Microsoft didn’t reveal how much it will pay for privately-held ProClarity, which develops guided analysis and visualization applications that are designed exclusively to work with Microsoft’s SQL Server-based business intelligence (BI) platform.

ProClarity will become a wholly-owned subsidiary of Microsoft and will retain its headquarters in Boise, Idaho. Neither company commented on any possible layoffs.

Microsoft also gains around 1,200 ProClarity customers, most of whom are also big SQL Server users. The deal is expected to close in May.

Microsoft officials said roClarity’s technology will help it to flesh out its BI and performance management strategy, which it has been building for several years on a foundation of its SQL Server 2005 relational database platform and Office suite.

Microsoft’s ambition in the BI sector continues to grow ever since the company bought OLAP technology from Israeli software developer Panorama Software back in 1999. Microsoft promptly bundled the technology into its SQL Server 7 database. It is now branded as SQL Server Analysis Services.

Since then Microsoft has consistently rolled out new query, analysis and scorecarding technologies platforms aimed at beefing up its BI portfolio.

The company added an enterprise reporting capability called Reporting Services in early 2004. And towards the tail-end of last year it released SQL Server 2005, which comes with significantly enhanced data integration, OLAP analysis and ad hoc reporting capabilities as well as a new scorecarding application called Microsoft Office Business Scorecard Manager 2005.

The forthcoming release of Office 2007 also promises to include more BI-like capabilities leveraging Excel and SharePoint.

Technical and sales force integration shouldn’t be a problem since ProClarity is already a Microsoft Gold Certified Partner and has been developing analytic tools and applications on top of the Microsoft BI platform since 1999 – making it the third largest provider of SQL Server-specific BI tools.

ProClarity’s Analytics Server already augments SQL Server Analysis Services and also links closely to the Office-based Business Scorecard Manager, Excel and SharePoint Portal Server applications to view and share business metrics and other analytical information. Microsoft says it will continue to forge tighter integration between these technologies.

One area where ProClarity’s technology will come in useful is linking back-end SQL Server services like OLAP, data mining and reporting to front-end business user interfaces. Right now Office is all that Microsoft offers as a front-end – which is good for presenting BI information to general information consumers, but not so good for building queries, OLAP analyses and dashboards. ProClarity’s software helps to do just that.

Similarly, sales force integration should also run smoothly since both companies have experience of engaging in many joint deals in the past. Of course ProClarity’s sales team also gets a great fillip for accelerating its activities in the field.

ProClarity is just one of a cadre of BI vendors that has built its business by riding on the coat-tails of the BI-infused capabilities of SQL Server. Companies like Panorama Software (the same company that sold Microsoft its OLAP technology), OutlookSoft and Dundas Software have all done the same.

But Microsoft says this acquisition doesn’t necessarily change its partnership strategy for BI. Nevertheless Microsoft’s BI partners have always had good cause to be vary of Microsoft steamrollering into their bread-and-butter BI markets. As Microsoft’s appetite for BI increases, the cordial relations they have enjoyed with Microsoft could well be at risk.

Microsoft is part of a larger band of enterprise software vendors – including Oracle, IBM and SAP – that are starting to eye a share of the growing $13 billion BI software market. With independents like Business Objects, Cognos and SAS Institute leading the market, this software segment is starting to get increasingly crowded and competitive. Many analysts believe the sector is on the cusp of a big wave of consolidation. The likelihood is it will do so around the larger database and business applications vendors.

Market investors applauded Microsoft’s swoop, sending the company’s shares up nearly 1.5% to $27.60 after the announcement was made.