Is VMware the real motivator behind latest Microsoft-HP deal?

The $250 million Microsoft-HP partnership, unveiled on January 13, has resulted in lots of different interpretations. It's a public cloud play. No, it's a private cloud play. Or maybe it's just a veiled attempt to lock partners and customers in by selling integrated hardware/software/services stacks (known as "Smart Bundles"). Or maybe it's all of the above....

I couldn't help feeling the timing of the announcement -- coming a day after Microsoft rival VMware bought messaging vendor Zimbra from Yahoo -- wasn't purely coincidental. There was an awful lot of emphasis by HP and Microsoft officials during the conference call today with press and analysts about the fact this deal has been in the making since April 2009. But remember, there were rumors days ago that VMWare, headed by former Microsoft big-wig Paul Maritz, was going to snap up Zimbra to supplement VMware's story around providing an end-to-end stack. I'd bet that had something (and maybe quite a bit) about the timing.

One Microsoft watcher, Paul DeGroot, an analyst with Directions on Microsoft, said, in his opinion, VMware was definitely a motivator behind the $250 million, three-year Microsoft-HP deal.

The Microsoft-HP deal "is not different from the relationship that HP already has with VMware," DeGroot said. "The tip-off was the blog notation that MS is 'a preferred provider of virtualization solutions for HP,' not 'THE preferred provider.'"

DeGroot noted that HP already sells servers running the full stack of VMware products already and already integrate's VMWare's vCenter management product with its own Insight management tools.

"Since management is where Microsoft plans to make its money in virtualization, after making most other parts of the infrastructure free, it is critical that Microsoft get System Center on there," DeGroot added.

Smart Bundles -- which are forthcoming bundles of HP hardware, Microsoft and HP infrastructure software, and various Microsoft-HP applications build on top of SQL Server and Exchange Server -- will be available to customers (especially small/mid-size businesses) and partners who want to run them on premises. For customers who want to run all/parts of these kinds of apps in the cloud. Microsoft and HP did not make any commitments as to when or if these data-warehousing, business-intelligence, online-transaction-processing and messaging apps hosted in the Azure cloud at some point.

"Microsoft gets integration and inclusion of its apps (via the new Microsoft-HP partnership), but that's not a game changer," DeGroot said "since the same apps will and do run on VMware already, and in some cases better than on (Microsoft's) Hyper-V, because of VMware's memory overcommit and other features.So that's not really new business for MS--most of it would come their way even in HP/VMware deals that don't include Hyper-V or System Center.

At the end of the day, while this is a necessary step for MS, I can't see this being big incrementally" for the company, DeGroot continued. I think HP is the winner here. HP will drive customer choices toward whatever is the best deal for HP, VMware or Microsoft (or Xen, KVM, VirtualBox, etc.), plus they get the MS sales force and partners bringing HP into their accounts."

Microsoft and VMware officials with whom I spoke today, not surprisingly, downplayed the VMware aspect of the Microsoft-HP deal. Microsoft execs noted that VMware doesn't have a public cloud operating system (or a private-cloud one, like Windows Server), unlike Microsoft.

"It's not a tit-for-tat approach," said HP Director of Marketing, Infrastructure Software and Blades Jeff Carlat. HP felt as though "Microsoft has made advances in the virtualization and management space," he said, and is "increasing its footprint in the datacenter," which opened the door for such a deal.