A method and controller device for upgrading firmware in a virtualized storage environment having a virtual machine manager, guest virtual machines and a storage device. The method includes downloading a new firmware solution bundle to a first logical area of the storage device, and installing the new firmware containing the virtual machine manager and guest virtual machines. The installation includes moving the solution bundle to a scratch area carved out of a P-cache area in the storage device, extracting the new firmware, copying the new firmware to the first logical area, marking the first logical area as the Active area, and marking the second logical area as the Staging area. The method also includes rebooting the virtualized storage environment with the installed new firmware, committing to the new firmware if the installation is successful, and rolling back the firmware version from the new firmware to the current firmware if the installation is not successful.