By Therese Poletti
Published: July 7, 2021
In the years it took to name Microsoft as cloud-computing partner for Defense Department, the multi-cloud approach became popular, and Pentagon now appears to aim in that direction after canceling previous award
The Defense Department on Tuesday canceled a large cloud contract previously awarded to Microsoft Corp. GETTY IMAGES/ISTOCKPHOTO
The abrupt cancellation of a large and important cloud-computing defense contract that took years to complete is actually good news for the country.
Since the earliest requests for proposal years ago for the Joint Enterprise Defense Infrastructure contract, or JEDI, the Defense Department’s approach was criticized by analysts and tech companies. The biggest concerns were that the contract called for a single-source provider and spanned more than a decade, a deal that would have locked the Pentagon in with one company and without redundancy plans as the tech ecosystem sprinted toward so-called multi-cloud deals.
So when the Pentagon canceled the 10-year, $10 billion contract in a surprise announcement Tuesday, only Microsoft Corp. MSFT, +0.82% really had a reason to complain. Microsoft’s victory in October 2019 was immediately clouded by a prolonged political battle and accusations by Amazon.com Inc. AMZN, +0.57% of favoritism by former President Donald Trump, who made it obvious on Twitter that he was no fan of then-CEO Jeff Bezos. The JEDI process was rife with lawsuits early on, as companies such as Oracle Corp. ORCL, +3.62% and IBM Corp. IBM, +0.75% complained about the lack of redundancy, and that the JEDI contract was going against standard industry practices.
For more: Therese on The early JEDI War and Amazon’s lawsuit
The Defense Department seems prepared to correct those issues, stating Tuesday that the new contract process will seek to create a cloud would be multi-vendor. It plans to solicit proposals from Amazon Web Services, or AWS, and Microsoft, because they are the only cloud providers that can meet its criteria.
“In the end, the government’s best interests are served by at least having some competition for service, innovation, redundancy, compliance, regulatory and security enhancements,” said Daniel Newman, principal analyst, Futurum Research. “I have long felt that the JEDI contract would be subject to intense post-award scrutiny and the most likely outcome would be a shared contract where the federal government would wind up utilizing the services of both AWS and Microsoft.”
Newman said he does not see the new contract as a 50/50 split, but that the new, shorter-term contract could be split approximately 30/70 between Amazon and Microsoft, respectively.
“If Microsoft gets more, it will be tied to the more comprehensive software suite,” he predicted.
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While fast advances in technology can be impossible to meld with government procurement processes that take years, there are other benefits from calling a do-over on the past few years of work. Bernstein Research analyst Mark Moerdler said in a note that he believed Microsoft had benefited from the long delays.
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“During complex contracting processes (especially ones that are delayed many times), time does not stand still and government agencies have been moving along adding cloud capabilities,” he wrote. Microsoft has been expanding products it supports and its own partnerships with companies like Oracle and VMware Inc. VMW, +0.80%, and added functionality and capabilities to its own products, he said. “They have also likely been capturing cloud contacts and increasing utilization within the U.S. government.”
While the name of the new multi-vendor contract, Joint Warfighter Cloud Capability, may not be as cool as the former JEDI acronym, the new plans are more appropriate for a modern cloud-computing scenario. And that will actually be a good thing for everyone involved.
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