The JEDI delay leaves Microsoft in limbo

In drizzly Redmond on Wednesday, Microsoft Azure chief Jason Zander invited a group of reporters on a tour of the company's sprawling Azure Cloud Collaboration Center, where it was hard to miss big signs that reserved a conference room and a snack table for "JEDI."

On Thursday, Microsoft learned that it can cut back on the JEDI snack budget for a while.

Microsoft's landmark military cloud contract is in limbo after a federal judge issued a temporary restraining order against Microsoft and its work on the 10-year, $10 billion JEDI (Joint Enterprise Defense Infrastructure) cloud contract, ruling in favor of rival AWS' protest of the bid. The order was sealed, but Microsoft confirmed that it will have to pause work with the Department of Defense on the coveted cloud contract.

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While the temporary restraining order doesn't exactly pave the way for AWS to win the deal, it's not the outcome Microsoft was hoping for, and it could have lasting impacts on how and when the contract is implemented. Company executives have pointed to the JEDI deal as a potential springboard for Microsoft's cloud business, which has lagged AWS for years.

"While we are disappointed with the additional delay, we believe that we will ultimately be able to move forward with the work to make sure those who serve our country can access the new technology they urgently require," Microsoft said in statement attributed to Frank Shaw, the company's head of public relations. "We have confidence in the Department of Defense, and we believe the facts will show they ran a detailed, thorough and fair process in determining the needs of the warfighter were best met by Microsoft."

Shortly after the Department of Defense announced in October that Microsoft had won the JEDI contract after a multiyear bidding process, AWS vowed that it would protest the decision, citing the lengthy record of derogatory statements made by President Trump against Amazon. Amazon CEO Jeff Bezos also owns The Washington Post, which has drawn the ire of the president by reporting on his administration over the last several years.

Earlier this week, AWS informed the U.S. Court of Federal Claims that it wants to depose President Trump and several other current and former members of the Department of Defense in an effort to determine how much the president interfered in the bidding process for the JEDI contract. AWS, a pioneer in cloud infrastructure services that has commanded this market for over a decade, believes that President Trump's well-known disdain for Bezos affected the Pentagon's decision to award the JEDI contract to Microsoft.

"President Trump has repeatedly demonstrated his willingness to use his position as president and commander in chief to interfere with government functions — including federal procurements — to advance his personal agenda," AWS said in a statement earlier this week. The company did not respond to a request for comment on the temporary restraining order Thursday.

Although the ruling was sealed, it seems like Judge Patricia Campbell-Smith would like to take a closer look at the case. The work was already underway: Microsoft executives began meeting with military officials in December to begin implementing the project, meant to catapult the military's technology infrastructure into the modern era, according to NextGov. And judging by the snack table inside the Azure Cloud Collaboration Center, discussions have continued as recently as this week.

AWS still faces several hurdles in its attempt to overturn the decision. The company has cited no hard evidence to back up its claims that the Department of Defense was subject to political manipulation by the president, pointing instead to several comments made by the president on television and in other forums disparaging Amazon and the JEDI bidding process. Recent events also suggest that President Trump plays a much more hands-on role in the day-to-day business of the various departments under his control than have past presidents.

The question now is whether Judge Campbell-Smith agrees that those comments — a mix of tweets and on-camera statements — were prejudicial against AWS' bid. That verdict will have to wait until the ruling is redacted and unsealed. Even if Microsoft ends up keeping the contract, the suit and the fact that a judge has now sided with Amazon's argument at least temporarily could become a black mark on what should have been a celebration for Microsoft.

The company has asserted itself as a bona fide cloud provider over the last several years, earning an estimated $5.3 billion from its Azure service during the last quarter (the company does not disclose revenue related to Azure). While it was slower than Amazon to grasp the impact that cloud computing would have on the way businesses acquire technology services, under CEO Satya Nadella, Microsoft has dedicated itself to cloud services and has emerged as a strong competitor to AWS when companies look for cloud infrastructure services.

AWS, Microsoft and the court will now confer on a redacted version of the sealed temporary restraining order by Feb. 27. AWS was also ordered to put up $42 million "for the payment of such costs and damages as may be incurred or suffered in the event that future proceedings prove that this injunction was issued wrongfully," according to the docket report for the case.

The JEDI contract is a massive undertaking, and any delay could have ripple effects on the Pentagon's efforts to modernize its infrastructure. It's unclear how much progress Microsoft and military leaders have made on the project to date, but the tech company is being treated to a taste of old-fashioned military culture: hurry up, and wait.