Microsoft beats Amazon for Pentagon's $10bn contract

It is now expected Amazon to challenge the contract decision

Photo: Reuters Microsoft CEO Satya Narayana Nadella speaking at a live Microsoft event.

The Pentagon announced on Friday it is awarding a $10bn cloud computing contract to Microsoft, following a highly scrutinised bidding process which Amazon had been favored to win. The 10-year Joint Enterprise Defence Infrastructure Cloud ( better known as JEDI) contract is part of a broader digital modernisation of the Pentagon meant to make it more technologically agile.

Specifically, a goal of JEDI is to give the military better access to data and the cloud from battlefields and other remote locations

"The National Defence Strategy dictates that we must improve the speed and effectiveness with which we develop and deploy modernised technical capabilities to our women and men in uniform," Defence Department Chief Information Officer Dana Deasy said in a release.

"This award is an important step in execution of the Digital Modernisation Strategy," he added.

In response, Amazon said late Friday it was "surprised about this conclusion." The company added that a “detailed assessment purely on the comparative offerings” would “clearly lead to a different conclusion,” according to the statement. 

"AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion," the company said.

Initially, it was Amazon that was considered the lead contender to provide technology for JEDI, with its Amazon Web Services (AWS) dominating the cloud computing arena and the company already providing classified servers for other government outfits including the CIA. But then the contracting process had been mired in conflict of interest allegations, even drawing the attention of President Donald Trump, who has publicly taken swipes at Amazon and its founder Jeff Bezos. As a result Trump in August said his administration was reviewing Amazon’s bid after receiving "complaining from different companies like Microsoft and Oracle and IBM" over the JEDI bidding process.

They were particularly concerned over whether internet giants, who say they want to make the world better, should be involved in the defence industry. The tactic, nevertheless, represented a major switch from the way the Redmond-based company built its empire selling packaged software to computer users. Microsoft however has defended its interest in military contracts, saying at one point, "All of us who live in this country depend on its strong defense." But many of its employees have urged it to drop out.

"Many Microsoft employees don't believe that what we build should be used for waging war," company staffers wrote in an anonymous op-ed posted a year ago on Medium, which said it had verified the authenticity of the piece.

"The contract is massive in scope and shrouded in secrecy, which makes it nearly impossible to know what we as workers would be building," they stressed.

Amazon chief Jeff Bezos had also defended the company's bid, saying it was important to support US defence efforts, even if it is unpopular.

It is now expected Amazon to challenge the Pentagon contract decision in court but until then it is giving a major lift to Microsoft's cloud business in a market where $1trn is expected to be spent in the coming decade.

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