New Pentagon Cloud Program Will Eat Into Vendors’ Revenue

The Pentagon’s fresh approach to procuring cloud services is likely scrambling revenue projections for incumbent vendors like Dell, Carahsoft, and SAIC.

A shift in Defense Department cloud purchasing away from tech integrators to four companies selling their own products and related services means the 10 vendors that have brought in the most revenue from the defense cloud market since fiscal 2018 are looking at a dramatic new selling environment.

Alphabet Inc., Oracle Corp., Microsoft Corp., and Amazon.com Inc. won contracts as part of the Joint Warfighting Cloud Capability program to build cloud computing that spans all parts of the Defense Department.

Earlier: Alphabet, Oracle, Microsoft, Amazon to Build Pentagon Cloud

The four companies will each have to fight for individual task orders under JWCC, which has a maximum total value of $9 billion.

Companies with an established foothold in the DOD cloud market have earned millions providing on-premises cloud infrastructure, platforms, software, and support services.

Dell earned $1.6 billion for Pentagon cloud services over the last five fiscal years, with Carahsoft bringing in $1 billion and SAIC $800 million.

Nine out of the department’s 10 top vendors for this market had cloud revenue growth over the last five years. Several of those companies, Dell included, enjoyed 1,000%-plus growth.

DOD officials have made clear there will be no on-ramp for new companies to enter the current JWCC vehicle but follow-on procurement once it expires could create more room for additional vendors. The four winners’ contracts have a three-year base with two option years.

“If industry changes—we see something that we want to go after, we can start that process earlier into the JWCC contract execution,” Sharon Woods, director of the Defense Information Systems Agency’s Hosting and Compute Center, said at a Pentagon press briefing.

To contact the reporter on this story: Josh Axelrod in Washington at jaxelrod@bloombergindustry.com

To contact the editors responsible for this story: Amanda H. Allen at aallen@bloombergindustry.com; Fawn Johnson at fjohnson@bloombergindustry.com