Microsoft Corp said Monday that it bought startup Calista Technologies and expanded its alliance with Citrix Systems, targeting the fast growing virtualization market.

The move pits the software giant against the current market leader, Vmware, who's virtualization software allows a single computer to host many different operating systems at once.

Virtualization is one of the most important developments in the software industry, allowing IT firms to get the most out of their hardware. It also disrupts the traditional business model which ties one machine to one operating system.

In November Oracle, the world's largest database maker, announced its foray into the virtualization market with Oracle VM.

Calista designs technology that helps compress and deliver virtualized desktops running on a remote computer server. Microsoft, the world's largest software maker, acquired Calista for an undisclosed sum.

Citrix is developing a software tool that helps Microsoft's new Windows Server 2008, which will incorporate virtualization technology known as Hyper-V, to be compatible with Citrix's competing XenServer product.

The two companies will also join together in marketing desktop virtualization, which separates a computer's desktop from its physical location.