Yesterday, the Pentagon announced two finalists in the $10 billion, decade-long JEDI cloud contract process — and Oracle was not one of them. In spite of lawsuits, official protests and even back-channel complaining to the president, the two finalists are Microsoft and Amazon.
“After evaluating all of the proposals received, the Department of Defense has made a competitive range determination for the Joint Enterprise Defense Infrastructure Cloud request for proposals, in accordance with all applicable laws and regulations. The two companies within the competitive range will participate further in the procurement process,” Elissa Smith, DoD spokesperson for Public Affairs Operations told TechCrunch. She added that those two finalists were in fact Microsoft and Amazon Web Services (AWS, the cloud computing arm of Amazon).
This contract procurement process has caught the attention of the cloud computing market for a number of reasons. For starters, it’s a large amount of money, but perhaps the biggest reason it had cloud companies going nuts was that it is a winner-take-all proposition.
It is important to keep in mind that whether it’s Microsoft or Amazon that is ultimately chosen for this contract, the winner may never see $10 billion, and it may not last 10 years, because there are a number of points where the DoD could back out — but the idea of a single winner has been irksome for participants in the process from the start.
Over the course of the last year, Google dropped out of the running, while IBM and Oracle have been complaining to anyone who will listen that the contract unfairly favored Amazon. Others have questioned the wisdom of even going with a single-vendor approach. Even at $10 billion, an astronomical sum to be sure, we have pointed out that in the scheme of the cloud business, it’s not all that much money — but there is more at stake here than money.
There is a belief here that the winner could have an upper hand in other government contracts, that this is an entrée into a much bigger pot of money. After all, if you are building the cloud for the Department of Defense and preparing it for a modern approach to computing in a highly secure way, you would be in a pretty good position to argue for other contracts with similar requirements.
In the end, in spite of the protests of the other companies involved, the Pentagon probably got this right. The two finalists are the most qualified to carry out the contract’s requirements. They are the top two cloud infrastructure vendors on the market, although Microsoft is far behind with around 13 or 14 percent market share. Amazon is far head, with around 33 percent, according to several companies that track such things.
Microsoft in particular has tools and resources that would be very appealing, especially Azure Stack — a mini private version of Azure, that you can stand up anywhere, an approach that would have great appeal to the military — but both companies have experience with government contracts, and both bring strengths and weaknesses to the table. It will undoubtedly be a tough decision.
In February, the contract drama took yet another turn when the department reported it was investigating new evidence of conflict of interest by a former Amazon employee who was involved in the RFP process for a time before returning to the company. Smith reports that the department found no such conflict, but there could be some ethical violations they are looking into.
“The department’s investigation has determined that there is no adverse impact on the integrity of the acquisition process. However, the investigation also uncovered potential ethical violations, which have been further referred to DOD IG,” Smith explained.
The DoD is supposed to announce the winner this month, but the drama has continued non-stop.