The Epic Battle Between Trump and Bezos Is On

Amazon is pointing the finger right at the president over the awarding of the JEDI military contract.

What did President Trump know and when did he know it? Whom did he pressure out of self-interest? Are there emails or tapes? And, maybe, let’s call some witnesses.

No, I am not referring to the Ukraine mess. And not the Barr-none desecration of the Justice Department through the president’s egregious tweet-meddling in the Roger Stone case.

I am talking about a “Star Wars”-themed face-off between Mr. Trump and the Amazon founder and chief executive Jeff Bezos. Things got more problematic for the Trump administration last week when a judge ordered that work be stopped on a huge $10 billion, 10-year, cloud-computing project for the Defense Department called the Joint Enterprise Defense Infrastructure project, also known as JEDI.

The sealed opinion last week was a big initial win for Amazon, whose Amazon Web Services cloud-storage powerhouse division last year had called foul over the awarding of the contract to Microsoft. Amazon asserts that there were irregularities in the Pentagon procurement process.

Amazon is pointing the finger right at — you guessed it — Mr. Trump, who has spent a lot of time trashing Mr. Bezos along with his newspaper, The Washington Post, and the enormous company he founded, often conflating them all into one billionaire blob of a rival. The Grand Canyon-size gulf in business talent and wealth between the two surely is a factor here. There is a long history of petty comments by the commander in grief aimed at the internet legend.

And there was that report by a staff member for the former defense secretary, Jim Mattis, saying that Mr. Trump had expressed a desire to “screw” Amazon. (Even earlier, Mr. Trump declared during his campaign that the company was “going to have such problems when he becomes president.)

The continuing public and private enmity is at least partly why Amazon is claiming it lost the bid. While Amazon had been seen as a front-runner for the contract, in October, it was awarded to tech’s other Seattle-based behemoth, Microsoft. Amazon sued in December.

Many think it’s an uphill battle for Amazon. But if the company continues winning legal motions, there is the possibility of a discovery process that could force the Trump administration to reveal what kind of pressure the president may have brought to bear to stop Amazon from winning the JEDI project. Some at Amazon believe the administration may have changed the terms of the proposal to advantage Microsoft.

Microsoft argues that it got the contract fair and square. Frank Shaw, a Microsoft communications officer, said the Defense Department “ran a detailed, thorough and fair process” and determined that its needs “were best met by Microsoft.” He said the company was “disappointed with the additional delay.”

For its part, the Pentagon is peddling the idea that the legal delay “deprived our war fighters of a set of capabilities they urgently need,” even though it was Mr. Trump who originally asked to have the bidding process reviewed last summer.

Some sources told me the government will seek to limit discovery to the technical record and rely on executive privilege to protect whatever Mr. Trump did or said related to the award (does the executive privilege excuse sound familiar?). That includes blocking testimony by Mr. Trump and Secretary of Defense Mark Esper.

The fact that Amazon has been hired by the federal government many times bolsters the company’s case that its loss of the JEDI project is part of the president’s vendetta against Mr. Bezos.

One oddity that Amazon will surely point out is that Mr. Esper recused himself from the process — citing a conflict of interest because of his son’s job at IBM. That’s unusual since IBM was not considered a top contender and weirder still since Mr. Esper did not step aside until the very last moment of deliberations. And he was the one who prolonged the bidding contest upon orders from Mr. Trump.

One of the most important factors in this battle — compared to a lot of other fights in which Mr. Trump delays and obfuscates and makes noise to muddy the waters — is Mr. Bezos’s tenacity. From my time spent with him in the days of Amazon’s founding, I know him well enough to say that he will fight as long as it takes, and he can outmaneuver any mud that Mr. Trump can throw at him.

Amazon has also been lucky since Mr. Trump’s behavior in the JEDI process seems to recall how he got into trouble with Ukraine and, more recently, with the Justice Department’s handling of the Roger Stone case (and really in so many instances). To that point, Amazon said in a statement, “President Trump has repeatedly demonstrated his willingness to use his position as president and commander in chief to interfere with government functions — including federal procurements — to advance his personal agenda.”

And that was the nicest part of the statement. Mr. Trump’s supporters may think that he brings it all and more when he is attacked. But I’d say Mr. Bezos brings it all to a fight — and also a drone howitzer, an army of lawyers and a huge wallet. And if Mr. Trump is already rattled politically by the willingness of the real billionaire Michael Bloomberg to go to the mattresses using his $62 billion fortune, remember that Mr. Bezos is more than twice as wealthy as that.

Mr. Bezos did just that this week with the announcement that he would devote $10 billion of his own money to fund climate change initiatives under the Bezos Earth Fund. Even as some denounce Amazon’s toll on the environment and call for taxing the company more, this laudable initiative was a smart move for Mr. Bezos and will burnish his reputation. It will also irritate Mr. Trump, no friend to climate change solutions.

Unfortunately, what is getting lost in these clashes of titans is that it is critical that the Pentagon modernize its tech as quickly as possible, as it faces challenges across the globe, most especially from China. Right now, the Defense Department is working with patched-up systems from the 1980s and 1990s.

So, given that both Microsoft and Amazon are U.S.-based giants, the mess that Mr. Trump has created with his careless words — and perhaps with his actions — only hurts the security of this country. So, while it might be called JEDI, it feels an awful lot more like “Spaceballs.”


How AWS came to be


There are lots of stories about the formation of AWS, but this much we know: 10 years ago, Amazon Web Services, the cloud Infrastructure as a Service arm of, was launched with little fanfare as a side business for Today, it’s a highly successful company in its own right, riding a remarkable $10 billion run rate.

In fact, according to data from Synergy Research, in the decade since its launch, AWS has grown into the most successful cloud infrastructure company on the planet, garnering more than 30 percent of the market. That’s more than its three closest rivals — Microsoft, IBM and Google — combined (and by a fair margin).

Chart from Synergy Research with Infrastructure as a Service market share.

What you may not know is that the roots for the idea of AWS go back to the 2000 timeframe when Amazon was a far different company than it is today — simply an e-commerce company struggling with scale problems. Those issues forced the company to build some solid internal systems to deal with the hyper growth it was experiencing — and that laid the foundation for what would become AWS.

Speaking recently at an event in Washington, DC, AWS CEO Andy Jassy, who has been there from the beginning, explained how these core systems developed out of need over a three-year period beginning in 2000, and, before they knew it, without any real planning, they had the makings of a business that would become AWS.

Creating internal systems

It began way back in the 2000 timeframe when the company wanted to launch an e-commerce service called to help third-party merchants like Target or Marks & Spencer build online shopping sites on top of Amazon’s e-commerce engine. It turned out to be a lot harder than they thought to build an external development platform, because, like many startups, when it launched in 1994, it didn’t really plan well for future requirements. Instead of an organized development environment, they had unknowingly created a jumbled mess. That made it a huge challenge to separate the various services to make a centralized development platform that would be useful for third parties.

So very quietly around 2000, we became a services company with really no fanfare.Andy Jassy, AWS CEO

At that point, the company took its first step toward building the AWS business by untangling that mess into a set of well-documented APIs. While it drove the smoother development of, it also served the internal developer audience well, too, and it set the stage for a much more organized and disciplined way of developing tools internally going forward.

“We expected all the teams internally from that point on to build in a decoupled, API-access fashion, and then all of the internal teams inside of Amazon expected to be able to consume their peer internal development team services in that way. So very quietly around 2000, we became a services company with really no fanfare,” Jassy said.

AWS CEO Andy Jassy speaking in Washington, DC in June, 2016.

At about the same time, the company was growing quickly and hiring new software engineers, yet they were still finding, in spite of the additional people, they weren’t building applications any faster. When Jassy, who was Amazon CEO Jeff Bezos’ chief of staff at the time, dug into the problem, he found a running complaint. The executive team expected a project to take three months, but it was taking three months just to build the database, compute or storage component. Everyone was building their own resources for an individual project, with no thought to scale or reuse. (I think you can guess where this is going.)

The internal teams at Amazon required a set of common infrastructure services everyone could access without reinventing the wheel every time, and that’s precisely what Amazon set out to build — and that’s when they began to realize they might have something bigger.

A perfectly wonderful awful idea

Jassy tells of an executive retreat at Jeff Bezos’ house in 2003. It was there that the executive team conducted an exercise identifying the company’s core competencies — an exercise they expected to last 30 minutes, but ended up going on a fair bit longer. Of course, they knew they had skills to offer a broad selection of products, and they were good at fulfilling and shipping orders, but when they started to dig they realized they had these other skills they hadn’t considered.

In retrospect it seems fairly obvious, but at the time I don’t think we had ever really internalized that.Andy Jassy, AWS CEO

As the team worked, Jassy recalled, they realized they had also become quite good at running infrastructure services like compute, storage and database (due to those previously articulated internal requirements). What’s more, they had become highly skilled at running reliable, scalable, cost-effective data centers out of need. As a low-margin business like Amazon, they had to be as lean and efficient as possible.

It was at that point, without even fully articulating it, that they started to formulate the idea of what AWS could be, and they began to wonder if they had an additional business providing infrastructure services to developers.

“In retrospect it seems fairly obvious, but at the time I don’t think we had ever really internalized that,” Jassy explained.

The operating system for the internet

They didn’t exactly have an “aha” moment, but they did begin to build on the initial nugget of an idea that began at the retreat — and in the Summer of 2003, they started to think of this set of services as an operating system of sorts for the internet. Remember, this is still three years before they launched AWS, so it was an idea that would take time to bake.

I don’t think any of us had the audacity to predict it would grow as big or as fast as it has.Andy Jassy, AWS CEO

“If you believe companies will build applications from scratch on top of the infrastructure services if the right selection [of services] existed, and we believed they would if the right selection existed, then the operating system becomes the internet, which is really different from what had been the case for the [previous] 30 years,” Jassy said.

That led to a new discussion about the components of this operating system, and how Amazon could help build them. As they explored further, by the Fall of 2003 they concluded that this was a green field where all the components required to run the internet OS had yet to be built — at which point I’m imagining their eyes lit up.

“We realized we could contribute all of those key components of that internet operating system, and with that we went to pursue this much broader mission, which is AWS today, which is really to allow any organization or company or any developer to run their technology applications on top of our technology infrastructure platform.”

Then they set out to do just that — and the rest, as they say, is history. A few years later the company launched their Infrastructure as a Service (a term that probably didn’t exist until later). It took time for the idea to take hold, but today it’s a highly lucrative business.

AWS was first to market with a modern cloud infrastructure service when it launched Amazon Elastic Compute Cloud in August, 2006. Surprisingly, it took several years before a competitor responded. As such, they control a vast amount of market share, at least for now. Rest assured, some very well-heeled competitors like Microsoft, Google, IBM and others are gunning for them.

When asked if he ever foresaw the success they’ve achieved, Jassy was humble, saying, “I don’t think any of us had the audacity to predict it would grow as big or as fast as it has.”

But given how the company carefully laid the groundwork for what would become AWS, you have to think that they saw something here that nobody else did, an idea that they believed could be huge. As it turned out, what they saw was nothing less than the future of computing.

Red Hat CEO Says Acquisition by IBM Will Help Spur More Open-Source Innovation

‘This is two cultures working together, not coming together,’ says Jim Whitehurst

International Business Machines Corp.’s recent acquisition of Red Hat Inc. is aimed squarely at building up its cloud business—in part by making it easier for IBM customers to use competing cloud services.

Red Hat’s open-source software enables chief information officers and other enterprise IT managers to run applications both within their own data centers and across a range of third-party providers, from IBM’s own cloud to Inc. ’s AWS, Microsoft Corp ’s Azure, or any other tech company that rents computer software and systems to businesses online.

“Public clouds are a big partner of ours,” says Red Hat Chief Executive Jim Whitehurst, “but they are basically saying ‘Come into my world and use all of my stuff.’”

Mr. Whitehurst says the ability to shift business applications between different cloud providers—known as a hybrid cloud strategy—is proving popular with CIOs as a way to minimize the risk of relying on a single tech service to handle a company’s entire information-technology system.

It also lets them shop around for a wider mix of cloud-based tools and emerging capabilities spread across an increasingly competitive market, Mr. Whitehurst says.

Revenue from IBM’s cloud business climbed 5% year-over-year in the second quarter, even as the tech giant posted its fourth straight quarter of declining revenue overall, but it remains far behind the pace of revenue growth set by Amazon and Microsoft.

IBM’s $34 billion deal to buy Red Hat, which closed in July, seeks to boost its standing in the market by drawing more businesses to hybrid cloud strategies.

Mr. Whitehurst spoke with CIO Journal on Tuesday about Red Hat’s role in that strategy, along with its place within IBM. Edited excerpts are below:

Some industry analysts worry about Red Hat’s independence under IBM. How is that working relationship shaking out?

I think the reason a lot of acquisitions fail is that there’s a reason somebody wants to sell. Generally, the reason they want to sell probably doesn’t mean they think there’s this wonderful, rosy future. Our view is that we’re at the beginning of a fundamental change in how technology is going to be built and consumed that is driven by open source.

Could we do it by ourselves? Maybe. But I think we thought the probability was small and being part of a bigger company was something we really wanted. Speaking for the senior team at Red Hat, we’re all still in and driving this. I think we have a real opportunity.

How is the cultural fit?

I’m the only dual-badged employee and that is absolutely intentional. We are a separate stand-alone subsidiary. This is two cultures working together, not coming together. There is a clear recognition from both organizations that we have very strong cultures and very different ways of operating that generate different capabilities.

The great news is that those capabilities are highly complementary. Typically if you jam things together you get the worst of both, not the best of both. And so we try to be really clear that we are separate companies. Let’s recognize the power of the other model and let’s work together.

Why is hybrid cloud compelling to CIOs and how does Red Hat help achieve it?

Not only does it reduce costs, it allows for a greater pace of innovation to occur, because you’re not hamstrung by all these incompatible vertical stacks. While there are other people talking about it, we are the only ones to deliver a hybrid platform.

This is why IBM bought us. OpenShift, which is our container platform, is the only way to have a consistent container platform that runs on any of the major clouds. You write code once and you can run it anywhere. That’s what’s compelling. I can innovate faster and protect myself from being locked in.

How does all this foster innovation?

The beauty of the Red Hat model is we get to sit and observe and dip our toe into a whole set of technologies and see what emerges. The majority of innovation is happening in open source, without a doubt. When something emerges as the next big thing, we’re just already more deeply into that.

Writing software and giving it away is a really bad business model. That is not what we do. We get involved in existing open-source communities and then we help commercialize and make it consumable. Open source is user-driven innovation. It’s users that have an issue and they solve that issue themselves. Big data emerged not because someone sat back and said we need a way to access data at scale. It was iterative issues that Facebook had, and Google had, and Yahoo had, and slowly built over time.