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Pentagon Splits Up Big Cloud-Computing Deal Among 4 Companies

The Department of Defense announced that it has given lucrative cloud computing contracts to four companies: Amazon, Google, Microsoft, and Oracle. The contracts will last through 2028 and could be worth up to $9 billion, according to a Pentagon press statement.

The development is for a new cloud architecture called the Joint Warfighting Cloud Capability, which would deliver cloud services to the Defense Department “across all security domains and classification levels.”

“The purpose of this contract is to provide the Department of Defense with enterprise-wide globally available cloud services across all security domains and classification levels, from the strategic level to the tactical edge,” said the Defense Department.

The Pentagon’s decision to grant contracts to four firms marked a departure from its previous choice to award a $10 billion cloud-computing contract to Microsoft three years prior. That deal, for the Joint Enterprise Defense Infrastructure, or JEDI, became embroiled in a legal battle. Amazon, the market leader in cloud infrastructure, contested the Pentagon’s decision, resulting in a legal struggle. Oracle also contested the Pentagon’s selection.

Months later, the Pentagon declared that it would continue to work with Microsoft on the JEDI contract.

The Defense Department, again, said in 2021 that it would not proceed with the Microsoft contract because it “was developed at a time when the department’s needs were different and our cloud conversancy less mature.”

Instead, the Pentagon announced it would solicit proposals from a variety of technology firms for the Joint Warfighting Cloud Capability. While market research suggested that Microsoft and Amazon would be best suited to meet the needs, officials stated that they would also contact IBM, Oracle, and Google.

The recent outcome is particularly beneficial to Oracle, which analysts do not believe is among the top cloud-computing service providers. In the third quarter that ended on August 31, Oracle generated $900 million in revenue from cloud infrastructure, a negligible portion of Amazon’s cloud subsidiary, Amazon Web Services, which generated $20.5 billion in revenue.

In an email, Dan Ives, a tech analyst with Wedbush Securities, said, “This is the biggest cloud Beltway deal in history and was a key deal to win for all the software vendors in this multiyear soap opera. It’s good to finally end this chapter and get a cloud deal finally done for the Pentagon after years of a roller coaster.”

The announcement of the major government contract was a significant victory for a broader range of technology companies. The largest of them had lobbied hard for the previous JEDI contract, which was considered a way to alter and modernize the military’s cloud-computing infrastructure. Oracle was one of the companies that persuaded the Pentagon to award various federal contracts for cloud computing and other services.

According to an email from a Department of Defense spokesperson, “JWCC is a multiple award procurement composed of four contracts with a shared ceiling of $9 Billion.”

According to Forrester analyst Devin Dickerson, awarding the contract to four companies rather than one demonstrates a “multicloud strategy” that could improve the Pentagon’s bargaining position with major cloud providers and make it easier for individual Defense Department offices to acquire cloud technologies and services.

A growing number of firms are increasingly attempting to rely on more than one cloud supplier. In certain circumstances, they rely on specialized capabilities on one and the majority of front-end and back-end workloads on the other. Having many clouds may give enterprises more confidence that they can endure service disruptions caused by outages.

All four technology firms have secured contracts for an indefinite delivery, indefinite quantity, or IDIQ, which means they can provide an indefinite number of services for an indefinite period of time.

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