Amazon’s Big JEDI Gamble ANALYSIS

WASHINGTON: Amazon’s legal strategy to overturn the award of the Pentagon’s JEDI cloud computing mega-contract to Microsoft is taking shape. Basically, their argument is that Amazon Web Services is so superior to Microsoft Azure that only meddling by President Trump could explain the Pentagon awarding JEDI to Microsoft instead. And Amazon is taking this argument straight to the Federal Court of Claims, bypassing the Government Accountability Office. But there are two big risks with that strategy.

Proving Interference Isn’t Easy

The President has publicly disparaged Amazon, its owner, Jeff Bezos in general and the company’s JEDI bid in particular. There are reports that the president told people privately he wanted Amazon to lose. While we can’t independently confirm this, it might explain why Amazon bypassed the normal forum of first resort for losing bidders, the Government Accountability Office, which confirmed to us it has received no protest from AWS.

(It’s worth noting that while GAO bid protest rulings are often acted on by government agencies, and it would extraordinary for DoD to defy one on JEDI, they have no legal force).

One big advantage of a GAO protest is that it automatically triggers a three-month halt in the procurement, whereas in a court case Amazon will have to convince a judge to issue an injunction. But a disadvantage of going to GAO, for Amazon, is that the agency prefers to rule on narrow procedural grounds. Did the agency that awarded the contract follow the law, regulations and its own criteria in picking the best contender or not? One longtime DoD contracting veteran, David Berteau, said last month he doubted GAO would even consider the president’s public statements.

By contrast, the Federal Court of Claims has a lot more leeway to consider a wider range of issues and subtler forms of interference. If Amazon wants to argue that Trump’s much-publicized animus poisoned the well for any impartial decision at the Pentagon, a court may be a more receptive audience than GAO.

Microsoft’s Gotten Better

The argument that Amazon Web Services is way ahead of Microsoft Azure is a harder one to make today than it would have been two years ago, when the JEDI program was getting started.

In fact, it’s harder to make that case than it was even six weeks ago. That’s when Microsoft announced its latest addition to Azure, a miniaturized, ruggedized, battery-powered device for accessing the cloud – the Azure Data Box Edge, co-designed by Dell. It’s small enough to fit into a soldier’s backpack but is capable of connecting troops in the field to distant servers. That kind of portable “edge computing” is crucial to the Pentagon’s vision of a cloud that can provide data and AI-driven analysis to even frontline combat troops.

Amazon Web Services absolutely stole a march on Microsoft and all its other rivals early on by getting a landmark contract to provide classified cloud services for the Intelligence Community. Since then, Microsoft has been rapidly improving Azure:

• It rolled out its Azure Government Secret offering in fall 2017, certified to handle classified data.
• It announced upgraded security for its unclassified cloud and two new Secret-rated “regions” in April of this year. That helped meet a crucial Pentagon demand that JEDI not be dependent on any one data center or any one region, lest the central services be destroyed.
• In October, it announced an “emulator” system that allows secure access to the Secret cloud from unclassified access points.
• And, that same month, as we noted above, it announced the new small access device.

The market is paying attention. Back in April, Microsoft announced earnings well in excess of estimates, driven in large part by Azure’s expansion. A leading market analyst named Daniel Ives declared at the time that the JEDI competition “is now a toss-up ….vs. the slam dunk win for AWS that it appeared to be roughly a year ago.”

Yesterday, Amazon Web Services CEO Andy Jassy told employees that AWS has filed suit over the JEDI award because “we feel pretty strongly that it wasn’t adjudicated fairly,” accoding to Federal Times.

“I think that if you do any thorough, apples-to-apples, objective comparison of AWS versus Microsoft, you don’t come out deciding that they’re comparable platforms,” Jassy said. So how did Amazon lose? “I think when you have a sitting president who’s willing to publicly show his disdain for a company and the leader of a company, it’s very difficult for government agencies including the DoD to make an objective decision without fear of reprisal.”

But what if the government can convince the judge that Microsoft has gotten good enough that Azure and AWS actually are “comparable platforms” and that a reasonable official could “make an objective decision” in favor of Azure? Then Amazo may have a hard time proving that President Trump’s badmouthing actually mattered.