Amazon's cloud chief says Pentagon's contract decision is 'dangerous and risky'

CNN Technology 1 week ago

The Department of Defense's decision to award a massive cloud computing contract to Microsoft was a huge loss for rival Amazon. An Amazon (AMZN) spokesperson told CNN Business it plans to file a formal legal complaint protesting the decision.

The head of Amazon's cloud business is getting publicly involved in the company's fight over a $10 billion contract to supply cloud services to the Department of Defense.

Amazon Web Services lost the contract to Microsoft's Azure cloud business in October, a decision that surprised many industry experts given Amazon's leadership in the industry. Amazon (AMZN) has now filed a suit with the US Court of Federal Claims contesting the decision. The company argues it was politically motivated by President Donald Trump's dislike of Amazon CEO Jeff Bezos and the Washington Post, which Bezos owns.

AWS CEO Andy Jassy said in an interview with CNBC Tuesday that he believes the decision was not adjudicated fairly.

    "Anybody who does a detailed, apples-to-apples comparison of the platforms won't come out in the same spot that that procurement did," Jassy said. "Most of our customers tell us we're about a couple years ahead of anybody else with regard to functionality and maturity, but there was significant political interference here."

    The contract — called Joint Enterprise Defense Infrastructure, or JEDI — involves providing cloud storage of sensitive military data and technology, such as artificial intelligence, to the Department of Defense, and could result in revenue of up to $10 billion over 10 years.

    After a long and contentious selection process, the Pentagon chose Microsoft Azure for the job, saying in a statement that Microsoft (MSFT) would help improve the "speed and effectiveness with which we develop and deploy modernized technical capabilities to our men and women in uniform."

    Losing the decision to Microsoft threatens to undermine AWS' role as the clear leader in the cloud industry — a potentially major loss, as the division has long been Amazon's leading profit driver.

    Amazon is calling for the JEDI decision process to be reviewed.

    AWS had been considered the clear favorite to win the contract. The company had already been providing some cloud services to the Department of Defense, and in 2013 won a $600 million CIA cloud contract. But that changed after President Trump began raising questions about the evaluation process. Trump has long been critical of Amazon, Bezos and the Washington Post.

    A book written by the speech writer for former Defense Secretary Jim Mattis says Trump asked Mattis in the summer of 2018 to "screw Amazon" out of a chance to bid on the contract, according to the website Task and Purpose. Mattis declined to do that, per the book.

    This past June, Trump said his administration would carefully review the Pentagon's contract plan after he said Amazon competitors, including Microsoft, complained about the process.

    In announcing the decision last month, the Department of Defense said the acquisition process "was conducted in accordance with applicable laws and regulations."

    Jassy, however, said he thinks the decision is "dangerous and risky" for the country and its national security.

    "When you have a sitting president who's willing to be very vocal that they dislike a company and the CEO of that company, it makes it difficult for government agencies including the DoD to make objective decisions without fear of reprisal," Jassy said. "When you have to do work to modernize your technology capabilities, as the DoD does, you need the best possible technology platform to build what you need to build."

      Microsoft has said the decision reflects how it brought its "best efforts to the rigorous JEDI evaluation process." Its cloud business has been growing faster than Amazon's in recent quarters.

      Microsoft did not immediately respond to a request for comment.


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