Microsoft and HP ink cloud, virtualization pact

Microsoft and Hewlett-Packard on Wednesday disclosed a $250 million, three-year partnership to develop and market next-generation data center technology and application infrastructure that combines virtualization, system management and cloud computing.

The companies made the announcement during a conference call led by HP CEO Mark Hurd and Microsoft CEO Steve Ballmer.

The pact is focused on the companies co-developing new systems and dedicating joint go-to-market efforts for delivering those technologies as bundled applications and services, the executives said.

Though the agreement is not exclusive, both companies suggested that they are working more closely with each other than with others. "This is the deepest level of collaboration and integration and technical work we've done that I am certainly aware of," Hurd said.

However, some questioned whether the deal is all that extraordinary. "If you discard all the hyperbole, this is simply another announcement of bundled solutions and an initiative by two major players attempting to cover major holes in their offerings," said Richard Ptak, managing partner of IT advisory firm Ptak, Noel & Associates, in an e-mail.

Ballmer said the end goal of the pact is to co-develop and deliver cloud-based application and system architectures. "This is entirely cloud motivated," he said.

For Microsoft, the deal underscores its quest to offer Windows Azure and SQL Azure as private cloud offerings. The public versions of Azure went live this month but many larger enterprises are awaiting private and hybrid cloud implementations.

Early deliverables are not expected to be groundbreaking. Bob Muglia, president of Microsoft's server and tools business, said on the call that engineers from both companies are already working to integrate Microsoft's System Center Management platform and Hyper-V virtualization technology into HP's ProLiant Servers and Insight Manager management software.

In the coming months, Microsoft will deliver power management capabilities in System Center that will be unique on HP hardware. "We have a whole set of milestones that will be coming associated with incremental deliveries to that virtualized environment — things like run book automation to help simplify the management of both Windows environments and heterogeneous environments, as well as the next set of steps as we begin to implement that private cloud infrastructure that Steve [Ballmer] mentioned," Muglia said.

Also look for turnkey appliances that bundle applications such as Exchange Server, SQL Server and the forthcoming Parallel Data Warehouse integrated with System Center and Hyper-V, the executives said. "Please, bundled SQL Server and Exchange as a base for market penetration sounds a bit weak," Ptak noted.

Both companies, however, are looking to fill gaps in each of their enterprise data center and cloud efforts, said RedMonk analyst Michael Coté. Both companies are seeing broad challenges from IBM, Cisco, VMware, and the likely combination of Oracle and Sun, he said.

"HP and Microsoft can fill a lot of holes in each others' strategies," Coté said. "If they deliver on these optimizations and these go-to-market initiatives they are promising, they can help each other out."

While HP recently launched its own cloud initiative, Coté said it doesn't have the cloud ecosystem that Microsoft has. Meanwhile, Microsoft can gain from HP's enterprise hardware, storage, networking and systems management expertise.

Key to the agreement will be the ability to marry both companies' systems management offerings, said Forrester Research analyst Glenn O'Donnell. "The fact that they're joining forces on that software isn't in and of itself unique. Both HP and Microsoft have built technology partnerships for their systems management software with other vendors," O'Donnell said. "What I think is notable with this is they are really tying this into a turnkey packages of applications, where the systems and the management software that orchestrates everything happen under the covers."

Both companies will shortly introduce management software based on both System Center and HP Insight Manager, said Edwin Yuen, a Microsoft senior technical product manager for virtualization, in a blog post.

Eventually, the two will offer "Smart Bundles," intended to bring virtualization to small- and medium-size business customers. Packages will consist of HP servers, storage and networking gear, bundled with Windows Server, Insight Manager, System Center Essentials and HP Operations Center, according to Yuen. "SMBs can really benefit from virtualization and these new Smart Bundles provide a single, cost-effective package for virtualization," Yuen noted.

Over time, enterprise customers can expect to see tighter integration of Insight Manager, System Center and HP's Business Technology Optimization software (which consists of the former OpenView and Mercury Interactive management tools), O'Donnell predicted.