Analysts project federal cloud spending will reach $2.2 billion next year and more than quadruple by 2017.
That’s a small fraction of the government’s $80 billion information technology budget, but agencies are increasingly outsourcing more IT operations to companies like Amazon Web Services, IBM, Microsoft and Verizon Terremark.
Most cloud spending will pay for private cloud services, which are restricted to one or more agencies and not accessible via the public Internet, Shawn McCarthy, research director at IDC Government Insights, said in a July report. For now, agencies are primarily in the market for virtual servers, where multiple applications share the resources of a server that may or may not be in an agency’s data center, and other infrastructure services.
“The backstory on this jump is that large systems integrators (SIs) are already a big part of the U.S. government landscape, so providing [infrastructure-as-a-service], ranging from networks to virtual machines to file-based storage, is a logical progression for both the government and the SIs,” McCarthy said.
The cloud market has many more players than the familiar big names, said Susie Adams, chief technology officer for Microsoft’s federal government business. Companies like Computer Sciences Corp., HP, Dell and telecommunications companies are getting into the cloud business.
The ongoing battle between IBM and Amazon for a $600 million CIA cloud contract illustrates how fierce the competition can be. Under the indefinite-delivery, indefinite-quantity contract with a four-year base period, Amazon was to provide a modified version of its public cloud, which are cloud services available to the general public. However, the agency requires that the hardware and software be installed in a government facility and operated by Amazon.
IBM and Amazon are among the companies dominating the federal cloud landscape, especially following IBM’s bid protest of CIA’s contract award to Amazon, and CIA’s subsequent decision to reopen the competition and accept revised bids last month.
Despite an initial CIA award for private cloud infrastructure to Amazon, IBM sees itself as the leader in providing such services.
“We’ve been pioneering the private cloud marketplace for years,” said Andrew Maner, managing partner of U.S. Federal at IBM Global Business Services. “There are adventurous new competitors in the market, but at the same time this is a long journey and you have to have done it for a while.”
Maner said IBM supports mission-critical applications for agencies and gives them the flexibility of cloud computing in a secure and private IT environment. Maner noted IBM’s contract win on a $10 billion Interior Department cloud contract and its July acquisition of cloud computing company SoftLayer Technologies Inc.
When asked about competition with Amazon, Maner said, “I just don’t see it that way. We are talking about federal here. They [Amazon] are good in public cloud, but that’s not where our customers are.”
“You can’t go down for 45 minutes on a weekend,” he said. You can’t go, ‘Ah shucks we were down again last week,’ when running bare metal for mission agencies and law enforcement [and] intel. You can’t go down. It’s just not an option.”
Maner didn’t mention Amazon by name, but IBM did in its February bid protest claiming the CIA did not properly evaluate Amazon’s past performance, including service outages with Amazon’s cloud in 2012.
But that hasn’t slowed Amazon’s federal business. At its public sector conference in Washington last week, federal customers from Health and Human Services, Treasury and other departments testified about the savings and efficiencies gained from using Amazon’s cloud solutions.
“We have fantastic stats around reliability and durability, and we continue to strive to improve on that,” Teresa Carlson, Amazon’s vice president for worldwide public sector, said in an interview. “Our goal every day is to continue to improve our services, and the government, when they look at a company like AWS, our entire focus is on that. It gives them a degree of comfort that we’re not stopping where we are but will continue to innovate day to day.”
Last year October, Amazon had 300 government customers. Today that number is more than 600.
“We have already demonstrated that we are a major player in this market because of the commitment we’ve made and benchmarks exceeded,” Carlson said.
The company stood up a GovCloud network of data center facilities, servers, networking equipment and software systems for U.S. government agencies and contractors. And this summer, GovCloud was one of two Amazon offerings approved by the government’s security cloud program, called the Federal Risk and Authorization Management Program (FedRAMP).
Carlson said the company has a big pipeline of federal opportunities in the test and development stage, but now that Amazon has received FedRAMP approval, she expects more agencies will begin to roll out applications such as big data analytics, video streaming and others to fully engage Amazon’s hosting presence.
“It’s not just us saying we have met and risen to the top of the bar,” she said.
An analysis of leading infrastructure-as-a-service cloud providers by consultant and IT research firm Gartner named Amazon as a clear frontrunner in providing public cloud infrastructure services, such as virtual servers and data storage that can be accessed on demand via the Internet.
In the Gartner report released last month, Microsoft was noted as a visionary for its new Windows Azure solution, which provides comparable cloud infrastructure services to Amazon, and is expected to emerge as a market leader in this area.
Microsoft is close to receiving FedRAMP approval for its Azure solution, Adams said.