Government shutdown could impact bottom line for cloud providers

Many infrastructure-as-a-service providers have talked big about their qualifications to serve government agencies. Rather than boosting revenue though, targeting federal agencies could now result in an unexpected hit for some.

I haven’t found a service provider willing to say much about the impact they’re expecting. If the shutdown goes on long enough, we might hear about it during quarterly earnings reports.

For now, a spokeswoman for Verizon’s Terremark service, which has a data center in D.C. that caters to government users, said that much of what it does for federal agencies is deemed essential and so it doesn’t expect much of a downside.

However, there are some federal websites that have gone dark and the providers of services for those sites, including Terremark, could lose out. For instance, has been shut down. When and launched, Terremark had the contract to host those sites. is still running. If Terremark is still behind (I’ve asked), it could lose some income during the shutdown.

But that might depend on the contract itself. Some large contracts are paid annually and thus might not be impacted by the shutdown. However, some agencies might try to renegotiate contracts so that they don’t have to pay for services during the shutdown, according to a PC World story.

I also asked Microsoft and Amazon Web Services, both of which have touted their government cloud offerings, about what they expect to lose and both companies declined to comment.

Beyond infrastructure-as-a-service, providers of other cloud services could also take a hit. For instance, government contractors have won a number of large deals to provide Gmail to agencies including the Department of the Interior, the GSA and NOAA. I’m seeing some signs that federal workers that are being furloughed won’t be able to access their email – but that could mean they aren’t allowed to access it, not that the service is shut down because their agency can’t pay. I asked Google and the company declined to comment.

Beyond current contracts for cloud services, the shutdown could slow down new contracts from being signed. Barb Darrow over at GigaOm has the story.

Read more of Nancy Gohring's "To the Cloud" blog and follow the latest IT news at ITworld. Follow Nancy on Twitter at @ngohring and on Google+. For the latest IT news, analysis and how-tos, follow ITworld on Twitter and Facebook.

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