mart. In return, some 5,000 suppliers now get access to Wal-Mart's information systems, allowing them to track sales minute by minute. The suppliers can test different types of promotions in different Wal-Mart stores before deciding which to roll out regionally or nationally. The suppliers can also spot areas where their products are selling especially well and then work with Wal-Mart to exploit the opportunities.

A few years ago, if Kraft Foods wanted in-depth intelligence about how its products were selling store by store, it had to commission a study from a market researcher like A.C. Nielsen. These days, Kraft and Nielsen are jointly developing software for Kraft sales reps. Using a laptop, a Kraft sales rep visiting Pathmark supermarket can find out how Kraft products are selling there and make recommendations to buyers. The data are updated about every nine days, while most consumer products companies get updates every 16 to 21 days.

The time advantage "means we can react faster than any of our competitors,'' says Mark Duffy, Kraft's director of analytics and database services.

OUTSOURCING

Although outsourcing is hardly new, its use continues to increase at skyrocketing rates. Corbett's most recent survey of 450 executives found that almost all are going to increase their outsourcing spending this year. Some 25% will increase it by more than a quarter. Even Microsoft, which traditionally likes to do everything itself, recently began letting other companies manufacture its software disks.

Increasingly, companies are willing to outsource operations that were once considered too close to the core of their business to be trusted to partners. Los Angeles-based satellite television company DirecTV, for example, uses Convergys in Cincinnati to handle virtually all of its customer service and sales support. Close to 2,000 Convergys reps based out of Oklahoma City and Salt Lake City are dedicated to DirecTV and handle as many as 20 million calls a year. Using the Internet to communicate, Convergys reps make daily reports to DirecTV about customers' reactions—what they're complaining about, what they like, what they're buying.

'SUPER-OUTSOURCING'

A new breed of company outsources just about everything to partners and manages the assortment of relationships largely via e-mail and computer networks. For instance, Green Mountain Energy, Burlington, Vt., recently set up shop in California to take advantage of electricity deregulation there. To get up and running as swiftly as possible, Green Mountain outsourced nearly every major activity, from marketing electricity to billing for it. All the company's outside affiliations are run from Burlington by a staff of 85 through e-mail and other communications over the Internet.

"I nearly have more strategic relationships than I have employees,'' says Kevin Hartley, executive vice president.

Even one of the most mundane forms of outsourcing—hiring a consultant—is being pushed to "super-outsourcing" levels. Ernst & Young, for one, is forming joint ventures with outsourcing clients like Farmland Industries of Kansas City, Mo. Rather than just take over and run the agricultural cooperative's information-processing operations, Ernst & Young has set up a joint venture, OneSystem Group, that has staff and management from both companies. OneSystem not only handles Farmland's needs but sells its expertise to third parties. The company has profit targets to meet and a joint management team that makes most daily decisions.

COMPLEX PARTNERSHIPS

Partnerships that aim to create an innovative product or service have a checkered history, both because they are operating in uncharted territory and because it can take too long for two or more organizations to agree on decisions. But the need for speed, together with other changes in the business environment, is pushing companies to form such partnerships anyway.

Microsoft, for instance, had decided that it would generate its own content for its MSN network—including magazines, games, and information services—but most of them flopped. In 1996, Microsoft realized it might not have time to try and fail again before some competitor, probably a high-traffic portal like Yahoo, gained too big a lead in information and entertainment. So, Microsoft went against its culture of making or, if absolutely necessary, buying and formed a partnership with NBC.

At MSNBC.com, Microsoft contributes the technical expertise, while NBC provides the editorial content to create a Web news service. Because the venture's 200 employees work at offices in Microsoft's Redmond, Wash., complex and at MSNBC offices in Secaucus, N.J., writers, producers, and technical experts from both coasts work on projects over a high-speed, wide area network. "We couldn't run the business without it,'' says MSNBC executive editor Michael Silberman. Reporters, editors, and media producers on both sides of the country are connected via the MSNBC network. So, a reporter might be writing a story in an office in Redmond at the same time that a media producer is adding photographs from offices in Secaucus. Additional links can bring third-party partners onto the MSNBC network.

In the financial markets, which are under stiff pressure to operate more globally, the Chicago Mercantile Exchange and the Societe des Bourses Francaises announced in February that an alliance they launched in 1997 would be expanded to include Singapore's International Monetary Exchange. The goal: to build a global system allowing members to trade each other's futures and options electronically. All three exchanges are linked over a shared, proprietary network of 2,000 or more terminals that give traders access to the products of all three. The financial instruments are still traded at the exchange where they are listed, but the trading can be initiated from afar. Such an arrangement would have been impossible a few years ago, before the network and the requisite technology were created. With technological progress and the need to operate internationally accelerating, the three partners expect to add ties to other exchanges down the line.

Sometimes, companies pool resources not because of pressure but because it's now possible to develop information jointly that no one company could produce on its own. As many as 1,000 catalog and direct-mail companies, for example, pool information about their customers through Abacus Direct. The pool of information allows the group of companies to identify prospects who are most likely to buy—and then cram your mailbox full of junk mail. (Nobody said partnerships had to be put to good use.)

If partnerships are the wave of the future, does that mean we are headed for a kinder, gentler business world where competitors can work together for their common good, and are willing to share equally the spoils and the glory? Not necessarily.

"Alliances have a tendency to fail,'' says James Oliff, vice chairman of the Chicago Mercantile Exchange. Partners may not start off with clear goals. The companies involved may have trouble making joint decisions. The competitive environment may change and force partners to adjust, as happened with the Merc and the Societe des Bourses Francaises. "That's just in the nature of partnerships,'' Oliff says.

But while partnerships, themselves, need to be quickly adaptable, that only underscores their need in a rapidly changing world.

Field is a free-lance writer based in Pelham, N.Y. She can be reached at annearf@aol.com.