Amazon becomes a serious government player

The company bests IBM in a huge computing deal with the CIA, upsetting the traditional market for these services.

By Benzinga Oct 9, 2013 4:27PM

Amazon logo on a warehouse in Bad Hersfeld on May 14, 2013 (© Lisi Niesner/Newscom/Reuters)By James Ha

 

When the CIA gave a $600 million cloud computing contract to Amazon (AMZN) earlier this year, IBM (IBM) appealed to the Government Accountability Office, stating that Amazon Web Service’s bid does not fall within the set criteria within the contract.

 

While the government agency stated that Amazon's bid was "the superior technical solution” compared to IBM’s bid, IBM’s lower price tag of $93.9 million compared to Amazon’s $148.1 million contributed to GAO’s recommending the CIA to reopen the bidding on the contract.

 

The agency also stated that CIA failed to properly evaluate the bids on the contract, prompting a quick lawsuit from Amazon. This week, a federal court ruled in favor of Amazon in this high-profile dispute and reversed the recommendation made by the agency.

 

IBM spokesman Clint Roswell said the company plans an appeal. "This court decision seems especially inappropriate in light of the current times, since IBM’s bid was superior in many ways, including being substantially more cost-effective," he added.

 

IBM has heavily invested in data center infrastructure, counting on high demand from government and corporate clients. Amazon, meanwhile, initially centered around on providing services to small startups.

 

The loss of the $600 million contract caused by the ruling will be a significant blow to IBM’s data center infrastructure and will give Amazon traction in gaining more government and corporate clients.

 

Amazon has "arrived as a serious player due to this award," stated research director Shawn McCarthy from IDC Government Insights. "That will change things going forward."

 

With Amazon already providing around 70 percent of the public 'infrastructure as a service' market, companies such as IBM, Hewlett-Packard (HPQ), and Oracle (ORCL) will need to maintain their clients against Amazon’s growing presence among large corporations.

 

Read more from Benzinga

7Comments
Oct 9, 2013 7:13PM
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"With Amazon already providing around of the public 'infrastructure as a service' market"

 

Who and what says Amazon has 70% of what infrastructure market?

 

Oct 10, 2013 9:34AM
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Amazon a "government contractor"....Isn't that like contracting with UPS or Fed-Ex.??

 

What do they make?

Oct 9, 2013 8:07PM
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Oct 9, 2013 8:09PM
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