Microsoft wins major defense cloud contract, beating out Amazon

Aerial of Pentagon building in United States

Microsoft has defended its interest in military contracts, saying at one point, "All of us who live in this country depend on its strong defense". The pool of bidders once included IBM Corp. and Oracle Corp., but it was narrowed down in April to AWS and Microsoft.

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 up real-time sharing of information across the military. "The expected completion date is October 24, 2029, if all options are exercised".

The move was likely to boost Microsoft's share price and bring "significant positive financial implications" for the company in the coming years, he said.

But the contracting process had always been mired in controversy, with Amazon rivals saying it wasn't competitive enough. But politics entered the picture.

Mr Trump has repeatedly criticised Amazon and its founder Jeff Bezos - who also owns the Washington Post newspaper - in the past.

Most pundits considered Amazon to be the frontrunner to win the deal.

"AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion", the spokesperson said. "We remain deeply committed to continuing to innovate for the new digital battlefield where security, efficiency, resiliency, and scalability of resources can be the difference between success and failure". IBM had previously bid for the contract but had already been eliminated from the competition.

Snodgrass declined to comment pending the release of his book.

Amazon was believed to be the front-runner until Friday evening.

The decision is a big boost for Microsoft's cloud business.

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"I had fully expected AWS to win JEDI given its scale and capabilities, but I think history with the military, alignment with Oracle and SAP, and client computing capabilities got it the win", said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy.

Microsoft's first-quarter results revealed that its Intelligent Cloud business accounted for $10.8 billion of Microsoft's total revenue of $33.1 billion. "This adds $10 to the stock in my opinion".

A Microsoft representative referred questions to the Defense Department announcement. After all, Microsoft is a more focused company and Amazon is now targeting nearly anything and everything where it thinks it can make a buck or displace other businesses.

One issue for Microsoft is whether its closeness to the military will cause it problems.

Oracle later challenged the process in federal court, but lost.

"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 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.

In early August, Defense Secretary Mark Esper announced the Pentagon would reexamine the project before announcing a victor. With this, Microsoft will provide infrastructure and platform services for both the Pentagon's business and mission operations. Oracle has appealed that verdict.

That sparked concerns the president might intervene to determine which company won the contract.

This week, U.S. Defense Secretary Mark Esper removed himself from reviewing the deal due to his adult son's employment with one of the original contract applicants, IBM Corp IBM.N .

With JEDI, the Pentagon aims to make the United States military more technological agile as part of an ongoing broader digital modernization process.

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