Pentagon awards $10 bn cloud contract to Microsoft

he 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.

Amazon was considered the lead contender to provide technology for JEDI, with its Amazon Web Services dominating the cloud computing arena and the company already providing classified servers for other government outfits including the CIA.

But the Pentagon earlier this year delayed awarding the hefty contract, saying the process would be reviewed by newly appointed Defense Secretary Mark Esper.

Esper was selected by US President Donald Trump, who has lashed out at Amazon and company founder Jeff Bezos, who owns The Washington Post.

In July, Trump said he had heard “complaining from different companies like Microsoft and Oracle and IBM” over the JEDI bidding process.

“We’re going to take a look at it. We’ll take a very strong look at it,” he said, raising concerns among observers that the process would be improperly influenced.

Amazon said late Friday it was “surprised about this conclusion.”

“AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion,” the company said in a statement. Microsoft did not immediately respond 

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. 

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