At today’s Worldwide Partner Conference, Microsoft announced that the hosted service provider community is getting access to deliver Microsoft Windows Azure-compatible cloud services from within their own data center as Redmond moves to expand its hybrid cloud strategy. But most importantly – this move takes away a key value differentiator from the VMware vCloud ecosystem.

The new capabilities, available now as a Community Technology Preview (CTP), allow hosting providers who are running Windows Server 2012 and Microsoft System Center 2012 to offer website hosting and turnkey virtual machine creation from a self-Service Management Portal, giving some overlap with the new features recently added to Microsoft Windows Azure itself.

Not only do these hosting providers get the ability to offer customers Azure-like capabilities to their customers, the customers get the ability to easily move or burst workloads and services between a third-party provider and Azure itself. Moreover, the new hosting options are extensible via API, meaning that hosted applications can connect to these partners’ clouds as well.

Standardization has long been the lynchpin of VMware’s vCloud strategy, and the virtualization provider likes to boast that its customers have the most choice of anyone out there. A VMware vCloud VM will work with any of hundreds of federated vCloud service providers. But now Microsoft is beginning to move in the direction of that kind of federation itself, and VMware should be getting nervous. GoDaddy, no small fry in the hosting world, is already signed on to offer these services.

In an attempt to get the momentum going, Microsoft also announced partner incentives to help move customers from VMware vSphere to the Microsoft Hyper-V hypervisor.

Microsoft’s tried to get Azure into the data center before, by way of its appliance. But only the largest of the large service providers had that option available to them, and it never took off the way Microsoft hoped. But with this initiative, the Microsoft Windows Azure ecosystem could get its toehold into the service provider market in a very real way, with ramifications that we can only now guess.