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By Don Clark 

Cloud computing has thrown computer makers into a forbidding landscape where prospective customers have incentives to rely on external service providers rather than buying hardware. But some have found a key ally in one of the biggest cloud providers, Microsoft Corp.

Hewlett Packard Enterprise Co. and Dell Technologies this week are using a Microsoft event in Atlanta to step up their public embrace of the software giant's Azure cloud service. The collaboration is deeper than their dealings with cloud vendors such as Amazon.com Inc.'s AWS unit, which leads the sector, and Google Inc.

The computer makers' motivations can be linked to the increasingly familiar phrase "hybrid cloud." The term refers to companies maintaining their own computing capability as well as running some computing jobs off their premises, using what the industry calls public cloud services such as AWS or Azure.

Public cloud services offer customers a series of benefits besides saving on hardware costs, including the ability to rapidly begin or discontinue new computing operations as needs change. But companies have reasons to keep operations on their own premises, too, including enforcing their own standards for computing performance and security. Supporters of the hybrid-cloud concept tout it as the best of both worlds.

Makers of server systems have a strong interest in this proposition, since sales to traditional enterprise customers make up the biggest proportion of their hardware revenues. So does Microsoft, which sells software installed on customer premises as well offering Azure and other cloud services.

Microsoft appears to agree most strongly with HP Enterprise that "it will be a hybrid world," said Bobby Patrick, chief marketing officer for the computer maker's cloud group.

"We are not expecting that all of a sudden you flip a switch and everything winds up in the public cloud," Jason Zander, a corporate vice president in the Azure group, said on Monday at the Microsoft event called Ignite.

Rivals like AWS and Google, by contrast, don't rely on hardware or software sales to corporations. They tend to predict that public clouds will gradually take over most if not all computing jobs.

AWS executives have expressed the view that most customers will eventually stop running their own data centers and move to the cloud. Nonetheless, AWS helps customers set up hybrid operations. "The vast majority of hybrid deployments in production at enterprises today are AWS customers," an AWS spokeswoman said. To help them, "we've built the broadest and deepest set of services and features."

Google also has announced a variety of technology to support hybrid cloud arrangements, and the company plans to discuss some cloud-related developments at an event Thursday night. A spokeswoman for the company declined to comment further.

HP Enterprise, one of two entities formed by the breakup of Hewlett-Packard Co., last fall discontinued a public cloud service that had failed to gain much market traction and announced plans to resell Azure as part of a new cloud partnership with Microsoft. On Tuesday, the company unveiled new services and software to help its server customers run computing jobs on their own premises with cloud-style features -- including the ability to quickly set up and take down new applications -- that are compatible with the Azure public cloud, so they work the same way on- or off-premises.

Dell, which is also reselling Azure, provided its own string of Azure-related announcements. New offerings from the Round Rock, Tx., company, which recently completed its acquisition of EMC Corp., include new combinations of its servers and Microsoft software and a way to easily send backup copies of data files from company-owned computers to Azure.

Dell has also created features to aid customers using Amazon's cloud service, but "the list is not as long," said Jim Ganthier, a senior vice president in the Dell EMC converged platforms solutions division.

He said his company and Microsoft firmly agree that hybrid clouds are the "end state" for most corporate customers.

History is another reason for the close relationships. Dell and HP Enterprise have sold Microsoft operating systems and other software for decades along with both servers and personal computers.

So has Lenovo Group Ltd., the Chinese company that operates former International Business Machines Corp. computer businesses and is also making Azure-related announcements at Ignite. Microsoft has designated the three big server makers as preferred hardware partners for Azure.

But analysts see defensive motivations for the alliances as the cloud phenomenon continues to gain momentum. Cisco Systems Inc. last week reported survey results showing that 52% of companies are now using public cloud services for at least some of their operations, up from 35% in 2015. Hardware companies need to come up with new incentives to keep customers maintaining their own computing operations.

International Data Corp. estimates sales to off-premises cloud services will account for 32.4% of global server shipments this year. That's a problem for big-name server vendors, since most of the largest cloud services prefer cheaper models supplied by Asian vendors such as Quanta Computer Inc. and Wistron Corp., said Matt Eastwood, an IDC analyst.

HP Enterprise, Dell and Lenovo see Microsoft as a force to help convince enterprise customers to keep buying servers, said Gina Longoria, an analyst with Moor Insights & Strategy. "By cozying up with Microsoft, they really are enabling the hybrid cloud story," she said.

Executives at the three hardware companies say they are also working to help customers who want to work with alternatives such as AWS or Google.

"We can help them get to multiple clouds and pick the right cloud with the right characteristics," said Mr. Ganthier of Dell.

Write to Don Clark at don.clark@wsj.com

(END) Dow Jones Newswires

September 27, 2016 17:15 ET (21:15 GMT)

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