Microsoft Asks Google, Oracle to Help Crimp Amazon’s U.S. Government Cloud Leadership
Software companies trying to get the U.S. to share its cloud-spending more widely by embracing multicloud approach
By Aaron Tilley
Wall Street Journal
July 27, 2022 9:00 am ET
Microsoft Corp. MSFT 1.57%? is rallying other big-name cloud-computing providers such as Alphabet Inc.’s GOOG 1.79%? Google and Oracle Corp. ORCL 1.04%? to press the U.S. government into spreading its spending on such services more widely, taking aim at Amazon.com Inc.’s AMZN 10.36%? dominance in such contracts.
The software giant has issued talking points to other cloud companies aimed at jointly lobbying Washington to require major government projects to use more than one cloud service, according to people familiar with the effort and a document viewed by The Wall Street Journal.
Microsoft also approached VMware Inc., VMW -0.14%? Dell Technologies Inc., DELL 1.26%? International Business Machines Corp. IBM 1.21%? and Hewlett Packard Enterprise Co., HPE 1.14%? said the people familiar with the effort. It hasn’t yet asked Amazon to join the loose alliance, the people said.
Amazon dominates the cloud-infrastructure industry with a 39% share of the 2021 global market ahead of Microsoft at No. 2 with a 21% share, according to research firm Gartner Inc. Amazon looms even larger in the business of selling cloud services to governments. Amazon’s cloud had a 47% share of the 2021 U.S. and Canada public-sector market orders, ahead of 28% for Microsoft, according to Gartner.
The National Security Agency last year picked Amazon as the sole vendor for a cloud contract that could be worth potentially as much as $10 billion over the next decade, renewing an existing business relationship.
An Amazon spokesman called the lobbying effort a self-serving campaign that could end up requiring customers to use inferior technology.
“Public-sector customers should have the freedom and flexibility to determine how to obtain secure, reliable and cost-effective cloud services and software—from the vendor or vendors of their choice—without mandates or unfair software licensing restrictions,” the Amazon spokesman said.
Microsoft’s push calls for the U.S. government to establish a preference for multicloud, an industry term that means using the services infrastructure of more than one company. It views multicloud as an urgent imperative for the government to get the best and most affordable cloud technology.
The Redmond, Wash.-based company has a history of making policy pronouncements. It has issued principle statements on unions, as well as its cloud policies in Europe recently. Its latest effort that hasn’t yet been made public is titled “Multi-Cloud Vision Statement and Principles.”
Cloud business is critical to Microsoft’s earnings, representing roughly half of its total sales. The company Tuesday posted lower-than-expected growth for Azure and other cloud sales.
Microsoft has grown frustrated about its lack of progress selling its Azure cloud services to the U.S. federal government with its rival’s Amazon Web Services continuing to win most of those contracts, said some of the people familiar with its efforts.
A Microsoft spokeswoman said the company “has consistently advocated a multicloud approach as a commercial best practice, and almost all companies have adopted this.” The company, she added, works “with other companies and trade associations to encourage the federal government to adopt the same strategy.”
Multicloud has become a popular approach for clients who seek to pick technologies from different vendors to optimize the service they receive and keep costs in check. In the document, Microsoft said the U.S. government should follow this example.
Oracle said it is backing the effort. “Microsoft is exactly right advocating for a multicloud strategy in government,” said Ken Glueck, executive vice president at Oracle. “We support their efforts wholeheartedly and plan to assist them in any way possible,” he said.
Whether to mix cloud-service providers has become a sticking point with some big government projects. The Pentagon embraced a multicloud approach last year after an earlier effort to pick one vendor was mired in controversy. Amazon was long considered the favorite for a massive Pentagon cloud-computing deal, though lost out to Microsoft. Amazon contested the award to its rival, and the Pentagon scrapped the contract, saying it would award contracts to multiple vendors in its future contract.
The Pentagon’s shift came after the Central Intelligence Agency, which had worked with Amazon for its cloud services, last year said it would embrace a multicloud strategy as it expands use of the technology.
Microsoft, in the document sent to others, has played down those government multicloud efforts as exceptions to the rule.
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Write to Aaron Tilley at aaron.tilley@wsj.com
Appeared in the July 28, 2022, print edition as 'Microsoft Presses Effort To Blunt Amazon'.
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