DOD going full steam ahead on commercial cloud

If the Defense Department’s cloud computing strategy released Monday puts the much-touted JEDI infrastructure program at the top of its hierarchy with other “fit-for-purpose” clouds below it, then that contract’s stakes have risen and take “winner-take-all” to a different meaning.

After all, the strategy specifically says JEDI will be the military’s foundational approach to gain and deliver capabilities of a general purpose enterprise cloud.

DOD has suggested this could be the case ever since it started to detail the potential $10 billion JEDI contract last year, but the Pentagon’s new document makes that fact clear.

Overall market forces and technological advances all add up to an inevitability that the military is going to a commercial cloud environment anyway though. That includes the separate $8.2 billion DEOS contract for cloud-based email and collaboration services.

But JEDI’s stakes alone are enormous. Analysts at Los Angeles-based investment firm WedBush Securities have gone as far to call this contract the “Cloud Super Bowl” for frontrunners Amazon and Microsoft in a report for clients sent Monday.

“The winner in this decade long contract could have a major ripple impact across the enterprise/government cloud space for years to come in our opinion,” wrote Wedbush analysts Daniel Ives and Strecker Backe.

Bids were due in October and an award could come in late March or early April pending the outcome of a court case (more on that later). Four bidders are known: AWS, Microsoft and two protesters in Oracle and IBM.

Even with JEDI’s size and scope though, Wedbush analysts see $20 billion in federal cloud market opportunities over the next five years. This race reflects the overall shift of enterprises everywhere to commercial cloud environments, largely either with Amazon Web Services or Microsoft Azure.

But somewhat contrary to popular opinion, the Wedbush analysts now see Amazon as only a 60-40 favorite to win JEDI versus being the clear odds-on favorite. Microsoft has quickly caught up in these analysts’ eyes, given a $1.8 billion enterprise services contract signed with DOD in early January and expectations of getting certified to host Top Secret classified government data by the end of March.

Also worth considering is Microsoft’s network of almost 70,000 cloud partners that outsize all of Amazon, Google and Salesforce combined; and an already longstanding relationship with DOD. The software giant signed a pact last year to sell Azure cloud products to intelligence agencies and also offers customers hybrid IT environments that mix both legacy and cloud-based systems, which DOD might take into consideration as it forges on its commercial cloud push.

James Bach, federal IT analyst at Bloomberg Intelligence, told me in May of last year that because of that hybrid IT positioning by Microsoft, them winning JEDI is a very real possibility. Microsoft also announced Monday a new suite of Azure hardware offerings for use in remote locations that are sold through Dell EMC. Presumably these would be part of the JEDI bid and possibly DEOS as well.

It then also makes sense that after losing a bid protest last year, Oracle has gone to the Court of Federal Claims to make sure JEDI and hence any other federal cloud opportunity does not slip without a fight given their longstanding government IT market position. IBM also filed a protest with GAO but it was dismissed when Oracle went to the court of federal claims. IBM has not joined that case.

Oracle did win one minor point in its case late last week when Judge Eric Bruggink ruled the company could add up to 25 pages to its motion for judgment, which would extend that filing’s limit to 65 pages beyond the standard 40. This expansion applies to the government as well though, plus the defendant-intervenor in AWS, according to court filings. Oral arguments are set for April 4.

The fact that Oracle wants more pages further helps illustrate why they see the stakes as high for them too. Oracle has essentially attacked JEDI on all fronts ranging from the overall strategy to single-award approach, even with conflict-of-interest allegations versus DOD and AWS thrown in.

Oracle and other market watchers have argued since the contract’s inception that DOD tailored the JEDI solicitation’s requirements in favor of AWS, which analysts see as the favorite given their CIA cloud hosting contract and overall presence as the global IT market’s largest commercial cloud player.

Even if Oracle loses this court case, they could protest to the Government Accountability Office again after DOD makes an award. But Oracle would have to find new grounds to protest and cannot raise any points currently being aired out in court.