Pentagon Jedi

Microsoft awarded $10 Billion JEDI Contract

Microsoft shares surge after company scores award

Microsoft has won a $10 billion Pentagon contract for cloud computing services. Amazon s considering a challenge to the award of the contract to Microsoft’s much smaller Azure business, citing President Donald Trump’s interference in the bidding process.

Amazon had been widely considered the front-runner because of its superior size and previous cloud contract with the Central Intelligence Agency.

Meantime, Microsoft employees have protested involvement in the contract, known as the Joint Enterprise Defense Infrastructure, or JEDI, intended to bring U.S. military technology into the modern era.

Microsoft has said it will continue to pursue government and military work, despite objections from some employees. The company will also be involved in bids for a second large Defense contract that involves cloud-based email and collaboration software.

Microsoft says workers can request to be moved to other projects. But that is no simple matter in huge cloud efforts: Sales, marketing, engineering and data center operations can involve tens of thousands of workers.

No matter the potential problems, the contract remains a major win for one of the world’s most valuable companies — showing investors and potential customers that it is a strong alternative to Amazon Web Services, which has been for years considered the default choice.

In the past year, Azure has racked up some large deals from Kroger Co. to AT&T Inc., but a customer as big, demanding and secretive as the Pentagon will go a long way toward cementing Azure’s reputation as a serious contender.

Amazon, which won a lucrative cloud contract with the Central Intelligence Agency in 2013, was seen to have the upper hand in the competition.

“We’re surprised about this conclusion,” said Douglas Stone, an Amazon spokesman.

He added that the company was:

“the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion. We remain deeply committed to continuing to innovate for the new digital battlefield.”

Amazon Web Services, the retail giant’s cloud computing arm, has a wide lead in the business of selling cloud services to businesses and governments, with $32.5 billion in sales during the most recently reported 12 months.

Microsoft, which doesn’t break out comparable sales for its Azure unit, likely pulled in a fraction of that, analysts say. Based on both companies’ earnings reports last week,

Trump surprised the industry earlier this year when he openly questioned whether the contract was being competitively bid.

In a statement released later Friday night, the Defense Department said that “the acquisition process was conducted in accordance with applicable laws and regulations. The process cleared review by” the U.S. General Accounting Office and the Court of Federal Claims.

Microsoft Corporation, Redmond, Washington, has been awarded a firm-fixed-price, indefinite-delivery/indefinite-quantity contract with a ceiling value of $10,000,000,000 over a period of 10 years, if all options are exercised.  The JEDI Cloud contract will provide enterprise level, commercial Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) to support Department of Defense business and mission operations.  Work performance will take place at the awardee’s place of performance.

The Pentagon’s inspector general said in a separate statement on Friday night that it had “not found evidence that we believe would prevent the DoD from making a decision about the award of the contract.” The watchdog agency, which was leading a review by “multidisciplinary team of auditors, investigators, and attorneys,” was aiming to have its work done by the end of November.

The Defense Department is investing in commercial cloud services, which host computing power and storage in remote data centers, to improve data security and speed real-time sharing of information across the military.

The Pentagon said the contract was expected to be completed by 2029. Microsoft shares rose 0.6% to $140.73 at Friday’s close.

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