IBM Cedes Victory to Amazon in CIA Cloud Kerfuffle

It seemed likely the war between IBM (IBM) and Amazon (AMZN) Web Services over the CIA cloud contract would have at least one more major battle, but in a surprise move, Big Blue has laid down arms and gone home.

The $600 million deal to build a private cloud infrastructure for the intelligence agency became a disaster when IBM disputed the CIA’s awarding of the contract to AWS. In turn, the CIA did an about-face and turned the cloud contract over to IBM in the summer. The story continued after AWS took the case to court, leading a judge to rule in favor of Amazon. The contract flip-flopped again, back into the hands of its original winner.

Although it looked like IBM might up the stakes, the most recent news out of Big Blue is it has given up the fight. On Oct. 29, IBM withdrew from the bid entirely, leaving the lucrative project to AWS.

That leaves the contract in the hands of AWS, and is likely the end of the story.

But now IBM and AWS have squared off in the legal arena over a cloud contract. It couldn’t have left a good taste in either of their proverbial mouths. And a few unkind words were said during the fight. For the two companies who are competing directly for major contracts, especially in the government sector, they have wounds to heal and renewed sales efforts to focus on.

The CIA cloud contract debacle should be a reminder for future government department and agencies to tread carefully in how they review and award contracts. This case has been high profile, and there’s certainly opportunity for such a legal battle to occur again if proper precautions are not taken.