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Amazon Seeks to Halt Work on Microsoft & DoD's JEDI Contract

Amazon AMZN is continuing its efforts to block Microsoft MSFT from working on the 10-year Joint Enterprise Defense Infrastructure (JEDI) cloud contract, which was awarded by the U.S. Defense Department to the latter in 2019.

Per a Reuters report, Amazon now plans to seek order to temporarily block Microsoft from performing any substantial work on the $10 billion Pentagon cloud contract.

Amazon’s cloud-computing arm, Amazon Web Services (AWS) gave a notice of its plans as its attorneys and the Justice Department filed jointly with the Court of Federal Claims in Washington. Among other claims, AWS contends that the award decision was affected by political bias.

Notably, Microsoft intended to begin the first substantive task order of building the unclassified portions of JEDI by Feb 11. As part of Amazon’s bid protest lawsuit, its lawyers had previously said they were considering asking the court for a preliminary injunction.

Moreover, the two companies set out a proposed schedule to deal with the litigation, including Amazon’s plan to seek a court order while Microsoft looks to ask the judge to dismiss the lawsuit.

According to the proposed schedule, the requests for the dismissal and for the temporary restraining order or a preliminary injunction are to be filed by Jan 24.

AWS Domination Challenged By Microsoft’s Azure

The battle for JEDI has been hotly contested since 2018 by Amazon, Microsoft, Alphabet’s GOOGL Google, Oracle ORCL and IBM among others.

Both Amazon and Microsoft have previously done business with the Pentagon and Department of Defense (DoD) in varying degrees. However, the JEDI contract represents a much larger public investment in the companies’ respective cloud infrastructure to support sensitive and timely data.

Notably, AWS remains the largest Infrastructure as a Service (IaaS) provider by some distance. Per a Canalys report, AWS, Azure and Google had 32.6%, 16.9% and 6.9% market share, respectively while the global cloud infrastructure services market grew 37% year over year to reach $2.75 billion in third-quarter 2019.

However, Microsoft’s Azure continues to see growth among businesses. Per a CNBC report, a recent Goldman Sachs survey of 100 technology executives working with Global 2000 companies showed that 56 executives are using Azure for cloud infrastructure while 48 are using AWS.

Microsoft’s Hybrid Cloud Gaining Traction

Microsoft has been a front-runner in hybrid cloud provisioning from the beginning. The company made the hybrid approach central to its cloud strategy, which is expected to support the DoD in its mission-critical operations.

Moreover, the DoD’s prior contracts with the company, including the Windows 10 and $1.76 billion enterprise service contracts, may have supported its decision to go with Microsoft.

Further, Microsoft invested heavily in new technologies in 2019. These include Kubernetes for Microsoft and GitHub Actions for Azure – which lets developers automate the process of checking code to deploy containerized applications, web applications or server-less applications. This is expected to be a strong driver for Azure cloud adoption in 2020.

Zacks Rank

Currently, both Amazon and Microsoft carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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