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As Trump Bash's Amazon, the government relies on it



But the company has quietly cultivated a large customer in its own backyard: the federal government.

In recent years, the Seattle-based company has captured much of the business to help the government move computing services from traditional mainframes to the cloud, a business in which Amazon is the world leader.

This extraordinary transformation has included providing cloud services in Washington's bureaucracy, from the Department of Homeland Security to the Smithsonian Institution. It has also made the US government a top Amazon customer.

The company does not give details, but research firm GBH Insights predicts that Amazon's government business will grow to $ 2.8 billion in 2018 and $ 4.6 billion by 2019, less than $ 300 million in 201

5. Other corporate analysts say these forecasts are optimistic but not unbelievable.

An even greater price is emerging: Amazon is seeking a 10-year deal with the Department of Defense that could be worth $ 10 billion.

Mr. Trump's attacks on Amazon, which indicated that the company has not paid its fair share of taxes and damaged the post office, have not mentioned Amazon's affairs of state.

"Amazon just is not on a balanced playing field," said Trump on Thursday. "They have tremendous lobbying, in addition to the Washington Post … What they have is a very uneven playing field, look at the sales tax situation." He added, "We'll take a pretty serious look at it." [19659003] Analysts say they see no reason to doubt that Amazon will continue to evolve as a major contractor in Washington The President's criticism has distorted the stock price and added uncertainty to the equation.

"The overriding question is whether there is a risk for Amazon because Trump seems to have it for the company," said

Tom Forte,

an analyst at D.A. Davidson & Co.

Mr. Forte added that it was difficult for the administration to relocate the government's business elsewhere due to the low number of competitors and the scope of Amazon's cloud network data storage centers spread across the country and across the globe to relocate elsewhere.

Press Secretary of the White House

Sarah Sanders

said Wednesday that Mr. Trump "is not involved in the process" to award the Defense Department contract.

Amazon's competitors have taken the moment to slow down the company's run into government business. At the dinner with Mr. Trump on Tuesday in the White House,

oracle
Corp.

Co-CEO,

Safra Catz,

complained that the Pentagon's process gave Amazon an advantage.

Amazon's growing government business coincides with a rapid increase in its presence in Washington. In 2010, the company employed eight lobbyists and spent $ 2.1 million on lobbying federal officials, according to data compiled by the Independent Center for Responsive Politics. Last year, Amazon spent $ 13 million and employed 95 lobbyists. Only six other companies reported more lobbying in 2017.

Amazon has also made an aggressive effort to hire former government officials and executives from the company's competitors to assist them in controlling procurement rules. In 2010, the company ceased

Teresa Carlson,

who led federal sales

Microsoft
Corp.

Scott Renda

joined the company from the Obama administration in 2014, where he led the development of cloud computing.

Amazon's most important early victory in 2013 was a contract to store data for intelligence agencies, including the Central Intelligence Agency. Amazon has joined the International Business Machines Corp. challenged to maintain the contract.

The intelligence community's willingness to give Amazon its tight-knit data was an important signal to other government agencies. Amid a general craze for using cloud computing to improve effectiveness, the CIA imprimatur suggested that Amazon Web Services, the cloud computing department known as AWS, was a safe choice, these observers said.

Later that year, the Interior Department awarded a $ 10 billion contract to 10 vendors, half of which had partnered with Amazon.

In 2014, Amazon benefited from another Obama-era computer initiative: 18F, a former Silicon Valley developer consulting firm that advises government agencies on software and computer procurement.

One of 18F's first projects was cloud.gov, which helps government agencies like the Federal Election Commission to move some data to the cloud. The government chose to run Cloud.gov on AWS 'GovCloud service, which makes it easier for government agencies to purchase other Amazon services.

Over time, Amazon has received additional government security approvals that allow it to store increasingly sensitive categories of files. Amazon is the only cloud company that has received approval for the government's most confidential information.

These security approvals have allowed Amazon to gain an advantage over its competitors, analysts say. For example, in January, the US Transportation Command, which manages transportation for the Pentagon, said it was ready to award AWS an order without a competitive bid. The company was the only "responsible source" for the business because it had been approved to manage government rankings up to "Secret," the command said.

Amazon Upgraded to 2,300 Government Offices in the US and Overseas in 2017 From about 100 in 2011, according to the company, Wall Street analysts were at a conference.

Government sales have helped AWS become the biggest source of revenue for Amazon. Last year, the company's cloud computing business posted $ 4.3 billion in operating revenue, $ 17 billion in revenue, compared to $ 2.8 billion in operating profit and $ 106 billion in North American retail sales. Analysts estimate that 10% of it comes from government contracts.

According to GBH Insights, over the next five years, Amazon is likely to receive the lion's share of $ 20 billion in federal cloud computing projects. The Washington region is one of the finalists for Amazon's new "second headquarters".

The next big break could come with the planned $ 10 billion Pentagon move to the cloud. The proposed contract, called the JEDI, would require a cloud infrastructure that could handle unclassified material and data classified as classified or top secret data, defense department documents said.

Amazon's competitors fear that the Pentagon will award the contract to a single vendor rather than multiple vendors who consider it preferable, as this provides the redundancy redundancy required.

Competitors such as Oracle and Microsoft question the security of Amazon's cloud architecture. They also argue that Amazon could use its dominance to prevent other technology companies from gaining government business.

A Pentagon spokesman said the department "held a full and open competition with" no favorites. "

Ted Mann at ted.mann@wsj.com and Brody Mullins at brody.mullins@wsj.com


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