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Microsoft, Amazon Sign $108M Cloud Contract with FAA

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Tech giants Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) are competitors in the cloud computing business. But both have now teamed up over the same.

How Come?

The Federal Aviation Administration (FAA) has awarded a $108 million, 10-year contract to IT consulting firm Computer Sciences Corporation and its team, which includes Amazon Web Services (AWS), Microsoft Azure and other strategic business partners. The deal could add up to $1 billion over the next decade.

Per the deal, the FAA wants them to deliver cost-efficient cloud services, data center consolidation and cloud migration capabilities. So the Computer Sciences team has to consolidate FAA data centers and migrate the agency’s data to the cloud-computing centers hosted by the two tech giants.

The FAA is basically trying to reduce its data centers and use the two clouds as much as it can as it moves to a hybrid cloud environment.

AWS’ security and conformity standards like FedRAMP, ITAR and SRG and FedRAMP JAB-approved Microsoft Azure will enable the FAA to recognize the benefits of agility, cost savings, flexibility and intelligent cloud.

Also, Microsoft’s Azure will work across applications, software, operating systems, and data to help the FAA in its mission of offering the safest and the most efficient aerospace system in the world.

Conclusion

Cloud computing is a flourishing area in the technology space. It is a procedure by which data or software is stored outside of a computer, but can be easily accessed anywhere/any time via the Internet. This process is gaining traction as it can cut IT costs of companies by removing expensive servers and trimming maintenance staff.

Research firm IDC projected last year that public IT cloud services spending will surge at a five-year CAGR of 22.8% to over $127 billion in 2018. The growth rate is six times higher than that of the broader IT market. In 2018, public IT cloud services will make up over 50% of the global software and storage development budgets.

Looking at the growth prospects, both Amazon and Microsoft are doing whatever they can to surpass their competitors including Google (GOOGL - Free Report) , IBM, Rackspace, Cisco and Oracle. They are looking to capitalize on the increasing demand for cloud-computing services, both in the private sector and among government agencies, which seek to streamline costs, consolidate data, boost data security and facilitate information sharing.

Microsoft’s cloud computing business is the fastest growing business within the company, so much so that management stated that the company is on track to deliver $20 billion in commercial cloud revenues by 2018.

As for Amazon, AWS is the leader in the space posting a profit of $391 million in the last reported quarter. The segment is on track to exceed the $6 billion revenue runrate it was targeting for the year and if growth rates continue to accelerate in the second half, it might hit $7 billion.

So the contract win will help the companies in achieving their goals.

While Microsoft has a Zacks Rank #3 (Hold), Amazon sports a Zacks Rank #1 (Strong Buy).




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