Microsoft's Pentagon Cloud Contract Canceled, New Partners to Come

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Jul. 7 2021, Published 10:56 a.m. ET

After awarding the Pentagon cloud contract to Microsoft, the government has decided to cancel the offer and move in a different direction. The contract, which was about two years in the making, ended because of shifts in the political and technological environments.

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With the original Microsoft deal off the table, who will win the Pentagon cloud contract next?

The Microsoft JEDI Cloud contract was a point of contention for years.

The Pentagon awarded the JEDI (Joint Enterprise Defense Infrastructure) Cloud contract to Microsoft in 2019. The goal was to consolidate and organize an expansive trove of data within the Pentagon and launch the government into the cloud computing era.

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However, political issues led to severe delays for the JEDI Cloud contract. Then-President Trump was at the helm when the government approved the contract. Competing companies vying for the Pentagon cloud contract said that the deal was ripe with bias. 

One of those competing companies was Amazon, whose founder Jeff Bezos also owns The Washington Post. Trump voiced his disdain for the newspaper in the past due to its critical publications centered around his presidency.

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Ultimately, the delays led to the JEDI Cloud contract aging. Cloud computing software has evolved immensely since 2019. According to the Pentagon, it has "evolving requirements, increased cloud conversancy, and industry advances" to think of. With all of that in mind, the Pentagon said that "the JEDI Cloud contract no longer meets its needs."

What cloud computing software is next for the Pentagon?

The Pentagon still plans to move forward with a cloud contract in the future, namely one that aligns with innovations like the JADC2 (Joint All Domain Command and Control) and the ADA (Artificial Intelligence and Data Acceleration) initiatives. JADC2 and ADA have pushed the Pentagon to proceed with something called JWCC (Joint Warfighter Cloud Capability), which will replace JEDI.

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JWCC will use multiple vendors, which means more than one company will receive the Pentagon cloud contract. According to industry experts, it's typical for the government to use multiple vendors for projects like this. The single-vendor model of the JEDI Cloud contract was never the status quo.

Still, Microsoft likely feels like its fate has been reversed. While the company is in the running for the future contract, it won't be the sole breadwinner. Microsoft CEO Satya Nadella will have to lead his team more aggressively because nothing is set in stone yet.

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Who will win the next Pentagon Cloud contract?

According to the Pentagon, the department "will immediately engage with industry and continue its market research to determine whether any other U.S.-based hyperscale [Cloud Solution Providers] can also meet the DoD’s requirements." 

The Pentagon plans to negotiate with those companies at a fast pace, especially considering the slow crawl that the now-defunct Microsoft JEDI contract moved at. 

In particular, Microsoft, Amazon, and Alphabet will be at the forefront of the upcoming contract. Under the Biden administration, things could move along differently for the Pentagon and the developers that ultimately get the cloud contract.

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