 Good morning. I'm Kristen Velletti and welcome to Newsdesk on Silicon Engle TV for Wednesday, March 20, 2013. What does the CIA want with Amazon? Join us now to answer this question is Wikibon senior analyst Stu Miniman. Good morning, Stu. Good morning. Happy first day of spring. Thank you. The CIA has agreed to a cloud computing contract with electronics commerce giant Amazon worth up to 600 million over 10 years. Now, Amazon already has a public cloud for government as part of AWS named Gov cloud. So why is the CIA engagement a big deal, Stu? Yeah. Well, first of all, Kristen, of course, since this is the CIA, realize everything that we're talking about is a rumor. So we don't expect to have any real confirmation. So everybody's reporting on it. There was a government blog that kind of broke this news. But as you said, Amazon was already had the public cloud offering for the government agencies. But now this is actually a private cloud and not a virtual private cloud, which is the infrastructure as a service that Amazon offers on Amazon's data centers. But this would actually be built in government facilities on government infrastructure using Amazon's software. So this is, as far as we know, a first of this nature. And as you said, it's a big deal. I mean, you know, 600 million over 10 years is nothing to sneeze at, especially if you look at it was estimated that the AWS revenue was a little bit under $2 billion for last year in 2012. And it could be upwards of $3 billion this year. Now, Stu, what will AWS help the intelligence agency with that wasn't possible under the CIA's previous cloud efforts? Yeah. Well, as I said, so first of all, Amazon had the offering that they had a private cloud, that Gov cloud that you mentioned, where we could put government services and it was cordoned off from everything else. So they already had what was really considered a secure public cloud, especially made for the government. And there was the virtual private clouds that could be done on that site. But really, the whole focus here is this is going to be done, you know, not on Amazon's infrastructure, but on the government's infrastructure. And as the government had a real push towards cloud, it really brings up this discussion as to what is the most cost effective and most secure. Is it the public cloud or is it the private cloud? And, you know, the federal government is a huge chunk of business for, you know, not only what Amazon's doing, but all of the traditional infrastructure players, you know, HP, IBM, and all of the like have lots of services and lots of solutions that they put into the government channel. So Amazon is cracking that business in the private cloud environment. So it's sizeable news that has everybody buzzing about. So speaking of secure, what's the security angle on this whole deal? Yeah, so, you know, one of the big challenges is even if a solution is cordoned off from everything else, or if it's a multi-tenant environment, you know, what is the security and how secure can it be? So the CIA obviously wants to keep their information, you know, utterly secure. I worked on plenty of federal government deals over the years and, you know, usually they won't even tell you, you know, what location it's going to be. They're very tight-lipped as to what they can tell you about the deployment. So, you know, with the CIA bringing this in-house in a private cloud, but using Amazon means that there is a, you know, high level of trust in what Amazon is doing. They feel that the software is secure. And that's a big deal. So, you know, Amazon, while they are a big player in cloud, they are not, you know, until recently thought of really on the same level of a, you know, Cisco and IBM or some of the big companies that the government sets, you know, their contracts with. So the solution, you know, absolutely has to be secure. And the government is sending some clear signals that Amazon's solution is mature enough to be considered secure for CIA environments. Amazon is already the revenue leader in public cloud. Do you see the steel as sort of the first step towards Amazon's push into private data centers? Yeah. So four years ago, Amazon had launched their virtual private clouds. And as we said, this is the first time that we know of Amazon putting on premise, you know, an Amazon based solution. There are partners such as Eucalyptus that help customers kind of take the Amazon solution and integrate it with their kind of on premise data center environment. And there are Amazon like solutions out there. But I really don't expect Amazon to put a huge presence into existing data centers. If you look at what Amazon has, its strength is really the scale of their environment. And they're really low margins. And it requires a lot of touch to be able to get into the premise environments. Talk to Amazon actually a couple of weeks ago, and their push into the enterprise is really going to be done through the channel. But all of these solutions are really to be able to do infrastructures of service or other types of solutions that are not going to be on the customer premise. So I don't think this is a harbinger for Amazon to put deep into the private cloud. They will be doing more the private cloud like solutions that are still done, as I said, in service provider and Amazon's data centers. Stu, Amazon's been making a lot of recent moves. Is it too late for OpenStack to get off the ground and compete? Yeah, so it's funny. Dave Vellante said recently that, you know, we think of Amazon as kind of the 800 pound gorilla. But as a market leader, they're not a gorilla. They're moving really fast. They're a cheetah in this space. If you look at how Amazon is releasing new features, you know, people are getting updates, you know, if not daily at least weekly with new functionality that's coming in. And OpenStack is lagging. So obviously, Rackspace has a huge push with OpenStack. They have a nice private cloud that they're offering, which is going to get into customers data centers and allow customers to really operationalize their environment. So that's a good place that I think OpenStack can push into. But if you look at the service providers and public cloud offerings, OpenStack has not matured. If you look at their release cycles, they're releasing updates every six months while Amazon is much more flexible in getting things in there. So OpenStack is behind and they're not catching up right now. Amazon is continuing to grow and it's going to be, you know, tough for the IBMs and HPs of the world to be able to push OpenStack and catch up to Amazon. But that doesn't mean that there aren't lots of customers that are going to want to choose their existing infrastructure providers. We talked recently about how VMware is really trying to push more into the service provider market in the public or hybrid cloud offerings. So, you know, Amazon definitely has a strong lead and they're going to have competition, but it's going to be tough to catch Amazon as they have razor thin margins that nobody else really can meet. And they are moving fast. Well, Steve, great chatting with you. Thanks for taking the time with us this morning. Thank you. And still to come on Newsdesk, who's fallen victim to a hack attack on Xbox Live? But first, John Casaretto will join us to talk about those other cell phone manufacturers.