Amazon Web Services and IBM are going punch for punch in the battle of securing a federal government cloud contract with the CIA. At this level, the potential revenue these technology behemoths can receive from Uncle Sam is enormous. Just over two weeks ago, IBM closed a cloud computing deal with the Department of the Interior worth $1 billion. Moreover, these battles have become increasingly hostile and nasty as Amazon recently indicated in court documents that their main competitor, IBM, is essentially just a government contractor and is incapable of handling such an account. This was filed in direct response to an IBM protest to the Government Accountability Office against a CIA contract worth $600 million that was given to Amazon Web Services. Furthermore, Amazon is challenging that the government had no legal ground to reopen the bidding to competition since the initial $600 million deal was slated to be an exclusive Amazon contract.
Neither of these companies seems willing to back down however Amazon may have the upper hand in this battle considering they have strong ties to powerful politicians. Additionally, Amazon previously won a CIA cloud contract over IBM even with a much higher bid. Amazon bid roughly $148 million whereas IBM bid roughly $94 million. The government report stated superior quality scores in various performance groups as the reason for choosing Amazon.
Needless to say, this had many in the cloud computing world talking about the strengths and potential reach of Amazon. Shawn P. McCarthy, research director at IDC Government Insights noted that Amazon “arrived as a serious player, due to this award. That will change things going forward.”
The current global cloud computing market is estimated to be worth approximately $131 billion annually. According to research firm Gartner, Amazon Web Services is the largest cloud provider by a long shot and is estimated to generate yearly revenues of about $3 billion.