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Trump Urges Tech Giants to Slash Cloud Costs Amid $20B IT Budget Cuts

▼ Summary

– Google will offer significant discounts on cloud computing services for the U.S. government, following pressure to reduce costs on federal contracts worth over $20 billion annually.
Oracle set a precedent with 75% discounts on some software contracts, and Google’s deal is expected to be similar, with finalization expected soon.
Microsoft Azure and Amazon Web Services are also anticipated to provide equivalent discounts, though their negotiations are less advanced than Google’s.
– The Trump administration aims to cut IT procurement costs as part of the Department of Government Efficiency initiative, previously led by Elon Musk.
– Oracle’s recent agreements could generate over $30 billion in yearly revenue by 2028, marking a pivotal moment in its cloud business growth.

The Trump administration is pushing major tech companies to reduce cloud computing costs as part of a broader effort to cut federal IT spending by $20 billion annually. Google has already agreed to significant discounts on its cloud services for government contracts, following a similar move by Oracle, which slashed prices by up to 75% on certain software deals.

According to a senior official at the General Services Administration (GSA), Google’s contract terms are expected to align closely with Oracle’s, with final details likely to be confirmed in the coming weeks. Microsoft and Amazon Web Services (AWS) are also in discussions to offer comparable reductions, though negotiations with these providers are still in earlier stages. The GSA emphasized that all four companies, Google, Oracle, Microsoft, and Amazon, are cooperating with the cost-cutting initiative.

These tech giants dominate the federal government’s $20 billion cloud services budget, making them key targets in the administration’s efficiency drive. The push for lower IT procurement costs is part of the Department of Government Efficiency program, which previously included input from high-profile figures like Elon Musk.

Oracle’s aggressive pricing strategy has already positioned it for substantial growth, with analysts projecting the company could generate over $30 billion in annual revenue by 2028. Jefferies highlighted the deals as a turning point for Oracle’s expansion into large-scale cloud services, potentially doubling its revenue pipeline.

Relationships between tech leaders and the Trump administration have played a role in these negotiations. Meta’s Mark Zuckerberg and Google’s Sundar Pichai have engaged with the president, while Amazon’s Jeff Bezos has worked to mend ties after AWS lost a major $10 billion defense contract to Microsoft in 2019. Oracle’s Larry Ellison has been particularly active, collaborating on projects like the proposed TikTok acquisition and a $100 billion AI data center initiative with OpenAI.

The outcome of these negotiations could reshape federal IT spending, with long-term implications for both government budgets and the competitive landscape of cloud computing.

(Source: Bezinga)

Topics

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