Tech

Amazon and Microsoft will have to play nice to win the new Pentagon cloud contract that replaces the $10 billion JEDI deal

  • The Pentagon announced on Tuesday it cancelled the $10 billion JEDI deal awarded to Microsoft.
  • Analysts said the new multi-cloud deal means AWS and Microsoft need to play nice.
  • The end of the JEDI cloud is a win for AWS, but a blow for former big winner Microsoft.

On Tuesday, the Department of Defense ended the $10 billion Joint Enterprise Defense Infrastructure (JEDI) cloud contract that had been the source of a contentious and ongoing legal challenge from Amazon since Microsoft won it in late 2019.

A new project called the Joint Warfighter Cloud Capability, or JWCC, is replacing JEDI, and is deliberately targeting multiple vendors. In a release, DOD called Microsoft and Amazon Web Services the only cloud providers currently “capable of meeting the Department’s requirements,” though it said it would seek other vendors that could meet its needs, too. Officials said bidders would be named by October and winners decided by next spring.

The Pentagon’s new cloud deal is a significant step back from what JEDI once was: The project has evolved from a single-cloud, winner-take-all $10 billion deal over ten years, to a multi-cloud, five year contract, worth “billions of dollars,” according to Pentagon officials.

But to analysts and experts, Tuesday’s decision was hardly surprising: Since first announcing JEDI, the Pentagon has been pushed towards multi-cloud and dealt with the headache of a drawn-out legal battle with former President Trump at its heart. “The DOD seemed powerless to overcome the repeated protests,” Alex Rossino, an advisory research analyst at Deltek, told Insider.

Shortly after Microsoft’s victory in October 2019, Amazon filed suit against the government, alleging Trump unfairly tipped the scales in Microsoft’s favor to deny Amazon the victory. Amazon’s motion for discovery in the proceedings may have involved deposing senior defense officials and Trump, and the Pentagon strongly hinted the situation could lead it to abandon JEDI — issuing a memo to Congress in January that said the delays were a risk to national security.

At the time, Bloomberg Government federal market analyst Chris Cornillie told Insider there were “a lot of folks in the Department who wouldn’t mind starting fresh,” especially with new Biden administration staff onboard.

The Pentagon has also learned since JEDI’s inception in 2017 that a multi-cloud approach is the more popular and secure way to utilize cloud, Cornille said. Other departments, such as Homeland Security, have already taken the tack of letting agencies decide the cloud provider they prefer.

While the JEDI cancellation is considered a win for Amazon, whose legal tactics helped pressure DOD into considering alternatives, it is also a blow to former winner Microsoft, as it “went from a lottery deal to a court nightmare,” according to Wedbush Securities managing director Dan Ives.

In a blog post about the decision, Microsoft President Toni Townes-Whitley (who will depart the company in September) said “we respect and accept DoD’s decision” and “we’re confident that we’ll continue to be successful as the DoD selects partners for new work.”

Amazon and Microsoft will have to play nicely with each other as the Pentagon has made clear it is utilizing multiple cloud providers, analysts said. Other software providers will also need to make sure their products can be utilized in both Microsoft and Amazon’s cloud environments: “Many companies make their solutions compatible with one or the other based on enterprise partnerships,” Rossino said. “Now they’ll need to engineer solutions to work on both Azure and AWS.”

But the more difficult and “complicating factor,” Rossino said, is between AWS and Microsoft, and will require a high level of cooperation and openness.

“The clouds AWS and Microsoft develop for DOD will probably be constructed differently than clouds used for commercial purposes,” he told Insider. “The new JWCC will need to incorporate the flexibility that DOD says it needs.”

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