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Amazon.com Inc.'s cloud-computing unit signed a deal with VMware Inc. to offer companies the ability to run their computing operations on both their own VMware-equipped data centers and Amazon's web-based servers.

The deal bolsters the retailer in its competition against cloud providers including Alphabet Inc.'s Google, International Business Machines Corp., and Microsoft Corp. It is a big step for Amazon Web Services, which started out catering to startups that had little or no on-premises operations but increasingly serves corporate clients that have their own data centers.

Amazon and VMware on Thursday announced a service for so-called hybrid-cloud deployments, applications that run partly on a customer's private servers and partly in publicly available cloud data centers. The service, called VMware Cloud on AWS, lets VMware customers take advantage of the cloud without abandoning their data centers and attendant investments in servers and software. It will be available in mid-2017, the companies said.

"With this announcement today, [customers] don't have to make that choice anymore," Andy Jassey, AWS chief executive, said in an interview.

VMware Chief Executive Pat Gelsinger during a Thursday press conference called AWS the "primary public-cloud offering by VMware."

International Data Corp. analyst Al Gillen said in an email that the deal is more significant in the short term for VMware, since it will give the company "a viable, world-wide public-cloud solution." In the longer term, though, Amazon will benefit by being able to offer corporate customers "an easier on-ramp to AWS," Mr. Gillen said.

The deal threatens a similar, earlier agreement between IBM and VMware. Those companies in February announced a collaboration to help VMware customers move some computing tasks from their own servers to IBM's cloud services. The companies also agreed to collaborate on marketing and selling hybrid-cloud products and services.

VMware's strategy is to present customers with choice, Mr. Gelsinger said. Big IBM customers will likely stick with IBM, while AWS customers will likely take advantage of the new partnership.

The two services differ in that the AWS offering is operated and run by VMware, Mr. Jassey said. It will allow existing customers to continue using their current licensing and billing information.

"IBM was first to market with VMware," said IBM spokeswoman Lisa Lanspery. "Together we have 1000 clients, and IBM Cloud is their clear preference."

The deal also strengthens Amazon's position with respect to Microsoft's Azure, widely seen as the No. 2 player in the public-cloud market. Microsoft is tapping longstanding relationships with corporate customers to drive that business, luring them with its familiar software products.

Hybrid cloud computing is a key aspect of Microsoft's pitch: It offers customers a path from running Windows servers in their data centers to using Azure services on Microsoft's cloud.

"Microsoft Azure has always been hybrid by design, based on our decades of enterprise experience," a Microsoft spokesman said.

The VMware deal should help Amazon go after Microsoft's customers, who—like IBM's—often use VMware's technology.

"This absolutely should be seen as creating a risk to Microsoft," Mr. Gillen said.

Amazon pioneered cloud infrastructure services a decade ago and is the leader in what is known as the public-cloud market, providing computing and data services that run computing jobs for many customers on the same computers. Startups such as Airbnb Inc., Slack Technologies Inc. and Pinterest Inc. built their computing operations on AWS. Several large corporations including Novartis AG, Siemens AG and Unilever PLC use AWS as well. Many tend to use cloud computing for non-mission critical applications. Unilever, for example, uses AWS for its digital-marketing efforts.

A few years ago, it was unclear whether a partnership between AWS and VMware would be possible. Mr. Gelsinger openly fretted at a VMware conference in 2013 about the power AWS was amassing.

"The market has clearly evolved," he said in an interview Thursday. "We have evolved our strategy. We're doing things we wouldn't have conceived of three years ago."

Write to Jay Greene at Jay.Greene@wsj.com and Laura Stevens at laura.stevens@wsj.com

(END) Dow Jones Newswires

October 13, 2016 20:35 ET (00:35 GMT)

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