Google, Microsoft, Oracle et al. Gang Up on Amazon for $10Bn Pentagon Prize

Wolf here: Amazon is a mega-force in online retail. The “Amazon effect” is everywhere. But even for Amazon (AMZN), it’s hard to make money on its online retail operations. Amazon, through its division AWS, also owns a big part of the internet “cloud.” And that’s where the money is. The article below is about Amazon’s potential mega-deal with the government — and how the other “cloud” providers are ineffectually flagellating their arms, trying to get some scraps of the deal.

By Alex Kimani, Safehaven.com:

For many years, the cloud quadrille of Amazon’s AWS, Microsoft’s Azure, Google Cloud and IBM SmartCloud has been engaging in rounds of fierce price wars in a bid to dominate both market share and mindshare. The cloud race has also frequently featured a healthy dose of ivory tower jousting and demagoguery.

But right now, the war is being fought on an entirely new front: to prevent a powerful rival from embarrassing its cloud competitors. Specifically, nine public cloud vendors have set aside their rivalries to gang up against Amazon, which is looking like a shoo-in to win a massive $10 billion cloud contract by the Pentagon.

AWS, the largest and most feature-rich public cloud, is slated to be awarded a contract known as the Joint Enterprise Defense Infrastructure (JEDI).

Nine other vendors including Microsoft (MSFT), IBM (IBM), Oracle (ORCL), VMware (VMW), HP (HPE), Dell, General Dynamic’s CSRA unit (GD), SAP (SAP), Red Hat (RHT) are not happy with the single-source arrangement and are banding together to persuade the Pentagon to divvy up the spoils among several vendors.

It’s laughable that Microsoft and Oracle, two sworn arch enemies, are at the frontline in the battlefield, kicking and screaming the loudest.

Firing Blanks

The JEDI contract, due to be awarded in September, has been highly contentious for months.

The anti-Amazon crowd has joined ranks to woo the press and lobby legislators to support their cause. They have even gone as far as taking out ads in The New York Times, one of Trump’s favorite publications, complete with pictures of a grinning Jeff Bezos, Amazon’s CEO. But so far they seem to be firing blanks.

Although the House Budget Committee has yielded to their charm offensive and passed legislation to halt funding for JEDI if it awards the contract to a single vendor, the senate is having none of it and has stuck with the old version of the spending bill.

Maybe Amazon should now throw a counterpunch by publishing ads of a weeping Larry Ellison in the Washington Post (owned by Bezos).

Bragging Rights

From a casual glance, the stonewalling sounds like nothing more than a bad case of corporate sour grapes. After all, a contract of that magnitude seems beyond the pay grade of some companies on that list and they could simply end up being cannon fodder for the likes of Microsoft and Oracle.

Sure, $10 billion is a lot of money. But JEDI will likely be a long-term 7- to 10-year contract, meaning the amount will be amortized over the entire period.

For a company like Microsoft with cloud revenues approaching $20 billion and total revenues approaching $100 billion, an extra $2 billion or so every year will hardly budge the top line.

This is not just about money. To a large extent, it’s about winning the bragging rights in the hotly contested cloud wars.

AWS is already several times bigger than second-placed Azure, while the other contenders would need the Hubble telescope just to see it. Winning such a huge and important contract would not only allow AWS to gloat in front of its rivals for years, but it would improve it’s already admirable standing in the eyes of other clients, especially the heavily loaded ones. Microsoft and Oracle et al are simply trying to prevent that from happening. By Alex Kimani, Safehaven.com

An industry dogged by non-believers who fret about privacy and fraud. Read…  Consumers Stubbornly Cling to Cash, after Multiple IT Fiascos & Payment Systems Outages 
 

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  20 comments for “Google, Microsoft, Oracle et al. Gang Up on Amazon for $10Bn Pentagon Prize

  1. kiers
    Jul 1, 2018 at 9:24 pm

    The design brief for this JEDI was always intended to be SIngle Sourced. Read “Acquisition Strategy”:

    https://www.nextgov.com/media/gbc/docs/pdfs_edit/121217fk1ng.pdf

    • fajensen
      Jul 2, 2018 at 10:38 am

      AWS will only make sense if one goes all in with it and exclusively commit to using the AWS management systems. With “boto” one can script, I think, Everything in AWS. It is really the best cloud there is, IMO.

      Imagine the nightmares that lurks in the client having to integrate disparate services from all of those other bit-players with ambitions?

      Quite apart from the extraneous work, then Every Time something breaks, we will have a circle of 10 monkeys pointing at the next one.

      • kiers
        Jul 2, 2018 at 6:05 pm

        @fajensen, do you believe the $10bn requisition for JEDI is for purposes of regular bureaucratic compute workloads, (of which, surely, DoD has huge bureaucracy) or more weighted towards AI/ML driven tactical warfighting?

    • gary
      Jul 2, 2018 at 1:11 pm

      So there you have it:

      “Wolf here: Amazon is a mega-force in online retail…But…it’s hard to make money on its online retail operations. Amazon…owns a big part of the internet “cloud.” And that’s where the money is…Amazon’s potential mega-deal with the government”

      Conclusion:

      1. Much of online retail is unsustainable hype, a fun novelty that will eventually fizzle out. (but it will always have a thriving specialty market).

      2. Amazon relies on AWS to make any money. AWS itself relies on Unicorns, who themselves don’t make any money because they too are unsustainable hype. (once the loose-money runs out)

      3. Amazon will rely on government hand-outs to sustain itself.

      Q.E.D.

      • Jul 2, 2018 at 4:02 pm

        gary,

        you said, “Much of online retail is unsustainable hype, a fun novelty that will eventually fizzle out.”

        That may be your opinion, but that’s NOT what I said. And I wouldn’t want you to misinterpret what I said. Online retail is a structural shift in how consumers spend their money. It started over two decades ago, and nothing is going to reverse it.

  2. Kiers
    Jul 1, 2018 at 9:30 pm

    afterthought: I do wonder if Amazon’s lobbyists were not in consultation with DOD even BEFORE the JEDI was made publick!

  3. Lt
    Jul 1, 2018 at 11:05 pm

    The president is clearly not a fan of Bezos. I would be surprised to see him give Bezos this “win”.

  4. Rates
    Jul 1, 2018 at 11:11 pm

    Bezos is CIA agent no 666. He comes through the Pentagon through the front door and leaves through the back door. Zuckerberg is 667.

    And people wonder why he “won” the contract.

  5. raxadian
    Jul 2, 2018 at 12:12 am

    One would think Google would be doing their best to dominate the Cloud but whatever…

    That said is a bad idea to put all your eggs in the same basket…

    • MCH
      Jul 2, 2018 at 1:37 am

      Google? Are you kidding, these days, Google can’t find its head when it’s shoved up its own ass. They’ve turned down their opportunity to work with the DoD when a bunch of whiners threatened to quit if Google kept up the work using AI to sort through drone images. The funny thing is it’s that same vocal minority at Google that keeps piping up on their own internal networks advocating for all kinds of crap.

      A couple of friends who work at Google wished that most of those morons could be just fired, because instead of working, they just spend all day soaking up the perks and whining on their own boards about everything. It’s just crazy.

      • raxadian
        Jul 2, 2018 at 8:44 am

        At least Google is trying different things even if you could argue that they are just thowing stuff at the wall to see what sticks.

        Unlike Apple that seems quite happy with their Iphones and increasing crappy computers and devices (Even Mac fanboys are complaining about Apple hardware getting worse and worse) Google is working on several Operating systems and devices, even if only Chrome Os seems to be doing well of all those new “post Android” ptojects.

        And Google still gets a lot of profit from web searchers, that military contract would have make people use it less.

        Hey remember Skype? How it became just a piece of spyware and junk once Microsoft got in and the US government used it to spy people?

        Who is still using Skype nowadays?

        Granted people are still using WhatsApp but that’s because cell phone users are less likely to just switch programs due to complacence and space problems.

        And is very hard to convince your contacts to switch to Signal.

        That said Amazon does have a lot of junk debt, it needs this contract more than just for bragging rights, but to keep investors drinking the Koolz Aidz.

        • Ethan in NoVA
          Jul 2, 2018 at 10:53 am

          Google generates new things, but apparently it’s not internally sexy to work on old things. So old things tend to fall behind and die.

          But they make money somehow.

        • MCH
          Jul 2, 2018 at 7:21 pm

          Remember for all of Google’s new things, it’s still google that’s making money. Not really NEST, Waymo, Verily, or any of the others. It’s Google, for all of their moon shots, none of the other parts of the company is making money as yet.

          BTW, I don’t count YouTube As a separate entity from Google, even though it really should be.

          And If you want to see a company that’s trying other things and making money, just look to Amazon. All the stuff they’ve been doing, without nearly the Google hype has been successful, starting with AWS, then hardware, and launching into different parts of retail. Bezos Seem to have some form of grand unifying strategy, and it is really scary. And most importantly, he isn’t bragging about it like Steve Jobs did.

      • Petunia
        Jul 2, 2018 at 9:35 am

        I think the google whiners were a deliberate plot to withdraw gracefully from the contract. Google is fast but their database is of limited capacity. They may not be able to accommodate the data set the govt needs.

  6. Matt P
    Jul 2, 2018 at 9:43 am

    What’s laughable is that this defense contract is being rewarded to a company whose workforce is majority foreign born. Not that the other companies are any different.

    I know I will get the usual spiel about there not being enough highly skilled workers in the US, but it is not true. The number of IT workers continues to decline even as colleges pump out fresh grads.

    • Ethan in NoVA
      Jul 2, 2018 at 10:56 am

      A local younger kid I’m friends with tells me the horrors of working with all the H1Bs. He loves coding and tech, but hates his job because of all the coworkers that don’t really care about the craft.

      I think it is interesting that all of the java coder immigrants that drove the house prices near me are likely dual citizen. So when the housing market tanks, they can just jingle mail and hop back to their home country (take out huge HELOC first) and there really won’t be much recourse from the banks.

      • Mean Chicken
        Jul 2, 2018 at 12:38 pm

        I never understood why it’s necessary to relocate to become a Java coder unless maybe your particular test bed sits on a factory floor somewhere.

  7. Mean Chicken
    Jul 2, 2018 at 10:19 am

    I love a good government program corporate welfare shining star. Where would we be today if it weren’t for the massive life-enabling Pentagon budget?

  8. Alex
    Jul 2, 2018 at 4:11 pm

    You would think with all the taxpayer money and employees the NSA could create its own private cloud that is more secure. But we know how crony organizations work.

  9. Jeff
    Jul 8, 2018 at 3:09 pm

    Great! More of our personal info floating around in the ether. That’s how they (Google, et.al.) make their money. And they get our (taxpayer) money to screw us over! And don’t tell me it’s secure. Block Chain is not secure either. Once quantum computing comes on line (some of it already has) NOTHING will be secure or unhackable.

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