Microsoft Wins $1.76 Billion Services Contract For U.S. Military As JEDI Decision Looms

Microsoft has won a lucrative contract to provide IT consulting and support services to various branches within the U.S. Department of Defense.

That award, which could total $1.76 billion, came last week—more than a month after six large government-focused solution providers received blanket purchase agreements from the U.S. Navy for Microsoft software licenses and subscriptions.

Even more tantalizing to Microsoft backers is how the latest services deal portends for Microsoft's prospects of winning the looming, winner-take-all JEDI contract, which could total $10 billion in cloud services for a single vendor over its lifetime. The Joint Enterprise Defense Infrastructure initiative has generated a firestorm of controversy as tech giants led by Oracle and IBM have challenged terms of the RFP, which they argue are designed to favor Amazon Web Services.

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The latest five-year contract under the DoD's Enterprise Software Initiative stipulates that Microsoft Enterprise Services, the vendor’s consulting division, will deliver product engineering services for military software developers "to leverage a range of proprietary resources and source-code."

Those services will benefit the DoD, the U.S. Coast Guard and the intelligence community, according to a Pentagon announcement.

Microsoft will also offer the military "premier support for tools, knowledge database, problem resolution assistance, and custom changes to Microsoft source-code when applicable," according to the DoD's announcement.

It's another notable win for the Redmond, Wash.-based software giant, which earlier this week revealed a massive deal to provide Microsoft Office 365 cloud services to pharmacy giant Walgreens for a seven-year term.

At the start of December, six solution providers were granted an estimated $3.17 billion in contracts, also issued under the DoD Enterprise Software Initiative, to procure software licenses and subscriptions for cloud services for the U.S. Navy, as well as the U.S. Coast Guard and the intelligence community.

Those companies were CDW-G, Vernon Hills, Ill; Dell Federal Systems, Round Rock, Texas; GovConnection, Rockville, Md.; Insight Public Sector, Chantilly, Va.; Minburn Technology Group, Great Falls, Va.; and SHI International, Somerset, N.J.

They will provision "commercial off-the-shelf products that will meet functional requirements for desktop software solutions, operating systems, virtualization, management tools, mobility, and software assurance," the DoD said.

The DoD Enterprise Software Initiative was started in 1998 by DoD chief information officers to save time and money on commercial software. It includes a team of software product managers who consolidate requirements and negotiate with commercial software, hardware, and IT providers.

Microsoft has also been aggressively vying for the coveted JEDI contract.

In October, the company re-asserted its commitment to working with the armed forces after some employees anonymously voiced concerns about supplying advanced technology that can be used in war.

Microsoft President Brad Smith made clear the world's largest software company, and second largest public cloud provider, will continue to pursue contracts supplying advanced digital technology, including artificial intelligence, to the military, despite the employees' concerns.

Smith argued his company has a duty to supply those who serve in the military with the best technology—then engage in the conversation over its ethical use in war.

"When it comes to the U.S. military, as a company, Microsoft will be engaged," Smith wrote in a blog.