As the Amazon re:Invent conference kicked off this week, rumors of major new business announcements from the Central Intelligence Agency (CIA), and Amazon.com Inc. are swirling around Amazon Web Services (AWS). Another rumor predicts AWS will announce an on-premise appliance as a play for the growing hybrid-cloud market.

theCUBE will be at Amazon re:Invent starting today (Wednesday) to cover all the news and the implications of the announcements. Watch it at http://live.siliconangle.tv for all the news and analysis from the event.

The blockbuster rumor predicts that the CIO of the Central Intelligence Agency (CIA) will announce that either the CIA or possibly the entire U.S. federal government will move its full IT infrastructure to AWS. It should be emphasized that this is a rumor. So what is the likely truth?

First, CIA CIO Douglas Wolfe did speak at an Amazon conference in early July, so it is possible that he will present again at this conference. In June he said in a public speech in Washington, D.C., that the CIA wants to expand its use of AWS. So it is plausible that Wolfe may announce a new contract with AWS at the conference.

However, the rumor that he will announce that the entire U.S. government is moving its entire computing operations to AWS, or any single provider, is highly improbable. The U.S. government has strong reasons for adopting cloud computing. Many civil servant IT technical people either have retired or are approaching retirement age. Government salary levels, set by law, are much lower than IT salaries generally in the private sector, making it difficult for the government to recruit good people with the IT skills it needs. Also the government IT infrastructure in general is out-of-date, and moving to the cloud would solve both problems.

However, Wolfe does not have authority to speak for any agencies besides his own. Any broader policy announcement would have to come from someone at a much higher level. Also the U.S. General Services Administration, which oversees federal government budgets, has a hard rule of always having at least two domestic sources for any major services or capital items the government purchases to promote competition in bids and get the best prices. This is outlined in the GAO report “Overview and Issues for Implementation of the Federal Cloud Computing Initiative: Implications for Federal Information Technology Reform Management“.  Thus when the government does start migrating its IT infrastructure to the cloud, it will use at least two, and probably more, service providers.

Finally, the expectation that AWS will announce some sort of on-premise appliance is highly likely. For years many in the industry has been saying that large companies in particular are going to build hybrid clouds rather than jumping directly to IaaS, moving major systems out of their data centers. Indications from other cloud vendors like IBM and Hewlett-Packard, Co. are that this trend is finally growing. AWS needs a hybrid solution to play in this market, which is expected to drive cloud growth for the next several years.

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