The JEDI contract is back — with a different name.
Photo: Bill Clark/CQ-Roll Call via Getty Images

Cloud wars: Four tech giants vow to take the military into the cloud

Protocol Enterprise

Hello and welcome to Protocol | Enterprise. Today: The Pentagon picks four contestants for its second attempt to enter the cloud era, new security-breach disclosure rules, and the chip-making chip shortage.

Warfighting as a service

At some point in the near future, many years after it was first thought to be a good idea, the U.S. Department of Defense is going to modernize its tech infrastructure. Last week we learned that three cloud-computing giants — and one remarkably persistent lobbying operation that also sells enterprise tech services — will compete for that business.

Remember the name Joint Warfighter Cloud Capability, because that is what the new version of the JEDI cloud contract will be known as — a wise name change by the Pentagon to limit the spread of cliched headlines. In a notice released on Friday, the DoD announced that it would solicit bids from Google Cloud and Oracle in addition to JEDI finalists Microsoft and AWS, which are still likely to pick up significant portions of the work.

The JWCC award process is going to be very different from the multiyear JEDI saga for many reasons, not least of which is a very different presidential administration.

  • The JEDI contract was a winner-take-all bid, which was defensible at the time the plan was conceived; managing multiple cloud infrastructure providers at Pentagon scale in 2017 would have been extremely difficult.
  • However, multicloud technologies have matured greatly since then, to the point where even AWS decided last year that there was enough demand to justify offering its own multicloud services.
  • Google sat out the JEDI contract process, bowing to the demands of a workforce that did not want to build tools that would eventually be used to kill people. Under Google Cloud CEO Thomas Kurian, who joined the company in 2019, those concerns have been sidelined.

Still, AWS and Microsoft are in the driver's seat when it comes to defense cloud spending.

  • "Currently, the Department is aware of only five U.S.-based hyperscale [cloud service providers]," it said in its July notice canceling the JEDI contract. That makes Friday's decision yet another blow to IBM's fading cloud division.
  • "Furthermore, only two of those hyperscale CSPs — AWS and Microsoft — appear to be capable of meeting all of the DoD's requirements at this time, including providing cloud services at all levels of national security classification," the DoD said in July.
  • The department employs 2.91 million people, and most of those people aren't fighting wars; they need to run many of the same applications to manage payroll systems, inventory controls and resource planning as most of us.
  • That gives Google and Oracle a chance to compete for business at different levels of the massive DoD organization. Even a slice of the $37.7 billion the Pentagon spent on IT services in its 2021 fiscal year is serious cash.

So what happens next? The four companies selected will now submit proposals and negotiate with Pentagon officials, a process that could run well into next year and seems likely to take far longer.

  • Expect a formal protest from any cloud company that does not get awarded as much business as it thinks it should, which probably includes all of them.
  • Integrating multiple cloud providers is easier than it was in 2017, but that doesn't mean it's easy.

It's a little unsettling in the age of ransomware and widespread government cybersecurity failures that much of the military is still operating on outdated tech. If the deal is finalized on schedule, it will have been five years since the Pentagon prioritized the need to improve its infrastructure, and that is a very long period of time in a market that changes as quickly as enterprise tech.

— Tom Krazit

This week on Protocol

On notice: President Biden's cybersecurity agenda is starting to take shape, and a new rule scheduled to take effect next year requires banks to inform the federal government of any ransomware attacks or other cybersecurity issues within 36 hours of detection, Protocol's Sarah Roach reported. Many companies are loathe to admit their systems were breached or that they paid ransomware, but financial services companies won't be able to sit on that information under the new rule.

AI opportunity: The recently passed Infrastructure Investment and Jobs Act will direct significant amounts of money to companies working on AI for transportation and clean energy. Protocol's Kate Kaye broke down which areas are ripe for investment and how the new funding will roll out.

Upcoming at Protocol

Join us Wednesday, Dec. 8, at 10 a.m. PT for The Year in Enterprise Tech, a live virtual event recapping the week that was at AWS re:Invent and discussing some of the most important trends and developments that will shape enterprise computing in 2022. Our panel features Shelia Gulati of Tola Capital, Liz Fong-Jones of Honeycomb, and Corey Quinn of The Duckbill Group in a free-wheeling discussion moderated by Protocol's Tom Krazit. RSVP here.

Financial corner

Lacework raised $1.3 billion from new and existing investors valuing its cloud security technology, built on top of Snowflake's cloud data warehouse service, at $8.3 billion.

Netlify raised $105 million in new funding as it tries to establish new ways of building web applications.

Companies are snapping up tools to help them improve their online customer support experiences, allowing Braze to raise $520 million during its IPO last week. Formstack just raised $425 million for similar customer-support tools that can be built using no-code technologies.

Kandji needed more resources to build out its existing business in the small-business mobile-device management market and got it, raising $100 million valuing the company at $800 million. That'll be useful following Apple's decision to enter the market.

Around the enterprise

Workday acquired VNDLY, which helps companies manage their relationships with suppliers and contractors, for $510 million amid solid third-quarter earnings results.

How are things at Google Cloud? Thomas Kurian has dramatically increased the size of its sales operation in the last two years and told Protocol earlier this year that proper compensation targets will help it achieve its goals. But Google Cloud salespeople are worried about hitting their targets under a revamped bonus structure, according to Business Insider.

The chip shortage is so bad that Applied Materials, a company that sells desperately needed chip-making tools for chip companies, missed its first-quarter revenue guidance because it couldn't get its hands on enough chips to make its chip-making tools.

Thanks for reading: Protocol | Enterprise is off this week for the holidays, but we'll see you next Monday!

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