AWS’ $10B NSA cloud contract could make it a government cloud leader...if it can get past a Microsoft protest

The news: Amazon Web Services (AWS) quietly secured a National Security Agency (NSA) cloud computing contract reportedly worth up to $10 billion, per NextGov.

  • Codenamed “WildandStormy,” the contract appears to be part of a larger, multi-year effort by the agency to move most of its data to the cloud, though details around the deal remain unclear.
  • If the contract succeeds, it would represent the most expensive cloud deal struck by the US government to date.
  • For context, US federal agencies collectively spent a record $6.6 billion on cloud computing in the fiscal year 2020, up from $6.1 billion in 2019, according to an analysis by Bloomberg Government via NextGov.

How we got here: The NSA’s cloud contract comes on the heels of fallout from a highly contentious competition between AWS and Microsoft over the Department of Defense’ ten-year $10 billion Joint Enterprise Defense Infrastructure (JEDI) cloud contract.

  • Microsoft was awarded the JEDI contract in October 2019, but was immediately challenged with a lawsuit from AWS, which claimed that then-President Trump’s bias against Amazon influenced the Pentagon’s decision.
  • Facing the prospect of a lengthy legal battle, Pentagon officials announced that they were scrapping JEDI earlier this year.

The big picture: US federal agencies such as the Department of Defense and the Central Intelligence Agency (CIA) have spent years soliciting private cloud partners to help store and analyze mammoth amounts of data.

  • AWS signed its first major cloud deal, worth $600 million, with the CIA back in 2013.
  • Then, late last year, the CIA awarded another multibillion dollar cloud contract, this time spread out amongst AWS, Microsoft, Google, Oracle and IBM.

The tables have turned: In a role reversal, now Microsoft is jockeying to have AWS’ contract thrown out. The company filed a petition against the deal with the Government Accountability Office on July 21, reportedly claiming that the NSA failed to conduct a proper evaluation when deciding on a cloud partner.

The opportunity: If successful, the NSA contract could help solidify AWS’ place as the US federal government’s preferred cloud partner over Microsoft, which in turn could help the company widen its market lead.

  • As of Q2 2021, AWS made up 31% of worldwide cloud infrastructure service spent worldwide, compared to Microsoft’s Azure with 22%, according to Canalys. Though already a sizable lead, AWS could widen that even further with successful large, multi-billion dollar government contracts.
  • Since the Pentagon’s JEDI contract unraveled, AWS has been able to solidify itself as the government’s cloud partner.
  • In late June, AWS endeared itself even further to the public sector by acquiring Wickr, an encrypted messaging app that has a strong reputation among government and military agencies.

What’s the catch? Microsoft’s protest of the NSA project could potentially derail AWS’ efforts, if Microsoft is willing to engage in a long, likely expansive legal battle. If that happens, the government cloud space might well end up right back where it started, with yet another $10 billion deal sent to the grave as the result of Big Tech deadlock.