Microsoft wins latest battle to build U.S. war cloud

The U.S. military has its head firmly in the clouds—computing-wise—a fact that is increasingly profitable for select American tech company.

In the war to win lucrative U.S. military cloud computing contracts, Amazon just lost the big battle for the hotly-contested $10 billion JEDI contract—to Microsoft.

The massive Joint Enterprise Defense Infrastructure contract (JEDI, for short) is part of the U.S. military’s ongoing effort to shift an enormous amount of its computing needs into the so-called “cloud”, a.k.a., computer servers hosted over the Internet.

Moving to cloud computing allows the Pentagon to concentrate exclusively on its data and leave all the complex issues of computer hardware and scaling to experienced third party providers.

The awarding of JEDI—to “provide enterprise level, commercial Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) to support Department of Defense business and mission operations”—was announced October 25, by the United States Department of Defence:

“Microsoft Corporation, Redmond, Washington, has been awarded a firm-fixed-price, indefinite-delivery/indefinite-quantity contract with a ceiling value of $10,000,000,000 over a period of 10 years, if all options are exercised.”

Microsoft took a whole day to release a statement crowing about the win that makes it “an integral partner in DoD’s overall mission cloud strategy”.

Amazon Web Services, however, waited a full three weeks before announcing, on November 14, that it would formally challenge the Pentagon’s decision to award the military cloud computing contract to Microsoft.

Amazon has reportedly filed its complaint with the US Court of Federal Claims, citing “Numerous aspects of the JEDI evaluation process contained clear deficiencies, errors, and unmistakable bias.”

The irony here is that, back in 2018, the JEDI contract was seen by many as having been tailor-made by the DoD specifically to be won by Amazon—long the world’s top provider of large-scale cloud computing services.

However, chances of Amazon just being handed the contract on a silver platter were delivered a blow in August, when U.S. President Trump suddenly ordered the DoD to put the contract on hold and investigate charges of favouritism toward…the perceived favourite.

At the same time, there was Microsoft—having built up its own enterprise cloud computing division, called Microsoft Azure, to the point where it can apparently compete on an equal footing with Amazon for the biggest of cloud contracts.

Aspiring cloud competitor and U.S. defence contractor

As I detailed in June, Microsoft is aggressively courting (and winning) not just cloud computing business but also United States military contracts.

The combined value of all of Microsoft-related U.S. Department of Defense (DoD) contracts (including third party resellers) in 2018 was over US$4.59 billion, or 4.16 percent of Microsoft’s $110 billion revenue for the year.

DoD contract-wise, Microsoft has done even better this year. (156 percent better, in fact.)

In addition to October’s award of the enormous JEDI contract, Microsoft was awarded three other big DoD contracts in 2019 (in January, April and June) worth a combined US$1,792,665,600.

Including JEDI, the total value of DoD contracts awarded to Microsoft in 2019 equals over $11.79 billion.

Few conscientious objectors

This move on the part of Microsoft toward (dare I say it) warmongering has met with resistance from the company’s own employees, if not civilian consumers.

In February a group of Microsoft workers sent a letter to top company executives demanding their company drop a 2018 contract worth $479 million to supply the U.S. military with tens of thousands of Microsoft’s HoloLens augmented reality headset, for use in both in training and actual combat.

Microsoft CEO Satya Nadella (one of the executive the letter was addressed to) went on CNN to defend the HoloLens military deal as a “principled decision” not to deny technology to “institutions that we have elected in democracies to protect the freedoms we enjoy.”

The next big one on the horizon

the next major U.S. military cloud computing contract on the bidding calendar is the one reportedly being planned by the U.S. Central Intelligence Agency (CIA)—currently dubbed the Commercial Cloud Enterprise, or C2E.

This will be an expansion of the 10 years-worth of commercial cloud services that the CIA contracted for from Amazon Web Services (AWS) in 2013, at a reported cost of $600 million.

While the C2E cloud computing contract is expected to be worth “tens of billions” of dollars it will not be a single-vendor contract, like both the CIA’s 2013 contract with AWS and the Pentagon’s 2019 contract with Microsoft. Rather, it is being planned as a multi-stage, multi-vendor affair.

As reported variously at the beginning of October, C2E has now reached a pre-solicitation stage. AWS, Google and Microsoft are all expected to be in the running for contracts, which will likely be awarded in 2021. Click the image to enlarge it.