Amazon Web Services (AWS) will offer up to US$1 billion in discounts to US federal agencies for cloud services, modernization, and training through 2028.

The General Services Administration (GSA), which manages government procurement, announced the deal on August 7, 2025.

The agreement is intended to help federal agencies accelerate cloud migration and adopt AI tools.

The discounts include credits for AWS cloud infrastructure, modernization programs, training, and incentives for direct partnerships.

The GSA recently made similar deals with Oracle and OpenAI, including a US$1 ChatGPT access offer for agencies over the next year.

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🔗 Source: CNBC

🧠 Food for thought

1️⃣ Government cloud migration remains slow despite decade-long head start

The federal government launched its “Cloud First Policy” in December 2010 under Federal CIO Vivek Kundra, yet many agencies are still transitioning to cloud services as of 20171.

This persistent delay highlights why AWS’s $1 billion discount package extends through 2028—agencies need significant financial incentives to accelerate what should have been completed years ago.

The complexity becomes evident when examining spending patterns: government cloud spending reached $37.1 billion in 2016, but dropped 16% in 2017 after “completion of easier transitions”1.

This suggests that remaining migrations involve more challenging legacy systems and complex compliance requirements, making large-scale discount programs like AWS’s deal important for pushing through the final, difficult phases of modernization.

2️⃣ Aggressive discounting has become the new normal in federal cloud competition

AWS’s billion-dollar discount program follows an industry trend of deep price cuts to secure government business.

Oracle recently offered a 71% discount on Workspace contracts to retain federal clients, with timing strategically aligned to the end of the federal fiscal year when agencies rush to spend remaining budgets2.

This pricing pressure reflects how valuable long-term federal contracts have become—securing one agency often facilitates expansion to others within the federal ecosystem2.

For agencies, this competitive environment creates opportunities to negotiate better pricing and service packages through consolidated procurement vehicles.

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