Pentagon To Divide Cloud $10B Contract

Amazon.com Inc. Chief Executive Officer Andy Jassy can celebrate at least one win during his first week at the helm of the e-commerce giant, reports Bloomberg.

The Seattle-based company notched a victory on Tuesday -- for now -- when the Pentagon announced it will scrap the $10 billion contract it had awarded to Microsoft Corp. in 2019 and divide the job between the two tech titans.

Amazon Web Services, the company’s cloud unit, which lost its spot as the front-runner after a heated lobbying campaign by competitors, will now be invited to submit a proposal to the Defense Department to win a piece of a new multibillion-dollar cloud contract. The revised proposal, dubbed the Joint Warfighter Cloud Capability, will be awarded to multiple vendors for a period of five years.

The Pentagon said it will also talk to other cloud-services companies such as International Business Machines Corp., Oracle Corp. and Alphabet Inc.’s Google over the next three months to determine whether they are eligible to compete for the award, which it expects to be in the billions of dollars, though it hasn’t yet determined a maximum award amount.

“This could be categorized as a win for Amazon because it gets them back in the game,” said Stan Soloway, who was a deputy undersecretary of defense under President Bill Clinton and is now president of a Washington-area consulting firm, Celero Strategies. “But for both companies, now they got to go win on the streets.”

The Pentagon’s decision to split the work between the two rivals is an unexpected victory for Amazon, which suffered an embarrassing loss in 2019 when the Defense Department chose Microsoft for the lucrative project. Amazon was widely expected to land the contract because it had already won a cloud deal from the Central Intelligence Agency in 2013 and had earned top-level federal security authorizations.

The announcement on Tuesday also marked an extraordinary defeat for the Pentagon, which had initially sought to choose just one company to serve as the primary data repository for military services worldwide. The Joint Enterprise Defense Infrastructure, or JEDI, cloud contract -- intended to evoke a “Star Wars” image -- was valued at as much as $10 billion over a decade.

Jeff Bezos reached a record $211 billion net worth Tuesday after Amazon.com Inc. shares rose 4.7% after the Pentagon announced it was canceling a cloud-computing contract with rival Microsoft Corp. The rally raised Bezos’s fortune by $8.4 billion, according to the Bloomberg Billionaires Index.