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Cloud superpowers Amazon and VMWare team up

Rival cloud dynasties Amazon Web Services (AWS) and VMWare announced a much-anticipated partnership on Friday — one they hope will be an easy sell in a increasingly competitive landscape, the CEOs told CNBC's "Squawk Alley."

The partnership between two tech heavyweights builds on one of the most important trends in business. Increasingly, companies are storing more data, and want to be able to access it from anywhere and use it in multiple applications.

The new offering, VMware Cloud on AWS, is software sold and supported by VMWare that leverages Amazon's public cloud. It aims to help the many firms who already use VMWare in their business but are hoping to move more of their data to offsite servers like those offered by Amazon.

Visitors arrive at the cloud pavilion of Amazon Web Services at the 2016 CeBIT digital technology trade fair in Hanover, Germany last March.
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Visitors arrive at the cloud pavilion of Amazon Web Services at the 2016 CeBIT digital technology trade fair in Hanover, Germany last March.

"The announcement that we made together is really a real win for customers," said Andy Jassy, CEO at AWS. "With the announcement, customers don't have to make that binary decision anymore, and they get to use that VMWare software they're used to using on AWS — and do so without having to buy any additional hardware, which most companies these days aren't looking to buy more hardware."

Though VMWare offers its own cloud services, because AWS and VMWare weren't well-integrated before, customers felt they had to choose, Jassy said. Pat Gelsinger, CEO of VMWare, said customers pushed the two companies together.

"What we're finding is that these are already our joint customers, and that's what really makes this announcement powerful," Gelsinger said. "Andy and I were both driven by that customer demand because ... essentially every enterprise [is] now taking advantage of Amazon, and this creates this seamless, hybrid experience where they get the best of both worlds."

Amazon has a 31 percent worldwide market share in cloud, and growing, according to research firm Synergy. But as businesses look for more flexible combinations of software services and data storage, companies like Oracle and Microsoft are bolstering the cloud offerings, too.

Hybrid cloud offerings, like the one offered by VMWare and Amazon, are expected to be used by 80 percent of IT organizations by 2018, according to IDC estimates. Nutanix saw its shares rise more than 130% after its IPO last month by offering a version of hybrid cloud service.

The combined product from Amazon and VMWare should allow businesses to get much more done, much more cost effectively and quickly, Jassy said.

"When our customers are pulling us it's an easy thing to sell," Gelsinger said.