President-elect Donald J. Trump’s antipathy toward Amazon CEO Jeff Bezos won’t threaten Amazon Web Services as the federal government’s major supplier of cloud computing, at least in the short term.
That’s the word from two analysts who say the bureaucracy is too thick, the competition is too weak, and AWS is too well entrenched for any vendetta to immediately affect Amazon’s cloud computing arm that helps a variety of federal government agencies with their cloud needs.
“My guess is that Trump doesn’t even know what cloud computing is,” said Dan Scholnick, a general partner with Menlo Park, Calif., venture capital firm Trinity Ventures. “The part of Amazon he doesn’t like is the retail portion and the politics of Jeff Bezos.”
Trump’s first clash with Bezos came late last year. Bezos bought the Washington Post in 2013 for $250 million, and Trump claimed Bezos used the paper to influence politicians in Washington, D.C. and keep them from taxing Amazon.
Trump has suggested Amazon could face antitrust issues under his presidency. In a May appearance on Sean Hannity’s Fox News show, he said: “He’s worried about me — I think he said that to somebody, it was in some article — where he thinks I would go after him for antitrust, because he’s got a huge antitrust problem, because he’s controlling so much. Amazon is controlling so much of what they’re doing.”
Bezos earlier this week congratulated Trump on his victory — a message quite different from those to Trump in the past. Bezos at one point joked on Twitter that he would “reserve him a seat on the Blue Origin rocket,” another venture he’s pursuing with his private fortune. In May, Bezos said Trump’s remarks were “not an appropriate way for a presidential candidate to behave.”
Despite their bad blood, it would be tough for an irate President Trump to break off relations with AWS, which Scholnick estimated provides up to 80 percent of the federal government’s cloud computing.
“First off, there are all sorts of things you need to do to work with the federal government,” he said. “You need data centers in the right places and need to have certain security standards in place. AWS has been working on this the longest, they have the largest data-center footprint and the most advanced functionality. So it’s not like the federal government has a lot of great alternatives at this point.”
In addition, he noted, “there’s an elaborate government procurement process and a big bureaucracy in the agencies that are using cloud computing. It’s not like the president can come in and change the rules overnight.”
Another factor is that a lot of cloud projects are massive migrations that have been planned over a number of years. “It would be hard to rewind them and just start over,” Scholnick said. “Maybe in two to three years, once the Trump administration has really settled in, we could see a change.”
Shawn McCarthy, research director for IDC Government Insights, echoed Scholnick’s sentiments.
“The federal government is a very different place than private industry,” he said. “If someone makes you angry in private industry, you can always take your dollars and go elsewhere. In the federal government, there are very stringent guidelines for who can bid on a contract and how those contracts are awarded. So people — I’m not going to say Trump — can get in trouble by channeling business in a way that’s not appropriate.”
It could happen, however, that Trump, as a businessman who prides himself on savvy management, might carefully assess the return on investment and total cost of ownership of cloud computing versus conventional on-premises IT. “Having that business focus, he’s likely to say ‘This is better’ or not,” McCarthy said.
Despite a commanding lead, AWS isn’t the only public-cloud service to do business with the federal government. IBM in 2013 signed a ten-year, $1-billion deal to host the Interior Department’s computing. The same year, AWS beat out public-cloud rival IBM for a $600-million cloud-computing contract with the CIA. The National Security Administration has reportedly moved some of its IT infrastructure to AWS, as have the Defense Department and the National Geospatial-Intelligence Agency.
AWS offers a recorded webinar explaining “how to buy cloud computing for your agency” and gives the federal government its own dedicated data centers, collectively called the GovCloud (US) region. It’s designed to host sensitive data and regulated workloads and complies with U.S. government standards including the International Traffic in Arms Regulations and Federal Risk and Authorization Management Program. The region is operated by employees who are vetted “U.S. Persons,” and root account holders of AWS accounts must confirm they are U.S. Persons before being granted access credentials to the region.
Azure and Google could very well make incursions into AWS’s federal dominance, Scholnick said.
“We’ll see big changes over the next few years. Both Microsoft and Google have very credible cloud strategies. AWS and Google don’t know how to sell to the enterprise, whereas Microsoft has relations with every enterprise in the world. So Microsoft is in the pole position to really dominate the enterprise space over the next five years, and that’s great for their federal presence.”
Neither AWS nor Microsoft reveals the percentage it holds of the federal cloud computing business or the percentage of its revenue derived from federal cloud computing. Scholnick estimated that their respective market shares roughly reflect those for the market in general. Estimates put Amazon far in the lead in terms of infrastructure and platform as a service, with Microsoft second and Google a distant third.
AWS specifically courts the federal government, while Microsoft Azure promotes itself to all governments, not the federal government in particular.
IDC said in February that the federal government would spend about 8.5 percent of its IT budget, or just over $6.7 billion, for cloud computing in its FY16, up from only 5 percent in FY15. (The federal government’s FY17 began on October 1, 2016 and will end on September 30, 2017.)
Federal spending on infrastructure as a service increased in FY16 to $1.2 billion, from $1.1 billion the year before. Spending on software as a service increased to $702.9 million, from $700.7 million. Spending on platform as a service increased to $231.3 million, to $227.1 million. And “other” cloud spending, which wasn’t defined, totaled $4.6 billion in FY15, with an increase of $45.2 million in FY16.
The cloud will account for half of all federal IT spending by 2018, estimated IDC’s McCarthy.