IBM Pulls the Rug from Under AWS
A $600 million contract between the Central Intelligence Agency (CIA) and Amazon has been derailed by IBM, which complained that the cloud provider has received favorable treatment from the spy agency. This week, the U.S. Government Accountability Office announced that it has accepted the company’s claims.
Big Blue alleges that the CIA “failed to properly evaluate prices and waived a contract requirement” only for Amazon, giving it an unfair advantage over the other vendors that competed over the deal. The arbitrator of federal contract disputes, whose advice is usually heeded by government agencies, subsequently recommended that the CIA reopen negotiations with IBM and other bidders.
The news has big repercussions for Amazon in particular and the cloud market as a whole. From Amazon’s point of view, losing the $600 million deal would not only deprive it of a sizable source of revenue, but also of an opportunity to validate its platform for security-conscious customers. From an industry-level perspective, losing one of the largest government cloud contracts to date would represent setback in the ongoing battle over traditional vendors’ turf.
For IBM’s part, the Government Accountability Office’s decisions presents yet another opportunity to increase its stake in the increasingly lucrative cloud market. The same could be said of the firm’s recent $2 billion acquisition of SoftLayer, a fast growing cloud provider that competes with AWS.
Wikibon Chief Analyst Dave Vellante commented on the deal in an interview with SiliconAngle NewsDesk host Kristin Feledy.
“There’s real opportunities to make money here. What IBM’s gonna do is take that SoftLayer platform [and] really build out services on top of it and accelerate the pace in which it can deliver those services. It will bring, much in the same way that Oracle does, a lot of its software technology to that cloud and add value to that cloud and sell that cloud very hard.”
One of these technologies will be OpenStack, an open-source cloud operating system that poses a threat for both Amazon and VMware. SiliconAngle contributing editor John Casaretto pointed out that SoftLayer will give IBM a “platform through which they can continue to support and build off of OpenStack without encroaching or dominating it.”
Check out the video below to hear Dave Vellante’s full commentary on IBM’s acquisition of SoftLayer.
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