Cloud Wars: Battle for the Pentagon

Cloud computing is one of the most lucrative markets out there right now. Almost every technology organisation will be using some form of cloud computing to host their products and technical infrastructure, and it makes very little sense to build these cloud services in-house. Instead, we can make use of the hundreds and thousands of products available from a huge range of cloud providers, hosted by the likes of Amazon (AWS), Microsoft (Azure) and Google (GCP).

Here’s a few examples of big names using cloud computing services:

  • Netflix – AWS
  • Twitch – AWS
  • ASOS – Azure
  • Pixar – Azure
  • Snapchat – GCP
  • Twitter – GCP

Cloud computing has a whole range of advantages, including being flexible, secure and reliable.

Whilst we regularly see the commercial use of cloud computing, it’s not only Tech companies that need to host their services and data in the cloud. The U.S. Pentagon has been on the lookout for the winner of a cloud services contract, known as the Joint Enterprise Defence Infrastructure Cloud, or JEDI for short. In short, the Pentagon needs to modernise its technology systems and needs the help of Big Tech.

The JEDI Deal

The JEDI deal is valued at $10 billion over 10 years (with some fine-print details), and was set to be awarded in September 2018 to only one cloud provider. In August 2018, this decision of only awarding one cloud provider the contract was protested by Oracle, arguing that the Pentagon would be locked into a legacy contract for a decade or more. This was denied by the Department of Defence in November 2018, stating that a single-award approach was in the government’s best interests (and they obviously knew that Oracle are just dwarfed by other companies).

Google pulled out of the bidding war very early on, stating that the company’s new ethical guidelines did not align with the JEDI contract… A little rich, to say the least, after recent news of Project Nightingale coming out. We’ll leave that for another blog.

In April 2019, Amazon and Microsoft were selected to continue competing for the contract, leaving Oracle and IBM out of the competition (and understandably so if they’re looking to modernise their tech).

AWS owns 32.6% of the cloud market share. It therefore comes as no surprise that over half of Amazon’s total income comes from AWS (having ended Q3 2019 with $9 billion in revenue)! Azure is slowly catching up and holds 16.9% of the market share, although their growth rate is gradually slowing down, alike to AWS.

AWS were seen as clear front-runners for the JEDI contract… And along came Donald Trump.

Trump vs. Bezos

There has been an ongoing feud between Trump and Jeff Bezos (Amazon CEO) for several years now. A few outstanding events:

  • Back in December 2015, Trump criticised Amazon for not paying fair taxes (a fair point but another extremely rich comment), and the fire mostly seems to come down to the fact that Bezos inadvertently owns the Washington Post through an investment company, a media outlet that has often criticised Trump since he was a Republican candidate.

  • Bezos, in reply, offered to reserve a seat for Trump on the Blue Origin rocket with the hashtag, #sendDonaldtospace. A classic return.

  • Trump then went on to threaten Amazon in February 2016: “If I become president, oh do they have problems. They’re going to have such problems.”

It’s fair to say the pair have had their history, and it seems as though this history has potentially played its political part in interfering in the JEDI contract.

Microsoft announced as winners

In July 2019, Trump said that his administration was looking closely at Amazon’s bid on the JEDI contract after “getting complaints from other technology companies”. And lo and behold, in October 2019, the Department of Defence announced that Microsoft were the contract winners.

Whilst I absolutely do not doubt Microsoft’s ability to uphold this contract, and it’s fair to say that Microsoft’s overall services are technically larger when you consider their Office 365 productivity suite, but it is extremely surprising to many to see Amazon as the runners-up in this race. What may have been a deciding reason (and who knows when we’ll find out) is that Microsoft already has a 5-year contract with DoD Intelligence to provide “innovative enterprise services”, as well as a Windows 10 contract won in 2016.

However, this doesn’t mean the end of this absolutely manic bidding war. Just a few days ago, Amazon formally announced that they were challenging this decision as they believe that politics got in the way of a fair contracting process.

Is a $10 billion contract really worth all this trouble if Amazon earned $9 billion in one quarter?

So the contract is for 10 years (supposedly), working out at a worth of $1 billion a year. The government can also use one of its out clauses, and the deal is actually only guaranteed for two years, and then there’s a few 2-year / 3-year options afterwards (a good decision in light of how much technology can change in a few years).

What it comes down to is that it’s not just the Pentagon contract that is the desired fruit amongst the giants; if a technology company can modernise the Department of Defence’s technology infrastructure, then there’s a huge chance that the same can be done for other areas of the government. The JEDI contract is simply a door-opener.

Who knows what’s next in this ridiculous saga. I, for one, am genuinely looking forward to the day that Trump tries to talk about serverless architecture. “Serverless is yuge! Believe me, we’re gonna spend a lot of money on it. Millions and billions. You’ll see!”