Microsoft Inks NetApp Partnership in Virtualization, Forms New Server and Cloud Division for Azure

It has been a busy week for Microsoft in cloud computing and virtualization. For starters, the Redmond, WA-based company (NASDAQ: MSFT) announced on Tuesday a three-year strategic alliance with data storage firm NetApp to collaborate on products and technical integration in virtualization, storage and data management, and cloud computing and hosted services. Financial terms of the partnership weren’t given, but it seems to be a more formalized extension of a collaboration that has existed for years between the two companies.

“Through the deeper integration of server, virtualization, management and storage technologies, Microsoft and NetApp customers can expect data center solutions that help them reduce costs, increase performance and reach new levels of efficiency,” said Bob Kelly, corporate vice president of infrastructure server marketing in Microsoft’s Server and Tools Business, in a statement.

NetApp (NASDAQ: NTAP), based in Sunnyvale, CA, is a leader in data storage and virtualization, and a key competitor to companies like Seattle-based Isilon Systems (NASDAQ: ISLN) and Hopkinton, MA, storage giant EMC (NYSE: EMC). Virtualization refers to the prevalent IT trend of using software that lets you efficiently run multiple operating systems on a given server, or multiple applications on a desktop computer.

I contacted five experts on virtualization and storage in the Northwest yesterday, and couldn’t get any of them to comment on the Microsoft-NetApp deal. It’s either the most boring announcement ever, or there’s more to the story that nobody wants to talk about yet. At some level, the partnership must be an effort to combat recent efforts by EMC, VMware, and Cisco to take the lead in the sector. My feeling is it’s just not that surprising, and everyone’s more interested in the cloud computing aspect of Microsoft’s strategy—namely, how the Windows Azure platform will play out in the coming year. (See this story on Azure by my colleague Wade Roush, who is helping run an Xconomy Forum on cloud computing in Boston today.)

Which brings us to the other big news—Microsoft announced yesterday that it has formed a new business unit, called the Server and Cloud Division, for Azure. The new unit will be headed by senior vice president Amitabh Srivastava and will be ultimately overseen by Microsoft’s server and tools unit head, Bob Muglia. That means Azure has officially moved out of chief software architect Ray Ozzie’s development domain and into a bona fide business group, as it gears up to offer a paid service early next year. Developers and big businesses—not to mention cloud competitors like Amazon, Google, VMware, IBM, HP, and even Apple—will be watching closely.

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