AMZN Amazon.com Inc

Rackspace Hosting Inc., a seller of cloud-computing services, is teaming up with Amazon.com Inc. to make it easier for corporate customers to move computing operations from their own facilities to Amazon Web Services, the retailer's cloud computing platform.

The partnership is set to be announced next week at a conference for AWS users, according to two people familiar with the company's plans.

Both Rackspace and Amazon declined to comment.

The deal mirrors an earlier agreement, announced in July, under which Rackspace is helping companies that want to use Microsoft Corp.'s Azure cloud-computing platform move their operations there.

Introduced in 2006, AWS was billed a fast way for software developers to gain access to basic computing power over the Internet. The service has evolved, however, and today it offers a broad array of options, from data warehousing to artificial intelligence. AWS generated $1.82 billion in revenue and grew by 81% year-over-year during Amazon's most-recent quarter.

AWS's customers have evolved, too. The service initially was popular with fast-growing Internet startups such as Netflix and Airbnb. Two years ago, Amazon won a $600 million contract to set up a cloud-computing system for the Central Intelligence Agency. Today, AWS lists clients outside of the tech industry including Nike Inc., Pfizer Inc., and Time Inc.

The deal would have been unthinkable just two years ago, when Rackspace and AWS were fierce rivals. But in early 2014, Rackspace, facing ever slimmer margins amid a cloud-computing price war, withdrew from head-to-head competition with Amazon. Since then, it has focused on offering higher-margin services.

Partnerships like the one between AWS and Rackspace will become increasingly important as Amazon seeks to sell to more non-tech companies, which are looking to move older corporate software to AWS.

"For the average enterprise, to really get value out of the cloud, they need a lot of help," said John Rymer a principal analyst with Forrester Research.

That makes partners such as Rackspace "crucial" partners as Amazon looks to build AWS into a $10 billion business, Mr. Rymer said.

The deal apparently had been in the works for more than a month. In an Aug. 10 conference call with financial analysts, Rackspace CEO Taylor Rhodes was asked if his company might partner with AWS. "We are working on it and we have big plans," he said.

Write to Robert McMillan at Robert.Mcmillan@wsj.com

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(END) Dow Jones Newswires

September 29, 2015 21:15 ET (01:15 GMT)

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