Amazon-IBM dispute enters next phase

The next act in the battle between Amazon Web Services and IBM for the opportunity to develop a cloud computing infrastructure for the CIA, the NSA and the rest of intelligence community opens Oct. 7, and the stakes could hardly be higher.

The U.S. Court of Federal Claims will decide whether the Government Accountability Office was right in June when it sustained IBM's bid protest against AWS's $600 million contract award from the CIA in early 2013. Following GAO's ruling, which directed the CIA to reopen negotiations and rebid the contract, AWS filed a complaint essentially asking the court to overturn the decision.

Oral arguments begin Monday – assuming the government shutdown does not affect the court docket – and Judge Thomas Wheeler will preside over a case that may have repercussions across the technology space. A decision is expected in mid-October.

Of course, money is on the line. A half-billion dollars and change is a lot of money in cloud revenue, and it's a particularly significant sum in the federal sector, where most agencies have yet to utilize cloud for more than the most rudimentary IT services.

Yet far more than money is at stake between these two tech behemoths.

Reputations matter, especially in Washington, where they play an immeasurable but important role in deal-making. IBM has a well-established track record as a contractor to civilian, defense and intelligence agencies, but AWS's aggressive foray into the federal cloud computing market suggests the landscape may be shifting.

Whichever company receives the award gets instant fed-cred. If IBM snatches the first-of-its-kind deal with the CIA away from AWS, Big Blue proves its staying power in an ever-changing tech arena; if AWS lands the contract, it will have proven itself a player, forcing its way into a market ripe with opportunities.

This is not lost on the leaders of both companies' federal efforts.

"It's always good to have people who are perceived as competition, it pushes all of us to do better things," AWS Vice President of Worldwide Public Sector Teresa Carlson told FCW in an interview. "We are moving the cheese. We're trying to look at IT differently."

Carlson said "new-school" approaches to IT such as pay-as-you-use service can lower costs and drive mission success. AWS attacked the cloud computing market early on and hasn't let up since.

IBM's Anne Altman, meanwhile, told FCW that the company has six years of experience in cloud computing and isn't the cloud newbie it's sometimes made out to be. IBM also has decades of experience working for the government, which Altman said helps separate it from challengers in the federal cloud market, especially in the high-stakes game of intelligence data.

"Experience is something to think of, and we have served some of the most mission critical environments for a long time," said Altman, who is general manager of IBM's U.S. federal business. She added that IBM would not have to "learn on the job."

The CIA accepted new bids from both companies in August, but the agency is waiting until the Claims Court ruling to disclose a decision. The new bids from AWs and IBM likely differ significantly from the bids they put forth in 2012 when the CIA first announced it was seeking a cloud solution.

Since FCW first reported the CIA's award to AWS in March and IBM's subsequent bid protest in May, both companies' bid figures and technical specs were put in the public spotlight -- not to mention each other's.

AWS has since added more than 150 new services to its repertoire, including Glacier storage, for rarely accessed data, and Redshift, its petabyte-scale cloud-based data warehouse. And in May it received certification under Federal Risk Authorization Management Program (FedRAMP) certification, the government's rigorous cloud computing security standards.

IBM hasn't been idle, either.

Big Blue made a huge $2 billion move to purchase SoftLayer Technologies, the world's largest privately held cloud computing infrastructure. IBM's federal team expects SoftLayer's acquisition to mitigate the apparent gap between IBM's and AWS's technical solutions as noted by GAO's formal bid protest ruling. In its ruling, GAO said the CIA chose AWS over IBM – despite IBM offering a cheaper solution – because AWS offered a "superior technical solution."

And the two companies have plenty of other competition in the federal cloud space as well. There are now nine FedRAMP-certified providers, with more in the pipeline. And Verizon, which provides a wide range of agencies with enterprise cloud services, on Oct. 3 announced new computing and storage offerings that promise faster deployment and better pricing. Verizon Terremark Public Sector's Chief Operation Officer Norm Laudermilch, speaking with FCW prior to the announcement, said that both services are already in the FedRAMP approval process.

For the CIA cloud deal, however, it's a two-horse race. And all eyes are on Oct. 7.