CA-CHING! Amazon Wins Court Battle With IBM To Build A $US600 Million Game-Changing Cloud For The CIA

Jeff bezosDavid McNew/Getty ImagesAmazon CEO Jeff Bezos

In the legal fight between IBM and Amazon to build a private cloud for the CIA, Amazon has emerged the winner.

Earlier this week, a judge for the U.S. Court of Federal Claims has ruled that Amazon can immediately resume work on the project. That’s a contract worth up to $US600 million over 10 years, Federal Computer Week’s Frank Konkel reports.

“We are pleased with the Court’s decision and look forward to resuming our work on this important contract with our customer,” an Amazon spokesperson told Business Insider.

This is Amazon’s first-ever “private” cloud and a real game changer in a fledgling market that’s already generating about $US131 billion this year and growing 47%, market research firm Gartner says.

All the big enterprise IT companies are pursuing the cloud: IBM, HP, Citrix, Microsoft, Dell, Intel, Oracle, VMware, etc. They want to snag lots of enterprise cloud customers. They view it as a big opportunity for growth.

Amazon’s cloud, called Amazon Web Services (AWS), is the biggest player in the cloud market market by far. AWS, has more than five times the combined capacity of its next 14 rivals, according to market research group Gartner.

But, until this contract, it only provided “public” cloud services, meaning its users shared Amazon’s data center.

This CIA contract is for a “private” cloud, meaning Amazon will build a cloud in the CIA’s own data center that’s not shared with others.

IBM, which had put in a competitive bid, protested the CIA contract. From court documents we learned that Amazon’s bid was a whopping $US54 million higher than IBM’s, but the CIA chose Amazon because it thought its tech was better.

Many of Amazon’s competitors have been offering private clouds as a way to lure enterprise customers away from AWS. They position their tech as more secure and reliable than Amazon. But other enterprises now know that Amazon’s tech is secure and reliable enough for the CIA, which has a very high standard.

This contract also means Amazon is ready to compete for big private cloud contracts. That’s not good news for its competitors either.

With so much at stake, IBM isn’t giving up the legal battle. It plans to appeal. IBM sent us this statement:

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. We are disappointed with the ruling from the U.S. Court of Federal Claims, reversing the GAO’s recommendation to reopen the competition and correct flaws in the bidding process. IBM plans to appeal this decision.

Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.

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