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CEO Satya Nadella says Microsoft beat Amazon for the $10 billion JEDI cloud contract because of its 'leadership' in connecting data centers to the cloud

Jan 14, 2020, 02:10 IST

Microsoft CEO Satya Nadella.REUTERS/Charles Platiau

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Microsoft CEO Satya Nadella believes the company won the Pentagon's $10 billion JEDI cloud computing contract over Amazon Web Services because of his company's investment in the so-called hybrid cloud.

"If you sort of even go back to the JEDI contract, that's kind of what happened really," Nadella said, "We stayed and said 'Look, somebody like the Department of Defense is going to need forward deployment that is not going to be like, 'Oh, here's the cloud.'' We just built basically a leadership position in what people describe as hybrid computing."

Microsoft's approach to computing, Nadella told reporters on Monday, emphasizes a balance between public and private resources.

Basically, the idea behind hybrid cloud computing is there are situations where on-premise computing is more appropriate than the cloud and vice versa, and it therefore makes sense to connect the two.

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The idea is not unique to Microsoft, but the company is generally accepted to have an advantage when it comes to hybrid computing. Analyst have said it's Microsoft's biggest opportunity to overtake industry-leading Amazon Web Services, which only relatively recently began investing in the space.

Nadella thinks it's behind Microsoft's win of the controversial Joint Enterprise Defense Infrastructure (JEDI) contract to move the Department of Defense's sensitive data to the cloud - although Amazon has other ideas and is challenging the decision based on alleged political bias and intervention.

"We are the only guys today who have the ability to distribute computation, dispute data and then have consistency of management, security and data across those two plates," Nadella said, apparently referring to on-site and cloud computing. "That's a hard thing."

Hybrid cloud and architecture 'advantages'

Microsoft, according to analysts, is "uniquely positioned" to get future cloud business because of its "best-in-class hybrid cloud offerings."

Nadella also pointed to advantages he sees for Microsoft in the way the company built its cloud infrastructure.

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Microsoft designed its entire cloud business around the idea of edge computing, basically expanding set of connected devices - like self-driving cars, or factory robotics - that process data locally, but connect to the cloud to tap into advanced AI and data-processing capabilities.

"You can't just - having built the cloud with one architecture - now say, 'Oh, let's now have an edge that's consistent," he said. "It's a decade-long effort, and that's essentially how we came to at it and that is an architectural advantage we have."

Why Amazon thinks Microsoft won

Amazon has a different take on why Microsoft won the JEDI contract.

Amazon is challenging the decision in the US Court of Federal Claims and, in court documents, said President Donald Trump led "repeated public and behind-the-scenes attacks" to ensure the company didn't get the contract, in order to harm CEO Jeff Bezos, his "perceived political enemy."

Meanwhile, the company has repeatedly touted what it believes is its own "technical superiority" over its competitor for the deal, to which Microsoft has said: "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."

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Nicholas Carlson contributed reporting to this story.

Got a tip? Contact this reporter via email at astewart@businessinsider.com, message her on Twitter @ashannstew, or send her a secure message through Signal at 425-344-8242.

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