Federal Government: Amazon’s Possible Biggest Customer

Cloud hosting is the procurement of computing resources from a cloud computing provider or facility to host data, services and/or solutions. Amazon’s cloud hosting business, is preparing to secure a lucrative federal contract. Amazon holds a number of federal contracts however their most important opportunity is valued at 10 billion. Interestingly, the company is also trying to serve as the portal for all government purchases. As result Amazon would be able to charge fees while serving as a government portal. The issue with this potential contract award is that Amazon could easily push out competition with their dominance in both the government and civilian sectors. The opposing argument is that Amazon would also increase efficiency and save taxpayers money.

Founder Jeff Bezos realized that housing data in a physical warehouse was less efficient than storing it on the internet. It took a while for Amazon to get federal contracts. In 2010, the Obama administration began urging federal agencies to put their data in the cloud to reduce government spending on data centers. Since other tech companies were still providing the government with software and data centers, Amazon had the advantage. The other tech companies would have to overhaul their processes to move into the cloud business. Amazon was able to assist the Obama administration in moving the website of “The Recovery Accountability and Transparency Board” to AWS cloud. In 2013, Amazon won a $600 million contract with the Central Intelligence Agency which solidified Amazon’s expertise and security.

By now you’ve probably heard of the Defense Department’s massive winner-take-all $10 billion contract dubbed the Joint Enterprise Defense Infrastructure (or JEDI for short). Oracle had challenged the Pentagon’s “single-cloud” strategy for the contract in early August, long before contractors had submitted bids. The protest argued that the Pentagon’s initial contract for JEDI should have more than one winner. Oracle and others have said that Amazon Web Services has an inside track to the contract. The online retail giant’s cloud computing unit is largely viewed as a front-runner because of its experience handling classified data for the CIA, part of an earlier $600 million contract. IBM submitted its own bid protest just days before bids were due Oct. 12. The Government Accountability Office (GAO) is reviewing that protest with a decision expected by Jan 18, 2019.

In summary, the JEDI contract can result into a big break for Amazon. It would provide them with the experience and trust needed to maintain a strong relationship with government agencies. However, their expertise could potentially bring about a monopoly that could push out their competitors. If Amazon became the primary procurement portal, it could not only charge fees to suppliers, but also compete against them with its own generic or branded products, as it does currently in its consumer retail business.