The Joint Enterprise Defense Infrastructure (JEDI) is a Department of Defence (DoD) 10-year contract valued around $10 billion. The JEDI program is meant to replace the poorly integrated & aged computer network of the U.S. Military with a single cloud system that would encompass all networked assets.
The biggest players in the cloud industry like Amazon (NASDAQ: AMZN), Google (NASDAQ:GOOGL), Microsoft (NASDAQ: MSFT), Oracle (NYSE: ORCL) & IBM (NYSE: IBM) all competed for this contract.
IBM & Oracle were eliminated from bidding in April by the DoD and Google dropped out last year after months of protests by employees. Amazon and Microsoft were the main two contenders left at the end and Amazon was considered the frontrunner due to its cloud work for the CIA, the fact that it holds impact level 6 — DoD’s highest level security certification — and its commanding share of the cloud services market (48%). Microsoft sits in second place with a 15.5% market share.
However, the Pentagon announced on Friday, October 25 that Microsoft had won the JEDI contract. This came as shocking news to Amazon as it was a clear leader in the process, but alleged political interference by President Donald Trump led to Amazon’s loss. It is now formally challenging Microsoft’s victory by reportedly accusing the Pentagon of bias against Amazon. At the same time, some experts feel that the Trump factor may have been overrated and maybe Microsoft won this on its own merits.
The JEDI has been highly contested not just because of its value but also because it puts the winner in a position to win similar contracts with other governments or large institutions around the world. The single vendor component is one of the main factors why JEDI is unique. The general trend right now is multi-cloud, where companies are using multiple cloud technologies and leveraging multiple vendors. JEDI has a sole cloud provided for all its needs, which brings an unfair advantage to the winner as it not only bags $10 billion in revenue but will also be leading the race to win the follow-on work.
The global government cloud market stood at $ 15.40 billion in 2017 and is expected to be around $28.85 billion by 2022, growing at a CAGR (Compounded annual growth rate) of 13.4%. The major drivers of this market includes low IT costs, minimized human dependence, the availability of compliant solutions, and the need for regulatory compliance and protection of data against disasters.
U.S. Federal agencies spent a combined $4.3 billion on cloud computing in 2018 and is expected to surpass $5 billion in 2019.
A late adopter of cloud computing, the Pentagon is rapidly making up for lost time. It spent $1.2 billion in FY2018 and that figure is expected to surpass $1.5 billion in FY2019.
It will be interesting to see how things roll out for Amazon. Cloud computing is only 10% of Amazon’s total revenue but more than half of the total operating income. Microsoft Azure has also been experiencing a slowdown in the growth in the cloud computing business. An easy solution will be to split the contract in two, letting both of these giants take a piece of the contract, but this option has been previously rejected by the Pentagon and it’s unlikely to happen now.
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This article was written by one of our MyWallSt freelancers.