HP and Microsoft are to team up on a product integration strategy meant to "significantly simplify" technology deployments for companies of all sizes.

The agreement, which will mean the companies investing $250 million over three years, will employ a new "infrastructure-to-application" model and result in prepackaged offerings that combine servers, storage, networking and software.

During a conference call, executives from both companies repeatedly insisted the pact has much more substance than a typical partnership announcement.

"This is the deepest level of collaboration and integration and technical work that we've done that I'm certainly aware of," said HP CEO Mark Hurd. "This is breakthrough for us. ... [Microsoft CEO Steve Ballmer] and I would not be on this phone call if this was just another press release from HP and Microsoft."

Hurd acknowledged HP and Microsoft have bundled their products in the past, but said "there's a difference between a bundle and how deep it's integrated and how much engineering is done."

Cloud computing is "the driving force behind this deal at this time," Ballmer said. Some companies may deploy applications to Microsoft's own Azure cloud infrastructure service but others will want to use a private version, he said. "That thing is going to need to be an integrated stack from the hardware layer to the management layer to the application model," he said. "We need to evangelise that same application model whether you host in the cloud or on-premises."

Microsoft will be using HP hardware to support Azure, and HP will be providing services for Azure

Later this year, the partnership will spawn products around Microsoft Exchange and high-end data warehousing for SQL Server, said Bob Muglia, president of Microsoft's server and tools business.

The deal also makes Microsoft "a preferred provider" of virtualisation technology to HP. The companies plan to deliver a series of "Smart Bundles" aimed at small and medium-sized businesses. The products will combine HP servers, storage and networking technology along with Microsoft's Hyper-V virtualisation platform and HP's Insight system management software.

HP will also resell Microsoft's own System Center on its hardware and work will be done to integrate Insight with System Center.

The announcement should be viewed simply as an evolution of HP and Microsoft's relationship and not any sort of reaction to market events, such as Oracle's pending purchase of Sun, according to Hurd.

That transaction, which is on hold while European regulators conduct an antitrust review, will usher Oracle into the hardware and systems business.

"[Oracle] is a great partner, but I'm here to talk about Microsoft," Hurd said. "I think Oracle will continue to be a very important partner."