As US plans to cut $ 10 billion cloud contract, software vendors ready to rush
More than a year after the U.S. Department of Defense awarded a $ 10 billion cloud contract to Microsoft Corp., a protracted legal battle and a change of administration threatens to shatter it, sparking a scramble. ‘or smaller offers for more software vendors and experts. say.
The unit of Amazon.com Inc., Amazon Web Services Inc., Google Cloud of Alphabet Inc., and Oracle Corp. were among the cloud providers who initially showed interest when defense chiefs asked for bids for the Joint Enterprise Defense Infrastructure project in 2019. While Microsoft eventually expressed interest. won the bid, AWS took legal action to stop work on the contract while challenging the award process, which Amazon said was tainted with undue political influence.
The Pentagon has repeatedly disputed these allegations, with the Defense Department spokesman Russell Goemaere said in a May 13 statement to the S&P Global Market Information according to which Defense officials “have consistently stated in all documents filed in court and in all public communications that the allegation of undue influence is unsubstantiated.”
Even setting political allegations aside, software analysts and government contract experts said the JEDI project, which aimed to put a single cloud service provider in charge of remote hosting and distribution of information to fighters, had suffered from perception problems early on.
“You have the two biggest cloud providers in the federal government, and if you choose one, you know the other is going to mount a large-scale effort to dismantle it,” said Michael Hettinger, founding director of the Hettinger strategy. Group, a consulting firm in government relations and federal contracts. “It would be easier from the point of view of perception [for the Defense Department] to say “let’s do multiple rewards”. “
AWS is widely regarded the market leader in cloud computing, although Microsoft’s cloud unit reports more quarterly revenue than AWS due to Microsoft’s inclusion of server products in its Intelligence Cloud division, which also includes sales of Microsoft’s Azure cloud services. AWS reported $ 13.50 billion in revenue in its most recent reporting period, while Microsoft’s Intelligence Cloud division reported $ 15.12 billion in revenue.
Pentagon officials are now considering withdrawing the JEDI project altogether, after months of delays and continued legal challenges, The Wall Street Journal reported on May 10.
Pentagon Press Secretary John Kirby said in a May 10 press briefing that the Department of Defense “will assess where we stand in relation to the ongoing litigation and determine what is the best way forward for the department”.
If the Pentagon abandons the current contract, the Defense Department could reiterate work as part of a multi-award project in which multiple cloud providers, such as Amazon, Microsoft and International Business Machines Corp., can win a game, Hettinger said. This would likely add millions to everyone’s quarterly revenues and help boost IBM’s profile in the cloud market, where it currently lags behind both Microsoft and AWS.
In an emailed statement to Market Intelligence, a Microsoft spokesperson did not comment on the status of the current cloud contract, but said it remains ready to meet the Defense Department’s cloud needs.
“We agree with the United States Department of Defense and Justice that prolonged litigation is harmful and has delayed the transmission of this technology to our military personnel who need it,” the spokesperson said. . “We are ready to assist the Department of Defense with JEDI and other critical DoD projects.”
AWS could not be reached for comment at time of posting.
Jean Atelsek, research analyst for the Cloud Transformation and Digital Economy unit at S&P Global Market Intelligence Research Unit 451, said that one of the main advantages of the cloud is that it enables people to operate systems in a disaggregated fashion, allowing for more agile updates. The digital needs of an organization are changing.
“Different capabilities can be upgraded and evolved independently, without having to overhaul the entire system,” said Atelsek. “This is probably one of the reasons the DoD is suing the cloud.”
But she noted that there are potential drawbacks to using a single cloud provider.
“Other cloud providers may have more appropriate or even better services for a particular use case, but DoD may not be able to profit as easily by sticking to a single cloud,” said Atelsek. “On the other hand, a cloud provider is likely to grant preferential business terms if it helps to gain an exclusive relationship.”
John Weiler, executive director of the IT Acquisition Advisory Council, said a win-win acquisition contract “creates an unnecessary monopoly, and monopolists are never incentivized to give better value.” the IT Acquisition Advisory Council is a public-private partnership of concerned citizens, public interest groups, private sector sponsors and government partners that advises government agencies on making sound acquisition decisions and stakeholders. industry on best business practices.
Weiler pointed to a precedent allowing multiple cloud players to work on a single contract to the Central Intelligence Agency, which in 2020 awarded part of its C2E Commercial Cloud Enterprise contract to AWS, Microsoft, Google, Oracle and IBM.
“In less than a year, the CIA was able to embrace the JEDI concept and do it right,” Weiler said. “You are eliminating the whole protest nightmare by awarding a multi-cloud award to those who are viable.”
Having multiple vendors working on a cloud contract is also beneficial from a national security perspective, he said, claiming that Awarding a large contract to a specific company makes that company an attractive target for cybercriminals.
If JEDI is scrapped, Weiler believes that all of the original bidders will likely return to the table, with Amazon, Microsoft, Google, Oracle and Dell Technologies Inc. among the most likely interested parties.
“All the bidders who have been successful with C2E already have their proposals ready,” he said.