Amazon vs. IBM: Big Blue meets match in battle for the cloud

Sun Jul 21, 2013 8:08am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Alistair Barr

SAN FRANCISCO (Reuters) - The tech industry maxim that "no one ever got fired for buying IBM" is a testament to how Big Blue has been the gold standard in computing services for decades.

But IBM faces an unlikely challenger in Amazon.com Inc, the e-commerce retail giant that is becoming a force in the booming business of cloud computing, even winning backing from America's top spy agency.

After years of being dismissed as a supplier of online computer services to startups and small businesses, Amazon Web Services (AWS) beat out International Business Machines this year to snag a $600 million contract with the Central Intelligence Agency.

IBM has successfully appealed its loss in the contest, stalling it for now. But the episode highlights how Amazon is evolving from an online retailer into a competitive provider of information technology and services to big companies, and government bodies.

That has helped push Amazon shares to a new record ahead of the company's second-quarter results due on Thursday. Amazon doesn't break out AWS results, but Wall Street believes it is expanding faster than the retail business and is more profitable.

"AWS is one of the main spokes of the bull case on Amazon shares," argues Ron Josey, an analyst at JMP Securities. "Software and IT investors are aware of and are trying to size AWS, and what the impact could be on their sector."

IBM is entrenched in corporations across the globe; and with one of the industry's biggest research budgets, is likely to remain so for some time. But it and other players like Oracle are taking note of AWS as cloud computing takes off.

Public cloud computing, which AWS pioneered in 2006, lets companies rent computing power, storage and other services from data centers shared with other customers - typically cheaper and more flexible than maintaining their own.   Continued...

 
A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008. REUTERS/Rick Wilking