Is Amazon Winning the Cloud Wars?

Joseph is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Editor's Note: This article has been amended to better reflect the contract specifics with the CIA.

Cloud computing will be a huge and growing industry going forward. The rise of the cloud will provide storage and access to massive amounts of data. Besides just storage, this data will also be interpreted and used efficiently to better industry performance and connect devices. Amazon (NASDAQ: AMZN) is emerging as a leader in cloud computing, but will they keep their lead?

We like you more, but we have to give the other guy a chance...

Amazon recently (thought they) won a $600 million private cloud contract with the CIA, and then International Business Machines (NYSE: IBM) made a big deal about the whole affair by filing a formal protest. While it would have only seemed natural for IBM to score a huge, bureaucratic private cloud deal automatically, it was Amazon's name that surprisingly popped up. While IBM's estimate worked out to be about $94 million a year over five years easily beat out Amazon’s estimated offer that would equate to about $148 million per year over an estimated five year period, a partially-redacted report prepared by the US Government Accountability Office made it clear the CIA felt that

"While IBM's proposal offered an evaluated [deleted] price advantage over 5 years, the [source selection authority] concluded that this advantage was offset by Amazon’s superior technical solution."

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Score card source provided by The Register

So Amazon was seen as simply better--at least according to the CIA. Who would have thought that the more classical federal contractor would have lost out to the largest public cloud infrastructure provider? Especially for a deal involving a private-cloud, something which Amazon had at one point in time indicated that it was opposed to.

An industrial victory...

The 'Industrial Internet' is a concept that General Electric (NYSE: GE) has been talking about for some time. Apparently as much as $500 million in investment money will be coming from GE to develop it, according to CEO Jeff Immelt. GE will need to utilize cloud computing to make their Industrial Internet work and tap into the newly created market, especially if analysts are correct in predicting that it could be worth hundreds of billions of dollars over the next ten years. Bill Ruh, vice president for GE's global software center, commented on his company's plans on utilizing the cloud:

"It is only in the ability to quickly analyze, understand, and put machine-based data to work in real-time that points us to a society that benefits from the promise of big data."

GE will inevitably sync all of its various components (everything from healthcare to energy) with data-- which will provide the company with everything from data captured from sensors on turbines to real-time industrial analytics. Industrial data in general is supposed to grow at double the rate of all other big data segments over the next ten years, according to Reuters. GE is getting in early and helping to pioneer it, and guess what? Amazon is too.

Amazon will be providing the first online cloud service for General Electric's Industrial Internet. The recently announced partnership will also build upon already established GE partnerships with IT companies such as Pivotal and consultant Accenture Plc.

The bottom line

Amazon Web Services (AWS) scored a big victory with the CIA until it was snatched away and recalled because of IBM. The CIA did, however, seem to believe that AWS was far superior to IBM's offerings--even with a larger price tag. If Amazon does finally get the deal finalized, they will be monetizing their cloud services in a big way. It seems likely that Amazon will trump IBM at this point as well. 

The Industrial Internet will also be a huge player in a rapidly expanding market. GE utilizing AWS for their Industrial Internet is a huge win for Amazon. GE is a massive conglomerate that, according to BusinessWire, is looking to "turn big data into real-time insight" as well as "benefit major global industries including aviation, healthcare, energy production and distribution, transportation and manufacturing. Combined with the new GE Predictivity(TM) services and technologies available today, airlines, railroads, hospitals and utilities can manage and operate critical machines such as jet engines and gas turbines in the cloud - running businesses better by increasing productivity and reducing waste and downtime."

GE has huge plans to move industry into the cloud, and Amazon will be the company helping them do it. The Industrial Internet is the future, and Amazon owns the cloud surrounding it. Amazon is also dethroning current tech kings like IBM and making major moves that not too long ago didn't seem like moves a company like Amazon would make.

Beating out IBM for a finalized CIA deal would be another huge victory for the company, but the GE deal alone is a huge accomplishment. Amazon is aggressively moving into the top spot in cloud, and monetizing this success should provide increasing revenues and much needed earnings for the company in the future.

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Joseph Harry owns shares of International Business Machines. and General Electric Company. The Motley Fool recommends The Motley Fool owns shares of, General Electric Company, and International Business Machines.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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