Microsoft defeats Amazon in bitter battle for $10bn Pentagon cloud contract
The US Department of Defence has awarded its $10bn (£7.8bn) cloud computing contract to Microsoft, snubbing Amazon after more than a year of competition.
The online shopping giant had been considered a front-runner for one of the world’s most sensitive and coveted military contract, which will last for ten years and cover both administrative and combat operations.
But on Friday night the Pentagon said that “Project Jedi”, which stands for Joint Enterprise Defense Infrastructure, would be awarded to the Seattle-based Microsoft, which is one of the “big three” cloud computing firms alongside Amazon and Google.
“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,” said a spokesman.
The decision puts an end to a bitter feud between Amazon and competing cloud providers, who have accused the US government of intentionally favouring Amazon and stifling competition.
It is also likely to please Donald Trump, who has made Amazon a personal target as part of a feud with its owner, Jeff Bezos, and who recently promised to scrutinise the bidding process “closely” after receiving complaints from “great companies”.
That intervention may provide a pretext for Amazon to challenge the decision, just as rival cloud providers such as Oracle and IBM protested the Pentagon’s earlier decision to rely on one single vendor as they were progressively frozen of the process.
Yet the victory may also prove contentious for Microsoft, given the controversy which has alighted on all American tech firms’ relationships with the US military and US law enforcement.
Google had already dropped out last year due to a wave of employee protests, saying that working for the military was in conflict with its principles.
The project will make it easier for different branches of the US military to share data securely across the world, and has been described as crucial for dragging its infrastructure into the modern era.
Dan Ives, an analyst at Wedbush Securities, said he “fully expected” Amazon to challenge the decision in court, but called it a “game changer” for Microsoft’s cloud business that could unlock up to $100bn in further future deals.
“Microsoft and [chief executive Satya] Nadella are popping the champagne tonight in Redmond, while Bezos and Amazon are likely shocked they lost the World Series of cloud deals,” he said.
“This will have a ripple effect for the company’s cloud business for years to come… we believe this deal adds at least $10 per share to Microsoft’s stock.”
Microsoft’s shares jumped by around 3.5pc in after-hours trading on Friday.
The contract is not related to the US military’s secret attempts to explore the defence implications of new-age concepts such as telekineses, auras and the paranormal, which was also named Project Jedi.