The software, codenamed TrustBridge and scheduled for release next year, enables companies using the Windows operating system to share user identities across business boundaries, Microsoft said.
A provider of human resources services, for example, could give its customers access to its systems by sharing user identity data.
Users of Microsoft's Active Directory service will be able to use TrustBridge to recognise and share user identities with other organisations running Windows or any other identity infrastructure that supports Kerberos 5.0.
Kerberos is a standard security protocol developed at the Massachusetts Institute of Technology.
TrustBridge springs from Web services security work Microsoft has been doing with IBM and VeriSign. The companies developed a specification called WS-Security, which describes how to exchange secure and signed messages in a Web services environment.
In addition to TrustBridge, Microsoft announced that its Visual Studio .Net developer package will be updated later this year to include support for digital signatures and encryption for messages sent using Simple Object Access Protocol (Soap) following the WS-Security specification.
Moreover, .Net Passport, Microsoft's authentication service for the Web, will next year support Soap over Hypertext Transfer Protocol (HTTP), Kerberos and the WS-Security specifications. This will enable .Net passport to federate with TrustBridge and other authentication systems employing WS-Security, Microsoft said.
.Net Server, scheduled to be available next year, will support Passport through Active Directory and the Internet Information Service.
Competing against Microsoft's network identity model is the Liberty Alliance, spearheaded by Microsoft rival Sun Microsystems.
The Liberty Alliance plans to release the first phase of its specification in coming months. This specification will create a federated network identity and authentication sharing mechanism, according to the Liberty Alliance.
The idea behind Web services is to allow companies to link their applications to the disparate systems of partners and customers, regardless of the application type or vendor.
Technologies enabling this include Extensible Markup Language (XML), Soap and Universal Description, Discovery and Integration (UDDI).
Microsoft has been pushing Web services as an important part of its .net initiative. The company was part of a group of industry players that formed the Web Services Interoperability Organisation earlier this year.
The consortium seeks to make sure that vendors developing Web services products implement standards in the same way.