Microsoft, Amazon and other Seattle-based companies that offer cloud services may take a hit if the federal government shutdown lingers. With hundreds of thousands of federal workers on furlough, the need for cloud solutions may prove to be less-than-critical.
Typically, the government, as well as private sector customers, pay for cloud services on a monthly basis or with an annual subscription. If those customers terminate their agreements early, providers lose expected revenue, even though they’ll often collect a penalty fee. Customers on monthly payment plans don’t pay for leaving.
Microsoft and Amazon have a number of government contracts. In fact, Microsoft touted its cloud-based Office 365 to 250 public sector CIOs earlier this year, according to a report in the Puget Sound Business Journal. Among the agencies using Office 365 is the Department of Agriculture.
Amazon.com, meanwhile, has its GovCloud service, which provides government agencies with the ability to house sensitive workloads in the cloud while meeting regulatory and compliance requirements. Its customers include the Department of Defense.
Unlike Microsoft Office 365, Amazon customers pay based on usage. Consequently, Amazon potentially faces a greater impact from the shutdown than its Redmond competitor.
Of course, the shutdown won’t only impact cloud service providers in Washington State. Any cloud company contracting the federal government is sure to be concerned.