Companies are targeting the U.S. government as it cuts costs by shifting $20 billion of the $80 billion in yearly information-technology spending to cloud computing, which lets users share resources such as data storage and software.
Amazon “can run it better for the government,’’ Herman Leung, analyst at Susquehanna International Group in San Francisco, said in an interview. “As you gain critical mass, those cost savings you can pass on to consumers.’’
The company’s Web services, including cloud computing, will account for $979 million of its projected $49 billion revenue in 2011, up from $204 million of $25 billion in 2009, Leung estimated. The company doesn’t disclose those figures.
“It’s very difficult to ignore the U.S. government’’ because of the size of its budget, Teresa Carlson, head of Amazon Web Service’s public division, said in an interview.
Expanding providers
The government has been using Amazon Web Services since the unit’s inception in 2006, Carlson said. The company focuses on Web site hosting and data storage, while Google and Microsoft’s main cloud-computing sales to the United States are for software, such as word processing and spreadsheet applications.
Amazon has worked on Web and cloud development for agencies on contracts worth at least $4.8 million in the past two fiscal years, according to data compiled by Bloomberg Government.
The company also receives a portion of the money on contracts won by companies that use its services in their own federal offerings. Such third-party vendors include Apptis, Smartronix and Redwood City, Calif.-based Oracle.
Work performed by Amazon’s third-party vendors may have generated as much as $475 million in sales in the 2010 and 2011 fiscal years, based on contract awards for Internet and systems integration held by Amazon’s federal partners, according to Bloomberg data.
In June 2010, Smartronix received a $3.7 million contract to revamp and operate the Treasury Department’s Web site using Amazon’s cloud products. Closely held Smartronix, based in Hollywood, Md., is scheduled to complete the project by September 2012, government data show.
Amazon started hearing from its partners earlier this year that agencies needed data-storage centers accessible only to U.S. citizens or permanent residents to comply with a law requiring limited access to defense-related information, Carlson said.
Amazon opened a group of data facilities in Oregon to offer that level of control, she said. Even though “all of our clouds are highly secure,’’ agencies including NASA’s Jet Propulsion Laboratory are seeking centers that restrict access, she said.
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