Tech Companies Up Their Game Vying for Pentagon Cloud Contract


A lucrative contract to provide cloud services to the Pentagon is coming up for bid, and the large US technology companies are jockeying for position, hoping to supplant traditional military contractors.

The US Department of Defense’s plan to award a cloud computing contract worth several billion dollars has triggered a frenzy within the tech community. Amazon, Microsoft, Oracle and other big companies are jostling to assure the military they are the right fit for its needs.

Under the 10-year contract, expected to be awarded in September, the winner would provide cloud services to the Department of Defense, which is in the process of overhauling its entire IT system for all of its 17 US intelligence agencies.
Cloud Services Providers Raw HTML Module

Fruitful Future

“The company that wins the contract will also have a foot in the door for future Pentagon work, as the Department of Defense looks to rapidly expand its artificial intelligence capabilities,” notes Gizmondo reporter Kate Conger.

Amazon Web Services is considered a favored choice because of its well-established position in the cloud services sector. It is estimated to control nearly 50% of the cloud market, compared with Microsoft’s Azure second place position with just 7%.

“Unless the Pentagon changes course and decides to use multiple cloud providers, instead of awarding the contract to a single provider, Amazon seems like a shoo-in” says Business Insider’s Hayley Peterson.

Amazon Web Services also gets a boost from its existing track record in the intelligence community, courtesy of its multi-million-dollar 2013 cloud contract with the Central Intelligence Agency for an onsite cloud facility.

Cloud Security Kicks Off

The new cloud services contract started life as part of the renewal of a prior contract with Dell, which subcontracts its government work to Microsoft. The Joint Enterprise Defense Infrastructure (JEDI) upgrade project will give the 17 intelligence agencies within the Department of Defense more options for data storage and analysis.

Microsoft and Dell recently concluded a joint licensing agreement with the Pentagon for the Azure and Office 365 cloud services, and the partners hope their existing relationship will provide enough of a competitive edge.

“This agreement bolsters Microsoft’s position as a leading government cloud provider delivering advanced capabilities to further the intelligence community’s national security mission,” MicrosoftOpens a new window says. “We are deeply committed to continue to… serve the full spectrum of intelligence community initiatives across all its agencies.”

As appetite grows in the intelligence world for accessing and sharing classified information via the cloud, Amazon, Microsoft and other providers have pushed hard to develop services that meet strict security requirements to keep such information out of unwanted hands. Microsoft’s Azure Government Services has already received the second-highest level of security clearance.

Microsoft has also proposed developing a version of its blockchain technology to enable secure internet transactions through a shared ledger, rather than a central database that is easier to hack.

Monopoly Concerns

The single-bidder proposal has created uproar among other players in the tech world for the perceived advantage it would give Amazon to increase its dominance of the cloud services sectors. To push back, companies including SAP America, General Dynamics’ CSRA unit, Red Hat and VMware have publicly raised concern about the single-bidder approach, asking the government to restructure the contract to allow multiple bidders.

“The companies are banding together to fight the Pentagon’s plans to award it to a single bidder out of concern it could disrupt their established business model for obtaining military contracts,” says corporate influence analyst Naomi Nix.

In the face of the protest, the Pentagon has delayed the bidding process, and in May justified the single-vendor approach before Congress, citing costs and potential security issues.

“Requiring multiple vendors to provide cloud capabilities to the global tactical edge would require investment from each vendor to scale up their capabilities, adding expense without commensurate increase in capabilities,” Pentagon chief management officer John Gibson told Congress in May.

While the final version of the bidding terms are expected in coming days, the Pentagon has tried quell the protests by emphasizing that there will be more opportunities in the future for other vendors as the Department of Defense expands its cloud capabilities.

“I would characterize the cloud as we’re ushering in a new age of technology,” says Patrick Shanahan, the deputy secretary of the Department of Defense. “It’s a small step of many steps that are going to occur over the next many years. I don’t think any of us has a crystal ball that’ll even be able to say what it’s going to be like two years from now.”