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Microsoft Beats Amazon to Win $10 Billion Pentagon Defense Contract

The 10-year contract will seek to make the U.S. defense department more technologically agile.

Microsoft has beat out Amazon to win a $10 billion cloud-computing contract from the Pentagon. According to a statement, the 10-year contract for the Joint Enterprise Defence Infrastructure, or JEDI, will seek to make the U.S. defense department more technologically agile.

RELATED: MICROSOFT WANTS TO BRING INTERNET ACCESS TO 40 MILLION PEOPLE BY 2022

A turning point

The milestone highlights the emergence of Microsoft’s Azure cloud as a challenger to Amazon's AWS and represents quite a turning point from the early days of bidding where Amazon seemed to be in the lead.

Initially, Amazon was seen as the probable winner because its AWS business won a deal with the CIA in 2013 and because the firm had been certified at the highest existing security clearance level. But then President Trump began questioning the process.

In July, he claimed that he was getting "tremendous complaints about the contract with the Pentagon and Amazon" and that his administration would "take a very long look" at the process. It seems his words may have changed the outcome.

Wedbush analyst Dan Ives told CNBC the deal was a “game changer” for Microsoft, stating that it “will have a ripple effect for the company’s cloud business for years to come.” He also revealed that he believes Amazon will challenge the decision in court, but that Microsoft will prevail.

But what exactly is the JEDI deal? The U.S. Department of Defense wants to replace its aging computer networks with a single cloud system that it hopes will give military better access to data and the cloud from battlefields.

Surprised by the outcome

The deal represents the latest victory for Satya Nadella, who took over as Microsoft chief in 2014. Meanwhile, Amazon is said to be "surprised" by this outcome.

“We’re surprised about this conclusion,” an AWS spokesperson told CNBC in an email. “AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion. We remain deeply committed to continuing to innovate for the new digital battlefield where security, efficiency, resiliency, and scalability of resources can be the difference between success and failure.”

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