by Rob Enderle

IBM Will Beat Amazon Web Services Because Process Beats Product

News Analysis
Nov 15, 20138 mins
Cloud ComputingCloud ManagementDeveloper

IBM will eventually beat Amazon Web Services, writes columnist Rob Enderle, but not because AWS has an inferior product. In many ways, AWS is better than IBM's cloud offering. But Big Blue's experience with enterprise customers, not to mention the federal government, shows that great businesses processes often beat great products.

Last week I discussed why IBM will beat Amazon Web Services. I got a lot of supportive comments, while a few folks, mostly young, thought I really didn’t get why AWS is superior to IBM. I also got a note from Amazon PR offering me an opportunity to find out why AWS is superior.

This made me realize that I hadn’t clearly communicated that this isn’t about technology at all. It’s about understanding how to work with large government organizations — something IBM has been doing for nearly a century — and why process is more important than product.

This points to why the first White House CTO left the job and why, more recently, the Affordable Health Care Act website has been a disaster. The government didn’t use a company such as IBM, which knew the risks and had the resources to get the job done; it saved some money and got a train wreck instead.

I spent a bit of time auditing federal contracts in IBM, and some time looking at technology implementation. Let me tell you: Government IT is a very different world.

IBM Serves Its Clients Well; the Government Loves That

In IT, we often cite the old saying, “no one ever got fired from buying IBM.” While we might, at times, put another name in IBM’s place, IBM was the first company to have that designation — and has had it for the longest time.

I once did a win/loss review of a competitive bid between Microsoft and IBM that showcases how this came to be. It was a massive bid, with five company sites that all had to agree the chosen solution., IBM was nearly impossible to displace at two of the five sites; for each sales meeting, IBM reps made sure the secretaries got fresh flowers and their advocates had all the ammunition they needed to defend IBM. Microsoft focused on the three more flexible sites, and convinced them to go with Microsoft technology, but the two sites that IBM protected refused to move. IBM won the business despite being the higher bidder.

My review, which went to Microsoft’s executive management, said the approximately $1 million spent to win the business had been wasted, since IBM had effectively locked Microsoft out. (This earned me a nasty call from the Microsoft sales team leader.) To win, Microsoft would have had to break the IBM lock, but it was unwilling to invest in what was required to make that happen. Microsoft actually had the better technology, but IBM understood the customer’s strategic perspective.

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IBM understands how to advocate for and protect a client in a large, complex bid — and there’s nothing more complex than the federal government. IBM knows that secretaries and administrative assistants at would-be customers are critical to IBM’s intelligence and support, so the company treats them particularly well and makes sure its advocates are protected. (I could go on longer about why flowers are important, but those who understand this get it already, and I’d likely need to write a book for those who don’t.)

CIA’s AWS Decision Shows It May Not Have Learned From NSA

Let’s take a look Edward Snowden and the National Security Agency. As we know now, Snowden’s permissions exceeded his clearance, he leaked a ton of information that the Obama administration wishes had been kept secret, and no one connected to the NSA is safe from the federal government’s witch hunt.

By all reports, Snowden isn’t stupid or nuts, and he passed his background checks. He simply should never have seen the information he had access to, but he didn’t like what he saw and decided to blow the whistle. In the months since, the NSA has significantly changed its vetting procedures to assure this doesn’t happen again.

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You might assume that any branch of government that didn’t provide the same protections would have its CIO flogged on site. Yet the CIA recently agreed to use Amazon Web Services. Even using an entity that would remotely host any service from an any intelligence agency, given the Snowden and Manning incidents, might be seen as suicidal for whoever agreed to do it internally and for the firm that agreed to make it happen.

There’s a difference between companies that deal regularly with the federal government and those that don’t. The ones that do know that critical rules change and naturally factor those changes into protect the client and themselves. New companies think that isn’t part of their job and don’t realize that, when the crap hits the fan, even if it isn’t your fault, you’re still going to get covered in crap. Shows Danger of Going With Lowest Bid

We saw this play out with, the Affordable Health Care Act website. By all reports it was underfunded and rushed, while the contractor, CGI, had previously been fired by the Canadian government. But it was the lowest bidder.

CGI is supposed to be an experienced federal contractor, and even it couldn’t execute properly. CGI really wasn’t at fault — this project was mismanaged from the start — but the vendor is being tossed under the bus, frequently and with relish, because it didn’t protect the folks that decided to use it.

IBM does hundreds of government contracts — and how often is the company caught like this? Now how often is AWS in the news for outages that take out partners?

It isn’t that IBM doesn’t break. It’s just better at making sure that, when bad things happen, there are contingency plans to keep the folks who bet their jobs on IBM in those jobs.

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Had IBM run, it would have assured a successful result, even if it cost margin, because IBM knows that a failure would hurt its brand and its advocate. That’s why agencies are willing to pay a little more for IBM; the company assures that its customers’ decision-makers are protected. Go to any IBM customer event and you’ll see CIOs on stage singing IBM’s praises. It’s not about the technology; it’s about IBM covering the CIO’s collective backsides.

Perception Rules, Even If Reality Suggests Otherwise

Folks often forget that IBM was late to the ecommerce market but managed to own that segment two years before it had a viable product. It’s like Apple taking control of the smartphone market six months before it had a working product. Both firms understood that perception and reality are two very different things.

Right now, for example, IBM is working both inside and outside the federal government to make their case for why AWS shouldn’t have won the CIA’s business. (Were the roles reversed, IBM would be protecting the folks at the CIA who chose its technology; AWS, not so much.)

While the initial court fight went to Amazon, the Government Accountability Office has backed IBM. I expect the GAO to be critical of Amazon and ready with an I-told-you-so when there’s a hiccup.

Understand, though, that a mishandled bid process will now hound this project. That’s not the kind of fame that makes careers in the federal government. Sticking it to the GAO and IBM will have long-term implications for Amazon.

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In large companies and government entities, battles aren’t won or lost on technology, and they can drag on for years. Battles are won and lost with customer care, an understanding of internal politics and assurance that the folks who support you are protected.

Government Work Is in IBM’s DNA

IBM wins because big contracts are in its DNA. AWS is a brilliant offering, but it focuses on folks who don’t have to adhere to process and can bypass IT departments. For organizations such as the CIA, such activity sounds career-limiting, if not suicidal, and IBM knows how to drive that point home with a vengeance.

The screwy thing is that, if Amazon thinks about this, high-profile federal deals are counter-strategic. Amazon wins by largely going against the grain. That’s not the government way. Federal contracts often lose money, thanks to things like excessive documentation and “Most Favored Nations” clauses. A major problem with the CIA cloud would be a very public problem — one that would draw the ire of the GAO and possibly cause many state and municipal governments to ban AWS.

IBM, on the other hand, is entrenched in the government. It knows how to play the game. It knows how to cover its backside, and the backside of its customers, which is critical in government work. It knows all the antiquated government systems and can interoperate with them. Finally, it can actually make money doing this — this which is rarer than you’d think. That’s why IBM will win the war with Amazon Web Services.

Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Enderle writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.

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