Pentagon taps Dell for $9.7bn Microsoft licensing deal

The Pentagon has handed a $9.7 billion deal to Dell to provide – and sort out – Microsoft licenses.

The five-year deal – known as the Microsoft Department of War Enterprise Software Agreement II Core Enterprise Technology Agreement (CETA) – was awarded to Dell Federal Systems, and will see Dell as the main contractor providing Microsoft 365, cloud subscriptions, and software licensing for Microsoft products, which have long been in use by the defense agency and military.

"By providing enterprise access to Microsoft 365 advanced cloud subscriptions and critical on-premises licensing, this CETA acts as part of the digital connective tissue essential for Combined Joint All-Domain Command and Control, CJADC2," said Defense Department Chief Information Officer Kirsten Davies at a press briefing, according to reports.

She added: "This ensures our war fighters have the tools for just-in-time data sharing, supports our pivot to AI and data analytics, and undergirds uninterrupted operational continuity for our most sensitive and disconnected environments."

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The aim is that the deal will give the Pentagon one supplier for Microsoft products, rather than multiple smaller contracts, helping to reduce redundancies in licensing. The agency believes that bringing together smaller IT budgets from across departments into one deal could save as much as $422 million each year.

"This second-generation blanket purchase agreement will streamline and consolidate critical Microsoft software and services across the Department of War, the intelligence community, and the US Coast Guard," said Defense Department Chief Information Officer Kirsten Davies at a press briefing, according to CNBC.

CETA will cover US intelligence agencies, the Coast Guard, and the military, including the Air Force, Army, Navy, Marines, and Space Force.

Previous deals

The CETA deal is the successor to the $1.76bn, five year Micrsoft Enterprise Services contract awarded in 2019, which was designed to give the intelligence community and defense agencies access to Microsoft technology and support as part of a pivot to the cloud.

That same year, the Pentagon awarded Microsoft a massive $10bn cloud deal known as JEDI, but two years later, it was scrapped following challenges by AWS that included accusations that then-President Trump had told the Department of Defense to "screw Amazon".

In 2022, Microsoft and AWS were both tapped by the Pentagon for a new joint cloud project worth $9bn.

Friendly relations

This time around, government representatives stressed the deal followed a competitive procurement process – but reports have been quick to point to Michael Dell's $6.25 billion pledge to fund so-called Trump accounts for children, as well as his wider support for Trump.

In return, Trump earlier this month said people should "go out and buy a Dell" – helping send the company's stocks soaring.

The officials announcing the deal said Dell beat out rivals in the procurement process. "The vendors were all evaluated based on competition, comparison to General Services Administration GSA schedule pricing, and overall chain of value to the department," said acting Navy Chief Information Officer Barry Tanner in a press briefing, according to reports. "Going through the process of evaluation, they came out on top."