The U.S. Department of Defense last Friday awarded its 10-year, $10 billion JEDI contract to Microsoft over Amazon, the latter of which was viewed as the frontrunner.
The Joint Enterprise Defense Infrastructure (JEDI) cloud contract has been a hotly contested and acrimonious process among Amazon Web Services (AWS), Microsoft, IBM and Oracle. The JEDI contract was supposed to be awarded in September of last year, but some of the competing companies contended that Amazon had an unfair advantage. The process was slowed after several investigations and legal battles.
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Due to his son's work at IBM, U.S. Secretary of Defense Mark Esper removed himself from the review of the Pentagon's $10 billion JEDI cloud-computing contract last week.
"This award is the conclusion of a process that began with the release of the first RFI to industry nearly two years ago, the Department of Defense said on its website. "Throughout that time, the department’s focus never wavered from the need to support our warfighters with this essential capability."
While the JEDI contract was originally going to be awarded to just one of the cloud vendors, the Department of Defense said on its website that "additional contracting opportunities are anticipated."
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President Trump, who has long been critical of Amazon founder Jeff Bezos and of Bezos-owned The Washington Post, openly interjected himself into contract process in July when he said to reporters that he "never had something where more people are complaining,” according to a story by CNBC.
In a new book, the speech writer for former Defense Secretary Jim Mattis wrote that Trump called Mattis in the summer of 2018, and directed him to "screw Amazon" out of a chance to bid on the contract, according to the website Task and Purpose. Mattis declined to do that, according to the book.
Aside from being the cloud market leader, AWS was considered the front-runner because it had built cloud services for the Central Intelligence Agency prior to Trump's reported interest in the contract.
“AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly led to a different conclusion,” Drew Herdener, a spokesman for Amazon, said. “We remain deeply committed to continuing to innovate for the new digital battlefield where security, efficiency, resiliency and scalability of resources can be the difference between success and failure.”
While Microsoft was announced as the winner, it's a safe bet that Amazon will be contesting that decision with Government Accountability Office until the protest window closes, based on Trump's hostility to Bezos.
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Even with the contract in hand, Microsoft will still trail AWS by a significant margin in the worldwide market. According to Synergy Research Group, Amazon has around 33.5% of the global market share in the cloud sector while Microsoft has around 16.5%.
Microsoft shares were up as much as 3.5% as trading opened Monday morning in New York from a close of $140.73 on Friday. If it maintains the gain throughout the day, it will set a new record.