Rival tech giants Microsoft and Oracle announced Thursday a deepening of their four-year-old cloud partnership, a reflection of how new technology and customer demand have led to more cooperation in the fiercely competitive software business.

Oracle will physically locate its Exadata hardware in Microsoft’s data centers, speeding up applications that customers use, the companies said. As a result, customers will have direct access to Oracle database services running on Oracle Cloud Infrastructure and deployed in Microsoft Azure data centers. Customers will be able to operate those Oracle services within Microsoft’s Azure Cloud dashboard, instead of having to run a separate Oracle dashboard.

The new interoperability will make it easier for Oracle users to run Microsoft Azure’s AI on top of the Oracle database, the companies said.

The integration will simplify the purchasing process from the user perspective, the companies said, because Azure customers will be able to use Oracle services even if they don’t have a separate Oracle account.

The Oracle Database Service for Microsoft Azure was announced last year but didn’t include the co-location of Oracle hardware in Azure data centers. It built on an integration introduced in 2019 known as Oracle Interconnect for Microsoft Azure, which required effort and technical expertise on the part of customers.

Customer previews of the new service, Oracle Database@Azure, will be available early next year in regions of the U.S., the U.K. and Germany, with plans to expand globally, the companies said. Oracle and Microsoft declined to disclose financial details of the plan.

Microsoft Chief Executive Satya Nadella and Oracle co-founder and Chief Technology Officer Larry Ellison announced the new platform at Microsoft headquarters in Redmond, Wash.

Companies often talk about the close relationship between AI and data, which is used to train models. In this instance, AI and data are coming together in a concrete way, according to Nadella.

“In the age of AI, for us, we do need to bring data to where AI is. And that’s what Oracle-Azure really represents,” Nadella said.

“To be able to help our customers take advantage of AI, you can’t do that if you don’t have low-latency access to data…Yes, it was possible in the past. This is a new generation of technology that accelerates what customers really want,” Nadella said.

Years ago, many cloud providers tried to lock customers into a single platform, but that isn’t feasible as the cloud has become more central to operations. Customers typically use multiple clouds, and cloud platform providers such as Microsoft and Oracle are adapting to that multi-cloud environment. About two-thirds of enterprise-level companies use multiple clouds, according to a May 2021 report by Boston Consulting Group.

“In the early days you can say that the clouds were like walled gardens,” Ellison said. “Customers should be free to choose the best-in-class technology, regardless of who the cloud vendor is and be able to mix those different technologies together seamlessly. I think the walls of the walled garden will come down,” Ellison said.

“It is unlikely that they would have done this pre-cloud. The multi-cloud adoption model by organizations has changed the dynamic,” said Sid Nag, a vice president analyst covering cloud services at researcher and consulting firm Gartner.

Google announced a new initiative, Google Cross-Cloud Network, two weeks ago. The new Microsoft-Oracle announcement “may be a response to that,” Nag said.

The Microsoft-Oracle deal came together over the past several months, according to the companies.

To the extent that both Microsoft and Oracle view cloud rival Amazon Web Services as the common enemy, “it is better to have a unified front against Amazon in the market,” Nag said.

The new partnership notwithstanding, Microsoft and Oracle will remain rivals, according to Nag.

“They are very competitive from other aspects—such as their applications portfolio and to some degree their database technologies too,” Nag said.

Ellison and Nadella said they could imagine an evolution of their companies’ work together, but there are limits. Both men laughed when asked if they could imagine a scenario in the future when the companies could merge. “Well, let me say right now Oracle has no plans to buy Microsoft. I can say that honestly,” Ellison said.