Since that announcement less than two years ago, the company has lured away Microsoft’s top federal executive, increased the number of federal, state and local government agencies with whom it does business from 20 to more than 150 and partnered with a host of traditional government contractors.
As the federal IT focus moves from cloud computing to big data, meaning the push to make better use of reams of data, Amazon is again in the spotlight. A government press release earlier this year describing big data pilot efforts mentioned just one company by name — Amazon Web Services — for its work on a National Institutes of Health program.
The business — a separate unit of Amazon.com — began in 2006, when the retailing giant realized it could use its experience developing technology for its online store and internal systems to create a cloud computing infrastructure for other businesses and organizations. The offering proved popular because it allowed companies to not only avoid purchasing their own equipment but permitted them to pay solely for what they used.
“By building that early, they dealt with a lot of the challenges that people moving to cloud are dealing with right now,” said said Shawn P. McCarthy, research director at IDC Government Insights. “The federal government has a lot of requirements ... [Amazon] already dealt with a lot of that.”
The federal government was slow to embrace the new model. But in late 2010, Vivek Kundra, the government’s first federal chief information officer, put together a federal IT plan that called for dramatic changes, from shuttering hundreds of government data centers to moving federal agency programs to the cloud.
At the same time, AWS, seeing an opportunity, hired Teresa Carlson, the former head of Microsoft’s federal business, to lead its public sector efforts.
“Our strategic approach to the market was number one, get the message out to the agencies that we’re here,” Carlson said of how Amazon took on federal sales.
Amazon’s pitch to agencies was that they could take a “self-serve” approach, paying for what they wanted and stopping when it was no longer needed.
For those concerned about the security of sensitive data, Amazon moved to create “GovCloud,” a cluster of data centers only available to government agencies and contractors.
“With the government space, there just is a lot of opportunity for change,” said Jillian E. Mirandi, an analyst with Technology Business Research. “Amazon — being a cheap, visible infrastructure-as-a-service vendor—saw an opportunity, and no one else was really doing it like them.”
Though Amazon does not break out AWS revenue, Mirandi estimates that the unit’s sales totaled $940 million in 2011. She estimates revenue in the first quarter of 2012 hit $290 million — a 40 percent boost from the same quarter a year earlier.