The US Department of Defense “Pentagon” has canceled a $10bn contract it awarded to Microsoft two years ago for use of the company’s Azure cloud services, dealing quite a blow to the software giant. The cancelation comes after the contract caused controversies for Microsoft and drew opposition from rivals like Amazon and Oracle.

• Now, the US Defense Department is re-opening the $10bn contract for bidding, but this time with a multi-vendor approach rather than a single vendor as it sought with Microsoft.

• The contract of concern here is the Joint Enterprise Defense Infrastructure (JEDI) contract, a project for modernizing the Pentagon’s IT infrastructure with cloud services rendered over a span of up to 10 years. It’s one of the biggest IT contracts to originate from US Defense operations.

• When Microsoft was the sole vendor awarded the JEDI contract in 2019, the company drew criticisms of the government awarding a big contract to just one vendor, with claims of unfairness from rivals. The case spurred related lawsuits from Amazon, Microsoft’s main cloud rival, and Oracle, a much smaller player but nonetheless loud mouth in the cloud sector.

• Notably, the JEDI award to Microsoft and now its cancelation were under two different administrations, the award in Trump’s time and the cancelation in Biden’s time. As it is, former President Donald Trump had major beef with Amazon founder Jeff Bezos and this led Amazon to accuse the government under him of bias when awarding the contract to rival Microsoft. 

• Microsoft has said it accepts the US DOD’s cancelation without challenge and that it’ll rebid for the contract as one of multiple vendors. It though punched back at Amazon and government bureaucracy, stating that “when one company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform.”

• With the cloud contract canceled, Microsoft can at least wipe its tears with crisp dollar bills from the $22bn deal it got this year to supply HoloLens augmented reality headsets to the US Army. Surely, the US government has much dollars to go around, especially when it comes to defense and warfare. It’s after all the biggest military spender globally. 

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