Will the CIA Cheat On IBM With Amazon?


International Business Machines Corp (NYSE:IBM) has a long history of symbiotic relationships with the Central Intelligence Agency and the U.S. military, dating back to at least World War II. However, now Amazon.com Inc (NASDAQ:AMZN) wants in on the action, and IBM is doing everything in its power to stop it.

According to The Wall Street Journal, following a long, faithful affiliation to IBM, the CIA surprised the technology vendor when it unexpectedly chose Amazon to build a cloud-computing service that would facilitate its connection to the broader intelligence community. IBM protested the estimated $600 million contract which led the Government Accountability Office to recommend the CIA reopen negotiations. It now has 60 days to assess the GAO’s recommendation and announce how it will move forward.

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Regardless of the CIA’s decision, its initial award to Amazon reflects the changing nature of the intelligence-agency business and its technology focus as it is now willing to move away from traditional vendors to accommodate more space for those that can provide the new technology it requires. The rise of cloud computing is especially on the CIA’s radar, as it allows users to share space on thousands of Internet-connected servers.

And because the U.S. government is working to cut spending and “capitalize on new technologies that use clusters of basic computer servers in place of supercomputers to handle big data-crunching tasks,” cloud computing may be its best bet, as the service would allow it to simply rent computing technology over the Internet. That’s where Amazon, the leading provider of cloud-computing services comes in. The company is confident it can secure its place in this new business venture, explained by Adam Selipsky, a vice president at Amazon Web Services who says, “The federal government opportunity is enormous. We believe that will be a very significant business for Amazon Web Services going forward.”

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Moreover, recent headlines illuminate that the National Security Agency has also already employed the new technology’s tools to help it collect and examine communication data with the ultimate  goal of blocking any potential terrorist threats. Thus, while The Wall Street Journal points out that the majority of technology spending used to be directed to large, established companies such as Raytheon Co (NYSE:RTN), Hewlett-Packard Co. (NYSE:HPQ), Boeing Co. (NYSE:BA), and Computer Sciences Corp. (NYSE:CSC), it is now apparent that other less traditional technology vendors are starting to find a window into the market, as evidenced by Amazon’s initial success.

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Amazon Web Services in fact have already been employed in part by the government, when the U.S. Department of Health and Human Services used some of its cloud-computing services in May. Selipsky expects that Amazon’s stake in the governments business will only increase if it gets its “key stamp of approval” from the CIA.

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