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At times sounding more like a single entity than two separate corporate giants, Microsoft and Hewlett-Packard today announced a three-year, $250 million technology-integration and go-to-market agreement that spans the entire data center stack from hardware infrastructure up to the application layer.

In a press conference, Microsoft chairman and CEO Steve Ballmer and HP CEO Mark Hurd took turns describing the alliance in superlative terms, both emphasizing repeatedly that the deal is not simply an extension of longstanding relationship the two companies have had, but represents a much deeper integration and commitment that, in addition to technology, encompasses sales, marketing, services and channel partner alignment. The two companies are collaborating on an engineering roadmap that involves data management “machines” that marry hardware and software, prepackaged application solutions, virtualization offerings and integrated management tools, according to the chief executives.

“This is the deepest level of collaboration, integration and technology work that we’ve done,” Hurd said. “We are aligning big parts of our go to market operations here. This is, to my knowledge, the biggest alignment of infrastructure ever.”

Ballmer said the two chief executives and their teams began holding discussions about the deal last April, prompted by the realization that future of the data center is forever altered by the emergence of cloud computing. The cloud, they agreed, is going to change how applications are developed and delivered and how end users consume technology.

“This is all cloud-motivated,” Ballmer said. “The cloud means you need a modern architecture for how you build and deploy applications, an integrated stack from hardware to the virtualization layer to the management layer to the application model. The cloud is the driving force behind this deal.”

Specific details of what channel partners for both companies can expect to see from the deal were scant today, but executives said engineers have been working to fully optimize Microsoft applications on HP’s infrastructure platform, with the result being, among other things, a series of technology bundles that enable plug-and-play solutions to take to market.

Ultimately, the motivation is optimize how physical infrastructure and applications work together, make them faster, easier to deploy, cost less and ship more easily, according to Dave Donatelli, executive vice president and general manager of enterprise servers, storage and networking at HP. Right out of the gate, Microsoft’s SQL Server database will be preinstalled on HP hardware, which channel partners can sell as one package, he said.

IT management is another focal point, which will see the marrying of HP Insight Software and HP Business Technology Optimization software with Microsoft System Center and Microsoft Hyper-V Server. The unified management solution, which partners can sell as a package or run in their own data centers, will enable IT monitoring and management of heterogeneous environments and fuel automated application deployment, the executives said.

HP and Microsoft’s sales teams and 11,000 of its services professionals, along with their thousands of combined channel partners, will be tasked with selling the combined data center portfolio — which also features Microsoft’s Azure cloud computing platform as the application development foundation – however no details were provided today on incentives, compensation or the distribution model.

Presumably, the combined HP-Microsoft infrastructure can also serve as the data center foundation for managed services providers and third party cloud hosting companies. Solutions coming out of the deal are being engineered to map not just to the enterprise, but to the midmarket and SMB spaces as well, the executives said.

Both HP and Microsoft positioned the alliance as a win-win for partners.

“For our Frontline partners, they’ll be able to take advantage of our full and comprehensive integrated offerings between Microsoft and HP. This offering will enable them to give to customers an environment to manage virtualized storage and servers and applications through a single pane of glass. Our frontline partners will be able to take customers solutions that enable them to lower the cost of managing a virtualized environment and deliver an integrated, heterogeneous solution that enables them to managed both installed VMware products and new virtualization technologies from Microsoft,”  said Ross Brown, vice president of channel sales at Microsoft, in a video presentation.

HP and Microsoft touted the following benefits for partners selling the integrated solution.

  • Faster time to revenue because of shorter sales cycles and prepackaged bundles that deploy more easily
  • Add-on application and service sales opportunities
  • Financing options through HP Financial Services that will help partners close deals with customers
  • Dedicated field resources emphasizing presales, along with expanding partner training
  • Jointly funded marketing campaigns, lead generation and sales tools

“Thirty-two thousand HP and Microsoft partners are going to be extremely excited about what they hear today. We’re setting the bar higher than we’ve ever set before. We’re increasing funding by 10x. They’re going to see better demand generation, increased profitability, all the training they need, financing and quicker time to revenue,” said Frank Rouch, vice president of HP’s enterprise server, storage and networking channel sales, in a video produced by Microsoft.

Microsoft has struggled to date over how to embrace cloud computing and software-as-a-service, in general, given that its corporate name has been built on the back of packaged, on-premises software. But in Ballmer’s tone today, it was clear that they no longer see the wisdom in fighting the new model and by aligning with HP and integrating their software with the infrastructure, the company gains access to the an army of data centers to deliver its wares.

In fact, Microsoft’s Robert Muglia, president of the Server & Tools Business described what HP and Microsoft were creating as the “next generation mainframe, with more power and an application model.”

Hurd, for his part, was positively bullish about the deal and deflected questions about other vendor alliances and the competitive landscape. He did, however, predict major upside for both companies and their channel partners that comes from such a tightly executed alliance.

“Now they get bundled solutions that have been tested and optimized, with collateral and promotion dollars around it,” he said. “We’ve taken complexity out. Don’t minimize how hard that is."