INSUBCONTINENT EXCLUSIVE:
The DoD JEDI contract saga came to a thrilling conclusion on Friday afternoon, appropriately enough, with one final plot twist
The presumptive favorite, Amazon, did not win, stunning many, including likely the company itself
In the end, Microsoft took home the $10 billion prize.
This contract was filled with drama from the beginning, given the amount of money
involved, the length of the contract, the winner-take-all nature of the deal — and the politics
We can&t forget the politics
This was Washington after all, and Jeff Bezos does own The Washington Post.
Then there was Oracle fury throughout the procurement process
The president got involved in August
The current defense secretary recused himself on Wednesday, two days before the decision came down
It was all just so much drama, even the final decision itself, handed down late Friday afternoon — but it unclear if this is the end or
just another twist in this ongoing tale.
In a victory over Amazon, Microsoft wins $10B Pentagon JEDI cloud contract
Some perspective on
$10 billion
Before we get too crazy about Microsoft getting a $10 billion, 10-year contract, consider that Amazon earned $9 billion last
quarter alone in cloud revenue
Microsoft reported $33 billion last quarter in total revenue
It reported around $11 billion in cloud revenue
Synergy Research pegs the current cloud infrastructure market at well over $100 billion annually (and growing).
What we have here is a
contract that worth a billion a year
What more, it possible it might not even be worth that much if the government uses one of its out clauses
The deal is actually initially guaranteed for just two years
Then there are a couple of three-year options, with a final two-year option at the end if it gets that far.
The DOD recognized that with the
unique nature of this contract, going with a single vendor, it wanted to keep its options open should the tech world shift suddenly under
It didn&t want to be inextricably tied to one company for a decade if that company was suddenly disrupted by someone else
Given the shifting sands of technology, that part of the strategy was a wise one.
Putting the Pentagon $10B JEDI cloud contract into
perspective
Where the value lies
If the value of this deal was not the contract itself, it begs the question, why did everyone want it so
badly? The $10 billion JEDI deal was simply a point of entree
If you could modernize the DoD infrastructure, the argument goes, chances are you could do the same for other areas of the government
It could open the door for Microsoft for a much more lucrative government cloud business.
But it not as though Microsoft didn&t already have
a lucrative cloud business
In 2016, for example, the company signed a deal worth almost a billion dollars to help move the entire department to Windows 10
Amazon too, has had its share of government contracts, famously landing the $600 million to build the CIA private cloud.
But given all the
attention to this deal, it always felt a little different from your standard government contract
Just the fact the DoD used a Star Wars reference for the project acronym drew more attention to the project from the start
Therefore, there was some prestige for the winner of this deal, and Microsoft gets bragging rights this morning, while Amazon is left to
ponder what the heck happened
As for other companies like Oracle, who knows how they&re feeling about this outcome.
Microsoft shows off government cloud services with
JEDI due date imminent
Hell hath no fury like Oracle scorned
Ah yes, Oracle; this tale would not be complete without discussing the rage
of Oracle throughout the JEDI RFP process
Even before the RFP process started, they were complaining about the procurement process
Co-CEO Safra Catz had dinner with the president to complain that the contract process wasn&t fair (not fair!)
Then it tried complaining to the Government Accountability Office
They found no issue with the process.
They went to court
The judge dismissed their claims that involved both the procurement process and that a former Amazon employee, who was hired by the DoD, was
involved in the process of creating the RFP
They claimed that the former employee was proof that the deal was tilted toward Amazon
The judge disagreed and dismissed their complaints.
What Oracle could never admit was that it simply didn&t have the same cloud chops as
Microsoft and Amazon, the two finalists
It couldn&t be that they were late to the cloud or had a fraction of the market share that Amazon and Microsoft had
It had to be the process or that someone was boxing them out.
Government denies Oracle protest of $10B Pentagon JEDI cloud RFP
What
Microsoft brings to the table
Outside of the politics of this decision (which we will get to shortly), Microsoft brought to the table some
experience and tooling that certainly gave it some advantage in the selection process
Until we see the reasons for the selections, it hard to know exactly why the DoD chose Microsoft, but we know a few things.
First of all
there are the existing contracts with the DoD, including the aforementioned Windows 10 contract and a five-year $1.76 billion contract with
DoD Intelligence to provide &innovative enterprise services& to the DoD.
Then there is Azure Stack, a portable private cloud stack that the
military could stand up anywhere
It could have great utility for missions in the field when communicating with a cloud server could be problematic.
Microsoft continues to
build government security credentials ahead of JEDI decision
Fool if you think it over
So that that right? The decision has been made and
Amazon will go home and lick its wounds
Microsoft gets bragging rights and we&re good
Actually, this might not be where it ends at all.
Amazon, for instance, could point to Jim Mattis& book where he wrote that the president
told the then Defense Secretary to &screw Bezos out of that $10 billion contract.& Mattis says he refused, saying he would go by the book,
but it certainly leaves the door open to a conflict question.
It also worth pointing out that Jeff Bezos owns The Washington Post and the
president isn&t exactly in love with that particular publication
In fact, this week, the White House canceled its subscription and encouraged other government agencies to do so as well.
Then there is the
matter of current Defense Secretary Mark Espers suddenly recusing himself last Wednesday afternoon based on a minor point that one of his
adult children works at IBM (in a non-cloud consulting job)
He claimed he wanted to remove any hint of conflict of interest, but at this point in the process, it was down to Microsoft and Amazon
IBM wasn&t even involved.
If Amazon wanted to protest this decision, it seems it would have much more solid ground to do so than Oracle ever
An Amazon spokesperson would only say that the company &was keeping its options open.&
The bottom line is a decision has been made, at least
for now, but this process has been rife with controversy from the start, just by the design of the project, so it wouldn&t be surprising to
see Amazon take some protest action of its own
It seems oddly appropriate.
Why the Pentagon $10 billion JEDI deal has cloud companies going nuts
