What the Amazon-IBM battle says about the market

IBM's protest of Amazon's CIA cloud computing contract is about more than just two companies squaring off over a $600 million contract. It's about a new player in the market, and a shift in what the government expects from its contractors.

The news last week that IBM Corp. had filed a protest against the awarding of a $600 million CIA contract to Amazon Web Services is the strongest indication yet that Amazon wants to sell more than just a cloud computing service to government agencies.

According to FCW’s Frank Konkel, the CIA's desire for a large private cloud is being pushed by the intelligence agency’s rush to embrace big data analytics. The CIA wants to collect massive amounts of information from diverse sources such as sensors, drones, social media, etc.

"It is very nearly within our grasp to be able to compute on all human generated information,” CIA Chief Technology Officer Hunt told an audience at GigaOM's Structure:Data conference on March 20.

Sounds like a job right up Watson’s alley. Watson is the supercomputer that IBM built that won a Jeopardy tournament, and is now busy taking on other projects that require the swift analysis of hugely diverse data sources.

That’s what makes Amazon’s win so interesting. You don’t think of them as a cutting edge of technology, unless you stop and think about the amount of analytics Amazon does on shoppers buying habits.

So, Amazon’s push into high-end government computing and its ability to take on the likes of IBM should send a real signal to the rest of the market that a new player has emerged.

But that’s just part of what makes this deal interesting to me.

On a broader note, the approach also indicates to me how the idea of partnering with the government is evolving.

Granted, a lot of details are not publicly known about this contract, so this is a lot of speculation on my part, but it seems obvious that Amazon isn’t just selling servers, routers and hours of connectivity.

What is says to me is that if you want to be doing important, mission critical work with the government, you cannot have an order-taker mentality.

I spoke about this in a different context at the Association of Proposal Management Professionals conference in Atlanta last week, when I talked about how value-added resellers nearly disappeared from the market. But several are still successful today because they abandoned the order-taker approach, and are instead invested in bring solutions to their customers.

You see a similar strategy from companies that traditionally earned their revenues through charging billable hours to the government. The incentive for the contractor isn’t to solve the problem, but to charge more hours.

But in today’s budget environment, agencies are pushing for solutions. As former Veterans Affairs CIO Roger Baker said when he went to work at Agilex, you need to deliver a finished result.

To me, the Amazon-CIA contract indicates both the arrival of formidable new player in the market, but also a continuation of the trend toward delivering real solutions and addressing mission-critical priorities. And not selling more products.

Sure, product sales and billable hours will continue to fuel business for many companies, but the higher margin, more valuable business lies in solving problems.