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Unprecedented change doomed JEDI

The ongoing JEDI controversy comes to an end

Since the process began in 2017, it was widely speculated that the approach used with the Joint Enterprise Defense Infrastructure (JEDI) contract was too large and diverse to be fulfilled by a single vendor. The unprecedented global disruption brought on by COVID-19 during 2020 and 2021 quickly confirmed those suspicions. The shift to remote work, disruptions in global IT supply chains, and accelerated interest in cloud-delivered IT services only added to the rapid pace of change in the cloud market from 2017 to present day.

Two weeks ago the Pentagon officially announced its decision to cancel the $10 billion JEDI contract with Microsoft (Nasdaq: MSFT), with the Pentagon stating, “With the shifting technology environment, it has become clear that the JEDI cloud contract, which has long been delayed, no longer meets the requirements to fill the Department of Defense’s (DOD) capability gaps.” Since Microsoft won the JEDI contract in October 2019, the contract has been mired in controversy, with Amazon Web Services (AWS) (Nasdaq: AMZN) filing numerous protests and legal challenges on the award starting in November 2019.

While politically charged rumors continue to circulate around the initial JEDI contract award to Microsoft, TBR believes the DOD’s decision to cancel the contract goes beyond these assertions and was driven by the realities of a maturing cloud market, which is becoming increasingly hybrid. And, when combined with the fact that the JEDI requirements were constructed almost two years ago, the needs of the highly complex, inter-related federal agencies demanding cloud technologies necessitates a hybrid IT and cloud approach. In summary, the DOD’s updated contract approach will provide the individual agency stakeholders with the flexibility to select cloud services and solutions based on the existing capabilities and strengths of all the leading technology providers vying for the opportunity.

Understanding the evolving JEDI controversy

Microsoft won the JEDI contract in October 2019 and prevailed against a subsequent lawsuit by AWS in 2020 that prompted the DOD to review its source selection process. The award has been mired in a legal battle between AWS and Microsoft and two years after the initial award, there was seemingly no end in sight. The DOD intimated in January 2021 that its patience with the unending court battles was running out as its need for a cloud platform was “urgent” according to acting DOD CIO John Sherman. The protracted litigation was likely a factor in JEDI’s termination and industry observers speculated the next phase of legal wrangling would examine claims of inappropriate political influence over the vendor selection process, potentially dragging the case out even further.

In the cancellation announcement the DOD stated that the original JEDI concept no longer met the DOD’s needs due to “evolving requirements, increased cloud conversancy, and industry advances,” implying JEDI had lost relevance from both technical and procurement standpoints. The contract aimed to be the foundation of a general-purpose enterprise cloud for the DOD, while the agency’s other major cloud vehicles, milCloud 2.0 and Defense Enterprise Office Solutions (DEOS), would provide for the DOD’s fit-for-purpose cloud needs. Even as the JEDI contract languished in legal purgatory, milCloud 2.0 moved forward and is now available. DEOS is right on its heels.

Not only did the DOD’s cloud needs evolve, but the termination of JEDI strongly suggests the DOD wants maximum flexibility to choose the vendor providing the most mission-appropriate cloud services on an agency-by-agency basis, while concurrently avoiding the risk of over-reliance on a single contractor for the entire agencywide cloud platform.

JEDI will be replaced by the multicloud, multivendor, and likely multibillion-dollar Joint Warfighter Cloud Capability (JWCC) IDIQ (indefinite delivery/indefinite quantity) program. JEDI was to underpin the DOD’s Joint All-Domain Command and Control (JADC2) initiative to connect systems across all military branches in a single, unified network, as well as the DOD’s Artificial Intelligence and Data Acceleration (ADA) program. The absence of a DOD-wide, purpose-built enterprise cloud solution would eventually hamper the JADC2 initiative, even as several DOD departments had recently kicked off their own cloud programs while JEDI remained stuck in court. JWCC will retain JEDI’s overarching objective to facilitate the adoption of digital solutions in AI, analytics, automation, big data, machine learning and storage across DOD C5ISR (command, control, communications, computers, cybersecurity, intelligence, surveillance, and reconnaissance) IT infrastructures.

The DOD will evaluate other cloud vendors, including Google (Nasdaq: GOOGL), IBM (NYSE: IBM) and Oracle (NYSE: ORCL), for future cloud procurements. However, AWS and Microsoft will remain the principal cloud competitors, at least at the outset, as the DOD stated that they were the only vendors able to meet DOD cloud requirements. AWS and Microsoft will receive RFPs by mid-October 2021 and notification of awards by April 2022. The DOD plans to have a more comprehensive multivendor cloud procurement vehicle in place by 2025, but for now, JWCC should address the DOD’s urgency to modernize its enterprise and tactical edge computing capabilities across all service branches.

COVID-19’s early financial impacts: Cloud and SI vendors

Insights from TBR’s Cloud and IT Services teams

Join Allan Krans, Patrick Heffernan, Kevin Collupy and Boz Hristov as they discuss how the COVID-19 outbreak has impacted 1Q20 earnings in the cloud, IT services and consulting markets. While the world has been significantly disrupted by COVID-19, the impact on technology vendor revenue and cost structures has thus far been the subject of speculation, but without many facts. With 1Q20 earnings being released by most vendors in mid-April, we will get the first real glimpse into the financial impact for technology vendors. Join TBR to hear our interpretation of the financial results from leading vendors including Amazon Web Services, IBM, Microsoft, Google, Capgemini, Accenture, Infosys, DXC Technology and SAP and challenges facing these markets and firms.

Don’t miss:

  • 1Q20 financial performance overview of cloud and IT services markets
  • Vendors faring better and worse in the current environment
  • Short-term and long-term impacts of the COVID-19 virus
  • Potential changes to 2020 and future market forecasts in the cloud and systems integration (SI) markets
  • Business strategies emerging in reaction to the COVID-19 pandemic

5G-readiness spend and migration to new network architectures spur the TIS market to growth in 3Q18

According to Technology Business Research, Inc.’s (TBR) 3Q18 Telecom Infrastructure Services (TIS) Benchmark, the TIS market grew as communication service provider (CSP) investment in areas tied to 5G-readiness increased. CSPs are rearchitecting their networks leveraging NFV, SDN and the cloud as well as implementing new business models, which requires growing spend across a broad range of professional services. Deployment services spend grew slightly, but the market will strengthen as the 5G spend cycle ramps up over the next couple of years, although the spend intensity will be lower than during the LTE cycle. RAN suppliers Nokia (NYSE: NOK), Ericsson, Huawei, ZTE and Samsung will capture incremental TIS market share as they drive high volumes of services attached to their 5G RAN. This is already occurring to some extent as CSPs densify networks as part of their 5G-readiness strategies. Though 5G will require significant hardware spend, the aggregate amount will be lower compared to LTE, which will drive vendors to explore new market areas, such as Industry 4.0.

The managed services market was flat year-to-year in 3Q18 as a decline in outsourcing was offset by growth in the out-tasking market. Generally, vendors are exercising pricing discipline when determining which outsourcing contracts to take on in an effort to improve margins. Ericsson is currently leading the way in this regard as it evaluates 42 contracts for exit or rescoping. Huawei, ZTE and CCS have been less concerned with price and are focused on consolidating the outsourcing market. Other vendors, including those that are historically hardware-centric with little to no footprint in the managed services market, are increasingly playing in out-tasking as they will manage applications deployed in CSP networks. Ciena (NYSE: CIEN) is an example of this trend.

 

 

TBR’s Telecom Infrastructure Services Benchmark provides quarterly analysis of the deployment, maintenance, professional services and managed services markets for network and IT suppliers. Suppliers covered include Accenture (NYSE: ACN), Amdocs, Atos, Capgemini, CGI, China Communications Services, Ciena, Cisco (Nasdaq: CSCO), CommScope, CSG International, Ericsson, Fujitsu, Hewlett Packard Enterprise (NYSE: HPE), Huawei, IBM (NYSE: IBM), Infosys (NYSE: INFY), Juniper Networks (NYSE: JNPR), NEC, Nokia (NYSE: NOK), Oracle (NYSE: ORCL), Samsung, SAP (NYSE: SAP), Tata Consultancy Services, Tech Mahindra, Wipro (NYSE: WIT) and ZTE.