When federal officials rolled out a new initiative to make cloud — or Web-based — computing a priority for all federal agencies, every information technology contractor felt the ground shift.
But maybe none more so than Amazon Web Services, which found in the policy change a massive business opportunity.
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.
As part of the government’s big data pilot effort, Amazon Web Services was credited for its work on the 1000 Genomes Project, a National Institutes of Health program that provides 200 terabytes of data on human genetic variation, the equivalent of 16 million file cabinets worth of text.
Amazon is storing the data, making it publicly available and free to government agencies, private researchers and individuals. Those who access the data — 3,500 did within the first week, according to the NIH — pay only to analyze the data, not to download or store it.
The data has always been available, but researchers previously needed to download it onto their own machines first, meaning they needed large bandwidth and storage capabilities. Now, researchers can move immediately to analysis, which Don Preuss, head of NIH’s National Center for Biotechnology Information’s systems group, said would give them more flexibility to do initial testing of a hypothesis.
Amazon also recently worked on a big data project for the Centers for Disease Control and Prevention, storing a health monitoring system to help track outbreaks.
According to the CDC, the new program allows jurisdictions to share data and represents the first Department of Health and Human Services program to completely move to the cloud.
As Amazon has made inroads in the government market, it’s made a point of partnering with a whole range of contractors, from small cybersecurity firms such as Herndon-based Xceedium to larger companies such as SAP. Carlson said contractors are coming to AWS as frequently as the company is reaching out.
Last month, Aquilent, a Laurel consulting firm that works exclusively with the federal government and focuses on helping agencies buy cloud solutions, announced it has added Amazon GovCloud to its schedule with the General Services Administration. GSA administers schedules as ways for federal agencies to buy products more quickly and use pre-negotiated deals.
David G. Fout, president and chief executive of Aquilent, said the company specifically sought to get Amazon onto its GSA schedule because Amazon’s GovCloud was becoming the best option for many of Aquilent’s customers.
“We came to them and said, ‘Hey, we think you guys can win this battle,’ ” Fout said. Amazon is “focused on building the best cloud computing services available. They’re not really focused on, let’s figure out how the federal government works and let’s figure out how to sell to them, so what they want to use is partners.”
Earlier this month, Xceedium — known for technology that makes sure only verified users can log onto secured IT infrastructure — showed off a new platform known as “Xsuite Cloud,” meant to provide Amazon infrastructure with Xceedium’s security controls.
When Xceedium heard from its customers about the “providers of cloud services that they were already either working with or were interested in working with ... frankly the one that came up the most — particularly in public sector — was AWS,” said Glenn C. Hazard, the company’s chief executive.
Carlson argued these partnerships will become even more valuable as the federal government moves beyond some of the easier shifts to cloud — like moving e-mail systems — to more complex issues.
For instance, last month Amazon and SAP announced a new cloud-based way for federal agencies to manage and secure their mobile devices.
McCarthy said it makes sense for Amazon to continue to partner with systems integrators now as these kinds of companies are helping federal agencies integrate their new cloud-based programs with existing systems.
“Anybody who’s offering this kind of solution always needs to play nicely with” systems integrators, he said. But eventually, he said, “my guess is more [federal agencies] will be going directly to the software providers.”
At the same time, competition is growing. Verizon, which maintains a federal office in Ashburn, has beefed up its infrastructure with the purchase of Terremark last year in a roughly $1.4 billion deal. About one-quarter of Terremark’s business was already with the federal government.
While Mirandi said AWS has something of a head start, other competitors include AT&T, Rackspace and IBM. Rackspace and NASA partnered on OpenStack, which provides an open source platform for building cloud computing services.
Carlson said she expects the government’s momentum toward cloud computing, data center consolidation and big data analysis to continue to provide opportunities for Amazon.
“Our work is not done, and it’s not going to be done for a very long time because we’re just in the beginning stages still,” she said.