The big picture: Amazon seems to think that given its dominance in the cloud space, it would have made perfect sense that the government choose them instead of one of the smaller competitors. The company will protest the decision in court as it believes it contains some political elements of bias to it.
Last month, the Pentagon decided to award its high-profile, JEDI cloud computing contract to Microsoft, which surprised many as Amazon was well-positioned to win. The deal will have Microsoft help the Department of Defense upgrade its aging computer infrastructure with a cloud-based solution.
While the Redmond giant doesn't seem like a bad choice considering the company has been primarily focused on the cloud for the last few years and has a lot of talented cloud engineers working on its Azure service.
Amazon says it plans to challenge the government's decision in federal court, alleging the contract has been awarded to Microsoft as a result of political bias. A spokesperson said in a statement that Amazon is "uniquely experienced and qualified to provide the critical technology the US military needs, and remains committed to supporting the DoD's modernization efforts."
The Department of Defense investigated the possibility of a conflict of interest but eventually settled on the same conclusion -- that Microsoft was more qualified than Amazon for the job. But the latter is convinced the JEDI evaluation process "contained clear deficiencies, errors, and unmistakable bias."
Amazon had been hiring tens of thousands of people in Washington as part of a strategic expansion that was meant to tackle government business. The company also leads the pack in terms of cloud computing, owning almost half of the entire market if you go by Gartner's numbers. That said, it has yet to dabble in cloud gaming services despite obvious signs that it plans to do so.
Oracle also wanted to get its hands on the JEDI contract but was ruled out early in the bidding process. The company has a solid partnership with Microsoft where the two linked their cloud services together.
Analyst say Microsoft managed to get the contract because it stayed out of politics and focused on aligning technology with the needs of its customer base. The Redmond giant earns one third of its total revenue from cloud services. By comparison, Amazon's cloud business brought in just $9 billion of the total $70 billion in revenue last quarter.
In a recent interview with GeekWire, Microsoft CEO Satya Nadella noted "we don’t celebrate the awarding of a contract for us. We want to stay focused on, in this case, on the Department of Defense, their mission and how we support them. I feel good about the fact that we were able to submit our proposal to their RFP and come out on the top. But this is just the start, and we now are very, very focused on ensuring that we meet their needs."
In any case, Amazon has bigger things to worry about, such as being under the watchful eye of Congress, who wants to get a clear idea of how the company was able to reach its dominance in online retail and cloud services.