The contract, valued at up to $10 billion over 10 years, was awarded to Microsoft in October, and Amazon has formally challenged the Pentagon’s decision, filing a protest with the Court of Federal Claims last month that cites comments by President Trump as indicating bias against Amazon. Trump has repeatedly criticized Amazon, whose founder and chief executive, Jeff Bezos, owns The Washington Post.
“You ended up with a situation where there was significant political interference,” Jassy said. “When you have a sitting president who is willing to share openly his disdain for a company and the leader of that company, it makes it really difficult for government agencies, including the DoD, to make an objective decision without fear of reprisal.”
Though Amazon is challenging the award, the Pentagon’s decision has also put Amazon on the defensive at the cloud computing Re:Invent conference. Company executives often say they remain focused on customers, rather than competitors. But Jassy and other Amazon executives took opportunities during their presentations to chide Microsoft for what they said are its high prices and restrictive-licensing terms, as well as to tout their market lead.
Microsoft declined to comment on Amazon’s claims.
The size and prominence of the Pentagon contract could pierce the inevitability of Amazon’s hegemony in the cloud infrastructure market, said Ben Narasin, a partner at New Enterprise Associates, a Silicon Valley venture capital firm. Large corporate customers that have been slower to adopt cloud technology than start-ups may find comfort in the Pentagon’s decision to use Microsoft’s technology.
“Are you going to get fired for using what the U.S. government decided is suitable for its needs? No,” Narasin said.
The Pentagon deal drew comparisons to Amazon’s winning a $600 million contract to provide cloud computing services to the Central Intelligence Agency in 2013, a deal that helped give Amazon credibility with corporate customers who were wary about the security of cloud computing services.
“Six years later, Microsoft has come far enough along that if it’s good enough for the Pentagon, then it’s good enough for anyone,” said Bill Richter, the chief executive of Qumulo, a Seattle start-up that offers data storage and management on Amazon’s system, and plans to expand to Microsoft’s cloud offerings next year.
This week’s conference, with 65,000 attendees, was Amazon’s chance to counteract that impression. At a time when the tech industry is under fire for an oligopoly of giants dominating markets, Jassy trotted out market-share data from the research firm Gartner that shows Amazon’s global share of the cloud infrastructure business of selling technology to run core computing functions online and on-demand hit 47.8 percent last year.
But Jassy didn’t note that Amazon is facing increasing pressure from Microsoft in the market, which grew 31 percent last year to $32.4 billion globally. Amazon is three times as large, but Microsoft is slowly gaining share, growing from 12.7 percent of the market in 2017 to 15.5 percent last year. At the same time, Amazon’s share fell from 49.4 percent.
One way Amazon hopes to thwart Microsoft’s rise is to offer more services on top of its infrastructure, an appeal to those big corporate users that have been Microsoft’s best customers who often don’t want to cobble together offerings from multiple vendors. Over the years, Amazon has added services, sometimes competing with partners who sell similar technology.
At the conference, Jassy rolled out a new service, called Aqua, designed to help customers run analysis on massive amounts of data. It’s an offering that competes directly with Snowflake, a start-up that built its business on Amazon’s cloud but expanded to work on Microsoft technology last year, too.
Amazon may have more-advanced cloud technology than Microsoft, but big customers such as the Pentagon also value the support they get from a company that has catered to the market for decades, Snowflake chief executive Frank Slootman said.
Jassy “has not fully responded yet to Microsoft. He has pooh-poohed it,” Slootman said. “They are not fully internalizing the scale and scope of the challenge.”