Microsoft was able to close a new deal with the Pentagon, beating Amazon for a $10-billion contract.
Over the past year, the Pentagon has allowed tech companies to bid for the "Joint Enterprise Defense Infrastructure," which uses the familiar acronym JEDI. The JEDI initiative sees the Pentagon seeking to replace their old computer networks with a single cloud system. The New York Times described it as "one of the largest federal information technology contracts in history."
Microsoft and Amazon were the two companies that the Pentagon considered most suitable for the project, making them finalists of the bidding process last April. Google was also a bidder early on but dropped out in October 2019 because of its "AI principles."
A Major Upset
Microsoft's win is considered a major upset, especially since Amazon Web Services (AWS) has been the obvious leader in the cloud computing market. The AWS also has a higher data certification from the military, reports The Washington Post.
Amazon showed complete surprise by the Pentagon's decision, stating that a "detailed assessment on the comparative offerings" would "clearly lead to a different conclusion." Amazon is currently assessing its options, and they could appeal to the decision.
The awarding affected the stocks of the company. Microsoft's shares were up 2.5% after the news broke out, while Amazon's dipped by 0.98%.
Trump tipping the scales
Amazon's standing with US President Donald Trump hasn't been flattering in the past few years, and this may have influenced the Pentagon's decision to award the contract to Microsoft. For example, Trump has been criticizing Amazon CEO Jeff Bezos ever since Trump took office at the White House.
Last July, Trump even considered stepping in on the bidding process, intervening against a possible awarding of the contract to Amazon. Trump cites complaints from competing companies that the contract "wasn't competitively bid."
Meanwhile, Amazon is free to contest the decision, on account of Trump's possible hand on the bidding process.
All's fair in love and war
The Pentagon maintains that all offers were "treated fairly and evaluated consistent with the solicitation's stated evaluation criteria." The Pentagon also stated that they may award additional contracts on other planned cloud services, along with supplementary services for the cloud, such as migration and implementation.
However, concerns have been raised on the fairness of awarding such a big project to just one entity. This makes it hard for other companies to jump in on future projects, as the foundation in place might not be compatible.
Microsoft's moral crisis
Even though Microsoft landed big fish with the JEDI contract, it doesn't seem like everyone involved would be happy about it. For example, Microsoft employees openly objected to the company's close relations with the military, fearing that the company's Hololens technology could be used for military training and weaponry.
Microsoft's lucrative deal with the Pentagon may bring in lots of money, but the gains the company will get will likely have far-reaching consequences into the future. So far, the book isn't closed on this chapter. With an impending appeal from Amazon and possible negative feedback from their employees, Microsoft might have to still jump through a couple of hoops before moving on to the project.