Tech heavyweights Hewlett-Packard and Microsoft on Wednesday announced an ambitious partnership under which they will jointly invest $250 million over three years to develop and market systems geared toward cloud computing.

"The cloud is the driving force behind this deal at this time," said Microsoft CEO Steve Ballmer, on a conference call with reporters. "This is entirely cloud motivated," said Ballmer.

Cloud computing is a new-wave IT architecture under which business tap their data and applications over the Internet or intranets instead of from local servers.

Under the tie up, Microsoft and HP will work together to build and integrate technologies, including virtualization, systems management and storage, that support cloud computing.

For instance, HP will reengineer some of its hardware to improve its ability to run Microsoft's SQL Server database and Hyper-V virtualization server software. It will also enhance management software such as HP Insight and Business Technology Optimization for tighter integration with Windows datacenter environments.

Additionally, the companies soon plan to add new Microsoft System Center management tools to HP ProLiant servers that will give IT managers the ability to better control power management within datacenters.

That's key, as datacenters—where racks and racks of power hungry servers are stored--are the hubs of cloud computing's hosted setups. Microsoft and HP are also jointly developing new run book automation solutions designed to improve the management of datacenter workflows.

Beyond that, the vendors plan to integrate a host of new products and technologies with the ultimate goal of delivering a unified datacenter "stack", from hardware through to applications, on which businesses who don't wish to hand off hosting to a third-party can build their own "private clouds."

"This is all with a desire to make things simpler and easier for our customers," said HP CEO Mark Hurd, who was also on the conference call. "It's about optimizing machine capability with software capability," he said.

The pact additionally calls for HP to be the premier hardware supplier for Microsoft's own datacenters, from which the software maker will provide cloud services based on its Windows Azure operating system.

Advocates of cloud computing argue that it helps businesses cut computing and IT personnel costs, while adding flexibility and fast innovation. Critics question the security implications of maintaining data off site and have voiced concerns about vendor lock-in if a business wants to switch cloud providers.