IBM captures GSA contract to manage $1B in transactions

EDITOR's NOTE: A version of this article first appeared on FCW.com.

IBM has landed a $30 million cloud computing contract with the General Services Administration to provide end-to-end services to the GSA Global Supply.

Global Supply provides $1 billion worth of commercial goods and services annually to government customers worldwide each year.

As part of the five-year contract announced Oct. 21, GSA will use IBM's SmartCloud for Government to handle some 5.5 million annual orders. While cloud hosting is an important part of this deal, it's the additional services IBM will provide GSA that make it a big victory for Big Blue.

GSA Global Supply will make use of several cloud-based solutions from IBM beginning in early 2014, including its Sterling Order Management and Sterling B2B Integrator, giving GSA a single view of order management for demand, inventory and supply across its global supply chain networks. GSA will also make use of IBM's analytics software, using purchase records and other big data to identify trends, order patterns and supplier reports.

Leveraged with IBM's SmartCloud for Government, these and other services are expected to help GSA streamline its business model over the next five years.

"The GSA is showing tremendous leadership for other government agencies by moving their order management system to the cloud," said Anne Altman, general manager of IBM's federal division.

"IBM SmartCloud will enhance visibility into GSS channel operations and make sense of big data within, but also optimize inventory and provide considerable process innovation, resulting in improved business processes to manage the agency's vast supply chain and logistics operations," Altman said. "This will reduce costs; creating more efficient outcomes for GSA customers, and ultimately translate into a benefit for the taxpayer."

For most of 2013, IBM has been locked in a war with Amazon Web Services for the right to develop a $600 million cloud computing infrastructure for the CIA. Yet even if AWS ultimately win that deal -- as seems likely based on recent legal proceedings -- it won't be a bad year for IBM.

Big Blue's cloud computing revenue exceeded $1 billion during the third-quarter – the first time that has happened – and in the first three quarters of 2013, its cloud revenue jumped 70 percent over last year. That's despite the company taking a third-quarter revenue hit of more than $1 billion -- $23.72 billion compared to last year's $24.74 billion -- in large part due to weak performance from the company's hardware division.

In terms of overall value, IBM landed its largest public sector cloud contract to date in August, securing an Interior Department deal worth up to $1 billion over 10 years. IBM officials expect its SmartCloud for Government solution to attain Federal Risk and Authorization Management Program (FedRAMP) compliance by year's end as well, meaning it will comply with the government's rigorous cloud computing security standards.

The GSA deal, however, highlights how much of IBM's growth in the cloud market is due to the end-to-end services it provides on top of the cloud infrastructure itself. IBM has long provided agencies with professional consulting and other B2B solutions that many cloud infrastructure providers would have to subcontract out.

"The reason why IBM was chosen here is we could not only provide [GSA] the cloud system, but the end-to-end capability – the analytics and new ways to look at business and efficiency," said Luann Pavco, managing partner for IBM Public Sector Services. "There really is a difference between IBM and a basic cloud infrastructure provider."