The battle between International Business Machines Corp. IBM -0.43% andAmazon.com Inc. AMZN -0.65% over a $600 million contract to set up a cloud-computing system for the Central Intelligence Agency shows the growing importance of intelligence-agency business for technology companies.
The competition comes amid extraordinary disclosures of secret government-surveillance programs and shows that even in the rarified world of intelligence agencies, companies selling Internet-based cloud-computing services—like Amazon—are challenging the position of traditional technology vendors.
Companies like IBM have long supplied the U.S. military and intelligence services with computers, software and the know-how to operate them. Now, new contenders like Amazon are getting into the act, drawn by a fresh source of revenue as business spending on technology remains sluggish and by the imprimatur of providing services to clients that have the highest security standards.
"The federal government opportunity is enormous," said Adam Selipsky, a vice president at Amazon Web Services, the company's cloud-computing unit. "We believe that will be a very significant business for Amazon Web Services going forward."
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