Documents reveal why Ottawa can’t stop using Amazon Web Services

OTTAWA — A review of Ottawa’s business relationship with Amazon—triggered by the closure of seven Quebec warehouses—found that disentangling the government from the company’s web services arm would take years, cost taxpayers and likely result in contracts going to other hyperscalers.

“A move to an alternate cloud-infrastructure provider would be costly and time- and labour-intensive,” the department said in its three-page review prepared for then-innovation minister Françcois-Philippe Champagne, dated Feb. 21. The Logic obtained a partially redacted copy of the document through an access to information request.

The review was part of a testy government response to Amazon’s decision in January to close its Quebec fulfillment centres and sorting facilities, shortly after it lost a legal challenge against workers’ efforts to unionize at a warehouse in Laval. Amazon called the closures, which resulted in more than 4,500 layoffs at the company and third-party logistics firms, an operational decision.

The day after the announcement, Champagne fired off a letter to the company’s CEO, Andy Jassy, voicing dismay about the move and saying it raised questions about Amazon’s commitment to Canada.

“You will undoubtedly understand that such action calls for a review of the business relationship that exists between Amazon and the government of Canada,” he wrote. The procurement minister and Quebec lieutenant in federal cabinet at the time, Jean-Yves Duclos, told The Logic the results of that review could deter the government from doing business with Amazon in the future.

The department followed through with that analysis, but its findings suggest the government’s leverage against Amazon was limited. Officials concluded the government is “very reliant” on Amazon Web Services (AWS), an Amazon subsidiary and the world’s biggest cloud infrastructure provider.

AWS is one of eight suppliers with agreements to provide cloud services to the government. Ottawa has more than 600 contracts with the company, and since 2020, has awarded it more than $220 million in cloud contracts, the review found. That makes AWS the second-largest cloud vendor to the government, though it’s a drop in the bucket compared to the US$33 billion the firm reported Thursday in its third quarter earnings. AWS saw a 20-per-cent year-over-year sales growth this quarter, the largest since 2022, which the company credits to a boom in AI adoption and development.

Within Innovation Science and Economic Development Canada (ISED), the cloud infrastructure provided by AWS includes several proprietary solutions for the Canadian Intellectual Property Office, the Competition Bureau of Canada and Shared Travel Services, the portal that federal employees use to book and expense work travel. 

Switching to a different provider for those services would take two or three years and require multiple teams of four to six full-time employees, the review found. “Alternative service providers with the infrastructure needed to handle ISED applications would almost certainly be other similar hyperscalers,” the analysis said.

Neither Industry Minister Mélanie Joly, who is also the minister for economic development in Quebec, nor her department provided a statement before The Logic’s deadline, and it’s not clear what, if any, action the government took as a result of the review. 

In the months that followed Champagne’s letter to Jassy, however, the federal government awarded more than $9.7 million in new contracts to AWS, according to the government’s public disclosure records. The largest and most recent is a $1.9-million agreement with the Department of National Defence for the rental of computer equipment. The contract, dated June 9, was sole-sourced.

AWS declined to comment on whether the company’s relationship with the government has changed since the review. “We’re committed to providing best in class services to organizations across Canada that enhance the lives of Canadian citizens every day,” spokesperson Kim Gradek said in an emailed statement.

While the layoffs resulting from Amazon’s decision to abandon its Quebec warehouses drew angry reactions in the province, the review pointed to 46,000 other jobs the company generates in Canada, including at corporate hubs in Toronto and Vancouver, as well as 70 operations and logistics sites across the country. It also noted the company’s “significant investment” in Canadian film and television productions.