Amazon Web Services is 'evaluating options' after Microsoft wins $10 billion JEDI contract out from under its nose

Mike Blake/ReutersAndy Jassy

Amazon Web Services is “still evaluating options” after the US Department of Defence selected Microsoft for a $US10 billion contract to move the agency’s database to the cloud, according to a source close to the situation.

“We’re surprised about this conclusion,” an AWS spokesperson said in a statement. “AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion. We remain deeply committed to continuing to innovate for the new digital battlefield where security, efficiency, resiliency, and scalability of resources can be the difference between success and failure.”

This contract – known as the Joint Enterprise Defence Infrastructure, or JEDI, contract – is a 10-year contract to move the US Department of Defence’s database to the cloud.

It’s a big loss for AWS, which drives the majority of the profit for the entire Amazon empire – and a surprise, given that AWS was the favourite to win by most industry-watchers.

It was not immediately clear what Amazon’s options might be after losing the contract. The bidding process for JEDI began more than one year ago, contenders like Oracle and IBM were eliminated from the process in April. Oracle previously launched an ultimately-failed lawsuit alleging that the JEDI contract selection process was “riddled with improprieties.”

One potential course of action available to Amazon might be to protest the decision through a “request for reconsideration” with the Government Accountability Office.

Wedbush Securities analyst Dan Ives said in a note to clients that his firm “fully” expects Amazon “and others” to challenge the decision in court. It’s unclear at this time how a legal challenge might work.

Previously, President Donald Trump reportedly wanted to “scuttle” the bidding process for JEDI. Experts speculated at the time that Trump’s public feud with Amazon CEO Jeff Bezos – who also owns The Washington Post, which has published coverage critical of the president – coul work against Amazon Web Services in the bidding process.

Trump had demanded more information about JEDI after hearing about complaints on the bidding process, and he promised to look into the deal after receiving letters on the matter from lawmakers, including Sen. Marco Rubio. In August, the deal award was delayed for furthe review, reportedly because the White House was concerned that Amazon would win.

Amazon reported a less-than-expected profit in its third-quarter earnings on Thursday – $US4.23 a share on revenue of $US70 billion. AWS raked in $US9 billion in revenue for the quarter and was responsible for nearly 72% of Amazon’s total operating income over the period.

Amazon Web Services still leads the cloud market and posted $US2.3 billion more in sales growth over the past quarter than it did in the same period of 2018.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.