US military cloud no longer backed by Microsoft’s China team

Microsoft has stopped letting engineers based in China provide technical support for US military cloud systems. The company made the change following concerns about security risks tied to its work with the Department of Defense.

The shift came just days after ProPublica published a detailed report describing how Microsoft relied on its team in China to help with Pentagon-related cloud services. According to the report, the situation had existed for around ten years and was seen as important to Microsoft to secure federal cloud contracts. US workers with security clearance supervised the overseas team to prevent security breaches.

“In response to concerns raised earlier this week about US-supervised foreign engineers, Microsoft has made changes to our support for US Government customers to assure that no China-based engineering teams are providing technical assistance for DoD Government cloud and related services,” said Frank Shaw, Microsoft’s chief communications officer, in a post on social media.

The update affects the company’s Azure cloud division, which now makes up more than a quarter of Microsoft’s total revenue. Azure is larger than Google’s cloud business but still trails Amazon Web Services. Microsoft earns a sizeable portion of its revenue from US government clients, with more than half of its recent $70 billion quarterly earnings coming from US customers.

In 2019, Microsoft won a $10 billion defence cloud contract, which was later cancelled in 2021 after legal disputes. In 2022, the Pentagon split a new $9 billion cloud deal among Microsoft, Amazon, Google, and Oracle.

ProPublica‘s report raised questions about how Microsoft’s China-based engineers were managed. It said US-based supervisors, referred to as “digital escorts,” often lacked the technical knowledge of the overseas teams they were overseeing. That imbalance raised fears about possible cyberattacks from potential gaps in oversight.

“The is obviously unacceptable, especially in today’s digital threat environment,” said Defense Secretary Pete Hegseth in a video posted to social media. He called the current setup a leftover from over a decade ago and said the Department of Defense will review its systems to make sure there are no other areas where similar arrangements remain.

Hegseth added that China would no longer play any part in US military cloud systems, with a two-week review planned to check for other potential vulnerabilities. “We will continue to monitor and counter all threats to our military infrastructure and online networks,” he said.

Microsoft had earlier told ProPublica that its teams followed all US government rules. Shaw added in his post that Microsoft is working with national security officials to keep improving its safeguards.

(Photo by Joel Rivera-Camacho)

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