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IBM Wins Deal to Supply Cloud Computing to California Agencies

CalCloud Launch Event
Government Operation Agency Undersecretary Tony Perez, left, and International Business Machines Corp. fellow Kerrie Holley stand for a photograph during a launch event for CalCloud, in Sacramento on July 24, 2014. Source: IBM, Steve Yeater via Bloomberg

July 24 (Bloomberg) -- International Business Machines Corp. will supply cloud services to the government of California, letting more than 400 state and local agencies save money by pooling their computing resources.

IBM will store data and software on remote servers in a service called CalCloud, available to all state and local government bodies, the company said today in a statement. The arrangement lets agencies pay only for the computing workload they need.

IBM is counting on cloud computing for growth after nine straight quarters of declining revenue, dragged down by weak demand for hardware and falling sales in markets like China. Cloud technology has been a conundrum for the Armonk, New York-based company because it can reduce demand for hardware, since companies rent computing power rather than assembling their own data centers.

The company competes for cloud-computing clients with Oracle Corp., Microsoft Corp. and Amazon.com Inc., to which IBM lost a $600 million contract with the U.S. Central Intelligence Agency last year.

Because government customers have additional data-security needs, they’ve been slower than corporations in moving to the cloud because it means surrendering some control over managing the technology. IBM said it designed CalCloud to comply with the requirements of the Internal Revenue Service, Social Security and the Health Insurance Portability and Accountability Act.

“CalCloud is an important step towards providing faster and more cost-effective IT services to California state departments and ultimately to the citizens of California,” Marybel Batjer, secretary of the Government Operations Agency, said in the statement.

To contact the reporter on this story: Alex Barinka in New York at abarinka2@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net Crayton Harrison, John Lear

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