Microsoft has placed Windows Azure development under the direction of its Server & Tools Business (STB). Microsoft announced the reorganization yesterday on its Windows Azure blog, but the news came as no surprise.

Microsoft President Bob Muglia will continue to manage STB, and Windows Azure chief Amitabh Srivastava will be reporting to him as the director of Microsoft's Server & Cloud Division. The Server & Cloud Division will oversee development of Windows Azure as well as Windows Server. Windows Server Corporate Vice President Bill Laing will be reporting to Srivastava.

The company made similar moves in the past. It did the same thing after products, including Exchange, were incubated by its internal IT group, and then moved Server & Tools when they were ready to be broadly sold, said Directions on Microsoft analyst Michael Cherry. The move also makes sense for Microsoft so that it can provide private clouds for its customers and to streamline application portability between its products.

Windows Azure was similarly an incubation project that is now on the verge of becoming a commercial service. It also hosts Windows Server and SQL Server, products that STB oversees, noted Directions on Microsoft analyst Robert Helm. "Muglia's organization owns Windows Server and SQL Server, and is in the best position to steer those products so they work well for hosting," he said. SQL Azure has already been placed under STB, according to reports.

Also expect further integration between Azure and Visual Studio. In an interview last month, Muglia told SD Times that Microsoft intends to integrate Azure into Visual Studio for provisioning test environments. I wonder what HP and SkyTap think of that.