Microsoft Corp. has landed a huge $1.76 billion cloud computing contract from the U.S. Department of Defense under which it will provide an array of services to several agencies over the next five years.

The contract, which runs until January 2024, calls for Microsoft to supply cloud services to the DOD, the U.S. Coast Guard and the intelligence community. The services include “support for tools, access to knowledge bases, problem resolution assistance and custom changes to Microsoft source code when applicable,” the DOD said in announcing the award.

The DoD explained late last week that the contract is based on an “indefinite delivery/indefinite quantity” agreement, which means Microsoft will be paid incrementally according to “individual task orders” using primarily operations and maintenance funds.

Microsoft will no doubt be satisfied to have won such a large contract, but more importantly the deal could also boost its chances of landing a much bigger reward: the DOD’s $10 billion Joint Enterprise Defense Infrastructure project. Whoever wins the JEDI cloud contract will host much of the Pentagon’s information technology infrastructure and help create huge cloud computing system that can enable new weapons capabilities and store classified data.

The Pentagon is set to announce the winner of the JEDI contract in the first quarter, and Microsoft’s rival Amazon Web Services Inc. is widely viewed as the front-runner at this stage. AWS is favored not only because it’s seen as the leader in the public cloud computing market, but also because of its solid track record with the U.S. government. It notably won a $600 million contract to host the Central Intelligence Agency’s IT infrastructure in 2014, for example.

AWS has another key advantage in that it’s the only public cloud provider certified as capable of supporting U.S. Defense Information Systems Agency Level 6 secret/classified data requirements, said analyst Charles King of Pund-IT Inc.

“However, it appears that Microsoft Azure will be able to support DISA Level 6 in the first quarter of this year, meaning that the company can and probably will give AWS a run for its money,” King said. “Having the same company provide both on-prem and cloud services would probably simplify some processes.”

The latest contract further boosts Microsoft’s chances, since it deepens the company’s existing close links to the DOD. In November for instance, Pentagon chiefs agreed a $480 million deal with Microsoft that will see the Redmond firm supply military personnel with the HoloLens augmented reality headset. And last month, six Microsoft resellers were granted a place on the DOD’s Enterprise Software Initiative framework that will allow them to bid for any new cloud contracts.

Other companies competing to win the JEDI contract include Oracle Corp., which has notably taken the DOD to court over its bidding process, which it says is “riddled with conflicts of interest that favor AWS” over the other bidders. IBM Corp., also trying to win a piece of the JEDI pie, has also been critical of the bidding process and the DOD’s decision to award the contract to a single bidder.

Analyst Holger Mueller of Constellation Research Inc. told SiliconANGLE that the smaller $1.76 billion contract will give Microsoft a unique opportunity to establish its development tools and services inside of the DOD and other agencies. “The large amount points to the likelihood that more than software and services are included into this contract,” Mueller said.

Mueller was also critical of the DOD’s decision to award the JEDI contract to a single bidder, saying that the decision goes against established enterprise best practices.

“We remain certain that these DOD projects need a multicloud approach, similar to much smaller enterprise-level projects,” he said. “Some best practices do not change between commercial and public cloud projects.”

Google LLC had also tendered a bid to win the JEDI contract, only to pull out of the race because of a conflict with its principles on the ethical use of artificial intelligence technology.

Photo: Microsoft