Amazon, Oracle, Microsoft jockey for Pentagon’s cloud business

Bloomberg

In late February, Oracle Corp. co-CEO Safra Catz met with a top Pentagon official to discuss the government’s defense strategy days before the department was set to outline how it plans to spend billions of dollars on cloud-computing services.
Catz’s meeting with Deputy Secretary of Defense Patrick Shanahan, which was confirmed by a department spokesman, came as technology companies are raising concerns that the Pentagon is leaning toward choosing Amazon.com Inc.’s cloud division as a single provider for a multiyear contract to modernise its technology infrastructure.
Having already won two other government cloud contacts, Amazon Web Services is widely perceived as the front-runner for the Defense Department’s cloud award, while companies including Oracle, Microsoft Corp., and International Business Machines Corp. fight for a piece of that business.
Oracle has a vested interest in how the contract is awarded because it has long-term contracts with multiple government agencies that use its flagship database to store information on their own systems. As the agencies look to switch to cloud computing and eye market leader Amazon, these moves threaten Oracle’s traditional revenue sources. Oracle has tried to protect its database business by offering cloud services of its own, but has come late to that market.
The Catz meeting was “one of several such meetings that Deputy Secretary Shanahan is having with senior leaders of technology companies to brief them on the National Defense Strategy and its implementation,” Defense Department spokesman Navy Capt. Jeff Davis said.
Davis said the Pentagon’s cloud initiative wasn’t specifically discussed and there was no mention of any specific contract or companies. Oracle declined to comment on the meeting.
The Pentagon, which has pledged a fair and competitive selection process, will outline its plans for the procurement to IT vendors at an industry event that more than 100 companies were expected to attend in Northern Virginia. Oracle, Microsoft, IBM, and Alphabet Inc.’s Google are just some of the companies planning to be there.
“For years, Congress urged the department to streamline the way we buy, sustain, and invest in capabilities,” Pentagon spokeswoman Dana White said. “We achieve this by leveraging the innovation and ingenuity of the private industry.’’

Shift to Cloud
Cloud services—in which computing power and storage are hosted in remote data centres run by a third-party company rather than on-site in locally owned machines—can range from powering email and storing personnel files to running complex decision-making algorithms. The Pentagon said it’s making the shift to the cloud to strengthen its use of emerging technologies, including artificial intelligence, machine learning and the internet of things.
Tech companies, still worried that the Pentagon could favor Amazon, point to the Defense Department’s decision in early February to award a contract of as much as $950 million to REAN Cloud LLC, an Amazon affiliate, to help migrate its data to the cloud.
The jockeying over the cloud contracts comes as President Donald Trump’s administration is trying to modernise the federal government’s technology infrastructure.
Seattle-based Amazon leads the cloud infrastructure market with 44.2 percent, followed by Microsoft’s Azure with 7.1 percent, China’s Alibaba Group Holding Ltd. with 3 percent and Google Cloud Platform at 2.3 percent, based on total cloud industry 2016 revenue, according to research firm Gartner Inc.