Meet America’s newest military giant: Amazon

The Pentagon’s controversial $10bn JEDI cloud computing deal is one of the most lucrative defense contracts ever. Amazon’s in pole position to win—and its move into the military has been a long time coming.

Sharon Weinberger, MIT Technology Review- In July, when President Donald Trump was in the Oval Office with the Dutch prime minister, he took a few moments to answer questions from reporters. His comments, in typical fashion, covered disparate subjects—from job creation to the “squad” of congresswomen he attacks regularly to sanctions against Turkey. Then a reporter asked him about an obscure Pentagon contract called JEDI, and whether he planned to intervene in it.

“Which one is that?” Trump asked. “The Amazon?”

The reporter was referring to a lucrative and soon-to-be-awarded contract to provide cloud computing services to the Department of Defense. It is worth as much as $10 billion, and Amazon has long been considered the front-runner. But the deal was under intense scrutiny from rivals who said the bid process was biased toward the e-commerce giant.

“It’s a very big contract,” said Trump. “One of the biggest ever given having to do with the cloud and having to do with a lot of other things. And we’re getting tremendous, really, complaints from other companies, and from great companies. Some of the greatest companies in the world are complaining about it.”

Microsoft, Oracle, and IBM, he continued, were all bristling.

“So we’re going to take a look at it. We’ll take a very strong look at it.”

Shortly afterwards, the Pentagon put out an announcement: the contract was on hold until the bid process had been through a thorough review.

Many saw it as yet another jab by Trump at his nemesis Jeff Bezos, the CEO of Amazon and owner of the Washington Post. Since arriving in the White House, Trump has regularly lashed out at Bezos over Twitter—blaming him for negative press coverage, criticizing Amazon’s tax affairs, and even griping about the company’s impact on the US Postal Service.

After all, until just a few months ago most Americans had never heard of JEDI, much less cared about it. Compared with efforts to build large fighter aircraft or hypersonic missiles—the kinds of headline military projects we’re used to hearing about—the Joint Enterprise Defense Infrastructure program seemed downright boring. Its most exciting provisions include off-site data centers, IT systems, and web-based applications.

Perhaps it’s equally mundane that Amazon would be in the running for such a contract. It is, after all, the world’s leading provider of cloud computing; its Amazon Web Services (AWS) division generated more than $25 billion in revenue in 2018.

But Trump’s diatribe wasn’t just about a contract war between a handful of technology companies. It was a spotlight on the changing nature of Amazon and its role in national security and politics. The company has spent the past decade carefully working its way toward the heart of Washington, and today—not content with being the world’s biggest online retailer—it is on the brink of becoming one of America’s largest defense contractors.

The Sheraton Hotel in Pentagon City, a neighborhood adjacent to the Department of Defense, feels a world away from the ethos of Silicon Valley and its fast-moving startup culture. In March 2018, the 1,000-seat ballroom of the 1970s-era brutalist hotel was packed with vendors interested in bidding on JEDI. As the attendees sat in tired King Louis–style ballroom chairs, a parade of uniformed Pentagon officials talked about procurement strategy.

For the Beltway’s usual bidders, this was a familiar sight—until Chris Lynch took the stage. Lynch, described by one defense publication as the “Pentagon’s original hoodie-wearing digital guru,” was sporting red-framed sunglasses pushed up above his forehead and a Star Wars T-shirt emblazoned with “Cloud City.” 

He had arrived at the Pentagon three years earlier to freshen the moribund military bureaucracy. A serial entrepreneur who worked in engineering and marketing in Seattle, he quickly earned the enmity of federal contractors who were suspicious of what the Pentagon planned to do. Some took his casual dress as a deliberate sneer at the buttoned-up Beltway community.

“There’s a place for that and it’s not in the Pentagon,” says John Weiler, the executive director of the IT Acquisition Advisory Council, an industry association whose members include companies hoping to bid on JEDI. “I’m sorry, wearing a hoodie and all that stupid stuff? [He’s] wearing a uniform to kind of pronounce that he’s a geek, but really, he’s not.”

Even those who weren’t offended thought Lynch made it clear where his preferences lay—and it wasn’t with traditional federal contractors.

“What if we were to take advantage of all these incredible solutions that have been developed and driven by people who have nothing to do with the federal government?” he asked during his speech to the packed ballroom. “What if we were to unlock those capabilities to do the mission of national defense? What if we were to take advantage of the long-tail marketplaces that have developed in the commercial cloud industries? That’s what JEDI is.”

The Pentagon had certainly decided to make some unconventional moves with this contract. It was all going to a single contractor, on an accelerated schedule that would see the contract awarded within months. Many in the audience inferred that the deal was hardwired for Amazon.

Weiler says the contract has “big flaws” and that the Pentagon’s approach will end up losing potential cost efficiencies. Instead of having multiple companies competing to keep costs down, there will only be a single cloud from a single provider.