by Jim Lundy
Microsoft recently won the ten year $10 billion U.S. Department of Defense (DOD) cloud contract that is code named JEDI. Everyone thought that Amazon, which has a CIA contract was the shoe-in. Enter Microsoft—who won it. There are far more implications for this deal than just the $1 billion in annual revenue. This blog is about the strategic implications of the deal.
Microsoft JEDI DOD Win Will Help to Level the Playing Field
While Microsoft has been pushing the envelope with Azure, until now, there were few signs that anything that it was doing were slowing down the progress of Amazon AWS, which is growing at 45% a year. Microsoft has been re-energized as part of the JEDI deal. While it is certainly a large deal revenue wise, it it just the beginning of selling additional services to the Department of Defense.
While protests from Amazon are expected, many view this deal as a way for the U.S. Federal Government to spread around their money. Earlier in 2019, when the list of bidders was reduced to a set of finalists, Oracle protested but a judge turned them down.
Other Governments Will Follow the U.S. DOD
While this is just one deal, given GSA schedules and the popularity of Microsoft in other federal agencies and other countries, Aragon expects a significant windfall to come to Microsoft, as well as all cloud providers, including but not limited to Amazon (already has U.S. CIA), Google, and IBM.
The U.S. Federal Government spends around $95 million on IT. As Table 1 shows, there are many other Federal Agencies that have yet to make a significant investment in cloud migration. Aragon estimates that most will by 2024.
Federal IT spending by U.S. government agency. Source: whitehouse.gov.
Microsoft Doubles Down On Azure at Microsoft Ignite
On the heels of the JEDI DOD cloud contract victory, Microsoft made a flurry of announcements around its Azure Cloud offering this week at Microsoft Ignite, including its Azure Stack set of Hybrid Containers that can be deployed on premise. Government agencies, which often prefer to have data co-resident, will like these options, which are similar to the Amazon AWS Outpost offerings announced last year.
Centers of Excellence Around Microsoft Power Apps
Of note, we also expect government, business, and IT teams to jump to the Microsoft Power App Platform, which is a low code approach to building new modern, digital applications. This in turn will create more demand for Microsoft Azure. We will discuss Power App Platform in some of our forthcoming analysis of #MSIgnite.
Bottom Line
The cloud world just changed—even if it is a little bit. With more government workloads going to the cloud, it is good to see a balance of trade occurring within the U.S. federal government. For everyone else, the challenge is how to leverage cloud to drive your business outcomes. One of the biggest strategies will be hybrid and multi-cloud. It is not just a SaaS cloud world anymore.