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Pentagon JEDI Cloud Contract: Microsoft Win Faces Scrutiny, Milestone Challenges

Microsoft has won a Pentagon cloud contract dubbed JEDI, beating Amazon Web Services (AWS) and other government cloud services providers (CSPs) for a deal that could be worth up to $10 billion over 10 years. Still, only a tiny portion of the JEDI cloud contract — which faces intense scrutiny — is guaranteed. Microsoft and potential subcontractors will need to hit milestones throughout the contract to earn all that money.

JEDI, short for Joint Enterprise Defense Infrastructure, spans commercial Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) to support U.S. Department of Defense (DoD) business and mission operations.

AWS appeared stunned by the JEDI award decision, which surfaced October 25. Both IBM Cloud and Oracle Cloud also pursued the early bidding process. The DoD issued an RFI (request for information) roughly two years ago. The bidding process was fraught with controversy. Oracle, in particular, alleged that a winner-take-all deal risked locking the Pentagon into proprietary cloud services.

Pentagon JEDI Cloud Contract Statement: We Are Multi-Vendor

The Pentagon, in an October 25 statement about the JEDI award decision, subtly touched on the multi-vendor concerns. The statement emphasized that Microsoft and its subcontractors will need to hit specific project milestones to maintain the long-term contract. For instance, the base contract period is two years with only a $1 million guarantee.  The department projects that user adoption will drive an estimated $210 million of spending during the two-year base period. The DoD will “rigorously review contract performance prior to the exercise of any options,” the statement said.

Also, the government emphasized that more vendors would have the opportunity to win additional cloud services deals.

In part, the statement read:

“Over the last two years the Department of Defense has awarded more than $11 billion across 10 separate cloud contracts. As we continue to execute the DOD Cloud Strategy, additional contracts are planned for both cloud services and complementary migration and integration solutions necessary to achieve effective cloud adoption.

Today the Department of Defense has taken another step forward in the implementation of our Cloud Strategy with the award of an enterprise general-purpose cloud contract to Microsoft.  This continues our strategy of a multi-vendor, multi-cloud environment as the department’s needs are diverse and cannot be met by any single supplier. This contract will address critical and urgent unmet warfighter requirements for modern cloud infrastructure at all three classification levels delivered out to the tactical edge.”

Pentagon JEDI Cloud Contract Statement: Bidding Process Was Fair

It’s a safe bet Amazon will closely investigate how the DoD selected Microsoft over AWS. But the Department of Defense essentially made a pro-active statement in a bid to mitigate such debate. The government stated:

“The acquisition process was conducted in accordance with applicable laws and regulations. The process cleared review by the GAO and Court of Federal Claims.  At the outset the competition included four different offerors.  All offerors were treated fairly and evaluated consistently with the solicitation’s stated evaluation criteria. Prior to the award, the department conferred with the DOD Inspector General, which informed the decision to proceed.”

Microsoft Azure vs. Amazon AWS: Slowing Cloud Services Growth?

Meanwhile, the Pentagon JEDI cloud contract arrives at a critical time for major cloud services providers. Although the public cloud market remains red hot, Microsoft Azure revenue grew “only” 59 percent in the company’s most recent quarter — a slowing growth rate compared to earlier quarters.

No doubt, plenty of IT vendors envy that growth rate — and the Pentagon JEDI cloud contract win.

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