Analysts and insiders say Amazon is the runaway favorite for the Defense Department’s Joint Enterprise Defense Infrastructure (JEDI) cloud project, which officially opened for bids last week and represents an ambitious effort to bring military data-sharing procedures into the 21st century.
The project has attracted interest across the technology sector, but Amazon seems poised to lap its competition and reportedly is the only company that meets all of the Pentagon’s stiff regulations on handling classified material. Amazon also has a significant edge after securing a prized cloud contract from the CIA in 2013, positioning the Seattle-based behemoth as a company that can be trusted with the most sensitive government information.
But leading companies such as Microsoft and IBM are expected to put up a tough fight and won’t easily cede the burgeoning market for military and government data.
Analysts say the contract is so high-profile and lucrative that companies could rethink their cloud storage strategies in order to compete more effectively for the Pentagon deal.
“This contract could be big enough, actually, that vendors could shape what they propose to meet the [Defense Department‘s] needs,” said David Berteau, president and CEO of the Professional Services Council, a trade association representing nearly 400 companies that do business with the federal government. “The companies are going to say, ‘Here’s how we’re going to evolve.’ That’s part of the evaluation process.”
An Amazon win would also extend its huge lead in the marketplace. According to market monitoring firm Gartner Inc., Amazon in 2016 claimed 44.2 percent of the cloud data storage market, three times the share of Microsoft, Google and the next two competitors combined.
“Amazon has achieved this position by serving the most customers across the broadest range of use cases,” Gartner analysts wrote, “from cloud-native startups, to midmarket businesses wanting to lift and shift traditional applications, to enterprises executing transformational migrations to the cloud.”
For the Pentagon, the JEDI project centers on moving huge amounts of data to a cloud system that will be operated by a commercial company. Military officials have cast the move — part of a much broader initiative inside the Defense Department to modernize its data storage and information sharing systems — as a necessary step forward.
“I firmly believe that the JEDI Cloud Program … is the best strategy for the department to meet its critical and urgent infrastructure needs,” Dana Deasy, the Pentagon’s chief information officer, wrote last week when the project was officially opened for bids. “We are looking for an industry partner who will learn with us and help us find the best ways to bring foundational commercial capabilities to our war fighters.”
The full JEDI contract could be worth as much as $10 billion over a decade. It is expected to be awarded by spring.
Although the contract could stretch for 10 years, the Defense Department — after prodding from lawmakers who pushed for greater flexibility — will have periodic options on whether to renew the deal. After an initial two-year period, the Pentagon will review the contract and decide whether to grant a three-year extension. After that, military officials could continue the contract for an additional three years, followed by a final two-year period.
Lawmakers also have questioned why the Defense Department is pursuing a single provider rather than dividing the cloud contract among multiple companies, an approach many in the technology sector also favor.
Analysts say the answer comes down to convenience: One company handling the entirety of the program will take much of the burden off of the Defense Department and eliminate the need for military officials to act as liaisons between rival companies.
In its request for proposals, the Pentagon lays out a host of requirements. Most center on specific security protocols to ensure sensitive information is fully protected.
Though Amazon looks to be the only company that explicitly meets all of those requirements, analysts say, others making pitches are certain to spell out exactly how they intend to meet the Pentagon’s demands.
“Even after reading through the proposal, it’s a pretty complex set of documents. There’s a lot still to be determined,” Mr. Berteau said. “On its face, it does appear to us there are several potential bidders here. But that’s up to the bidders to decide.”
At least one of Amazon’s chief rivals has made it clear that it intends to compete.
“IBM has proudly supported the U.S. military for decades, and we look forward to submitting a thoughtful, comprehensive proposal for a JEDI cloud that will serve the long-term needs of America’s men and women in uniform,” Sam Gordy, general manager for IBM federal and industries, recently told Bloomberg News.
Military officials say they are convinced that Amazon isn’t the only company that has a shot at the contract.
“Extensive market research has shown that multiple vendors are capable of meeting the requirements of the JEDI Cloud, including meeting the timelines for classified requirements,” Defense Department spokeswoman Heather Babb told The Washington Times.
For Amazon, which made its mark in online retailing and delivery, the company’s web services division reportedly is its fastest-growing and most profitable sector.
The company, which in addition to retail operations, now owns grocery giant Whole Foods and has become a major player in TV and film. Founder Jeff Bezos, who owns The Washington Post, has quietly become the nation’s leader in cloud storage for data, a lucrative corner of the economy that will become more valuable in the coming years.
Amazon’s cloud deal with the CIA — a contract reportedly worth about $600 million — represented a major financial boon and confirmation that the federal government was willing to accept Amazon as a major player in the data storage field.
But the political landscape in Washington has changed dramatically since Amazon secured that contract. President Trump has regularly taken aim at the company on Twitter, bashing its skirting of sales taxes, its supposedly sweetheart delivery deals with the U.S. Postal Service and other issues.
Last week, the president bashed Amazon and The Washington Post as part of a relentless assault over the past several years.
He was referring to a recent court decision that allows states to collect sales taxes from out-of-state retailers.
“Next up is the U.S. Post Office which they use, at a fraction of real cost, as their ‘delivery boy’ for a BIG percentage of their packages,” he tweeted. “In my opinion the Washington Post is nothing more than an expensive (the paper loses a fortune) lobbyist for Amazon. Is it used as protection against antitrust claims which many feel should be brought?”
The president has not weighed in publicly on the matter, and there are no signs he intends to step in.
“The president is not involved in the process,” White House press secretary Sarah Huckabee Sanders told reporters in April.
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