Pentagon hands Microsoft $10 billion ‘war cloud’ deal, cold shoulders to Amazon

The Pentagon awarded Microsoft a $10 billion cloud computing contract , insulting early front-runner Amazon, whose competitive bid drew criticism from President Donald Trump and its business rivals.

Bidding for the huge project, known as Joint Enterprise Defense Infrastructure, or JEDI, pitted leading tech titans Microsoft, Amazon, Oracle and IBM against one another.

The giant contract has attracted more attention than most, sparked by speculation early in the process that Amazon would be the sole winner of the deal. Tech giants Oracle and IBM pushed back with their own bids and also formally protested the bidding process last year.

Oracle later challenged the process in federal court, but lost .

Trump crossed into the fray in July, saying that the administration would take a very long look at the process, saying he had heard complaints.

Trump has frequently expressed his annoyance for Amazon and founder Jeff Bezos, who also owns the Washington Post, he said other companies told him that the contract “wasn’t competitively bid.”

Defense Secretary Mark Esper rescued himself from the controversial bidding process earlier this week, citing a conflict of interest because his son works for one of the companies that originally bid.

The JEDI system will store and process vast amounts of classified data, allowing the US military to use artificial intelligence to speed up its war planning and fighting capabilities.

A cloud strategy document unveiled by the Defense Department last year called for replacing the military’s disjointed and stove-piped information systems with a commercial cloud service “that will empower the warfighter with data and is critical to maintaining our military’s technological advantage.”

The Pentagon emphasized in an announcement that the process was fair and followed procurement guidelines. It noted that over the past two years, it has awarded more than $11 billion in ten separate cloud-computing contracts, and said the JEDI award continues our strategy of a multi-vendor, multi-cloud environment.

The deal is a major win for Microsoft’s cloud business Azure, which has long been playing catch-up to Amazon’s market leading Amazon Web Services. Microsoft said it was preparing a statement.

Amazon said Friday it was surprised by the decision.

Google decided last year not to compete for the contract, saying it would conflict with its AI ethics principles. Google employees have been especially vocal in protesting the company’s involvement with government contracts.

“It’s a prototype changer for Microsoft to win JEDI,” said Dan Ives, managing director of Wedbush Securities. “And it’s a huge black eye for Amazon and Bezos.”

Microsoft, Amazon, Google and other tech giants have faced criticism from their own employees about doing business with the government, especially on military and immigration related projects.