Early this month an obscure Virginia-based company, REAN Cloud, announced a nearly $1 billion deal to provide cloud computing services for the Defense Department, reports the NextGov website. REAN doesn’t build the data centers — it helps customers migrate to commercial cloud environments. Which cloud environments? Amazon Web Services’s cloud environments.
There’s likely to be more business where that came from, as the Defense Department migrates applications, services and data to the commercial cloud. Writes NextGov:
Led by the Defense Innovation Unit Experimental, which acts as a liaison between the Pentagon and industry, the Defense Department is targeting non-traditional suppliers to rapidly provide cutting-edge commercial technologies that address national security and military challenges.
And unlike traditional purchases under the Federal Acquisition Regulation, which can take months or often years to award, [Other Transaction Authorities, OTAs] can be issued in a matter of weeks.
“What we’re seeing is a strong shift in the pendulum of those who’d like to replace regular contracting processes with OTAs,” said Andrew Phillip Hunter, director of the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies.
Right now REAN is working most closely with Amazon, although it is building relationships with Microsoft, Google, Oracle, IBM, General Dynamics and other major players in the cloud. To get this business, cloud providers have to play by the rules that the federal government establishes for procurement. And if they want that business, as a practical matter, they have to maintain presence in the Washington metropolitan area where they can interact with the Pentagon’s procurement administrators — and perhaps influence the making of the rules.
The federal government is potentially the biggest customer in the world for cloud services, and now it is opening up to private competition. Every cloud provider who wants to compete for that business will have to beef up their presence in the Washington region. Serving the Pentagon will require a lot more than building data centers, most of which will end up in Northern Virginia, but developing a lot of back-end programs — perhaps the kind of work that would be performed at Amazon’s HQ2. It doesn’t make sense to serve the federal cloud market in Boston, Denver, Austin, Toronto or other locales frequently mentioned as potential Amazon favorites. It has to be done in the Washington metro — the closer to the Pentagon and other Defense Department markets, the better.
Knowing Amazon’s voracious appetite for subsidies and other kinds of special treatment, I don’t know whether to treat Amazon’s second headquarters as a blessing or a curse. And I’m not venturing any predictions — I’m sure Amazon has many other considerations than the ones described here. But I wouldn’t be be one bit surprised if the company lands in Northern Virginia.
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