Microsoft Reaches $22 Billion Deal With US Army For AR Technology

Microsoft has won a United States military contract worth up to $21.9 billion that will see the Xbox and Windows company build custom augmented-reality headsets for the US Army. Microsoft said in a blog post that it is creating a new Integrated Visual Augmentation System (IVAS) for the US Army based on its HoloLens and Azure cloud service technologies.

Microsoft said the new device "delivers a platform that will keep soldiers safer and make them more effective." The programs running on the headsets offer "enhanced situational awareness" to help soldiers in a variety of ways. Microsoft will create 120,000 of these headsets and deliver them to the Army over the next decade as part of the deal.

Microsoft has been in business with the Army for years already, and CEO Satya Nadella has defended his company's involvement with the military.

"We appreciate the partnership with the US Army, and are thankful for their continued trust in transitioning IVAS from rapid prototyping to rapid fielding. We look forward to building on this successful partnership with the men and women of the US Army Close Combat Force," Microsoft said.

The Army's statement says Microsoft is developing multiple technologies that will allow soldiers to "fight, rehearse, and train" inside a single platform.

"The suite of capabilities leverages existing high-resolution night, thermal, and soldier-borne sensors integrated into a unified heads up display to provide the improved situational awareness, target engagement, and informed decision-making necessary to achieve overmatch against current and future adversaries," the Army said. "The system also leverages augmented reality and machine learning to enable a life-like mixed reality training environment so the Close Combat Force can rehearse before engaging any adversaries.

The Army said its partnership with a technology giant like Microsoft demonstrates that the Department of Defense is capable of working alongside a private company to create modern technology "in the interest of national security."

CNBC reported the value of the deal to be worth up to $21.88 billion over 10 years. Microsoft previously got $480 million from the Army to develop the prototypes for its IVAS system, and the rest of the money is coming to manufacture the final versions that soldiers will use.

In 2019, Microsoft won a $10 billion contract from the Department of Defense to provide cloud services to the military. Amazon was also involved in the discussions, and the company is challenging Microsoft's contract in court.

These deals with the military have caused a stir at Microsoft. Some employees called for Microsoft to back away from its HoloLens contract, writing in an open letter, "We did not sign up to develop weapons, and we demand a say in how our work is used."

Nadella has defended Microsoft's business deals with the government. He told CNN, "We made a principled decision that we're not going to withhold technology from institutions that we have elected in democracies to protect the freedoms we enjoy."

GameSpot got to try an early version of HoloLens at E3 2015 with a Halo-themed demo. This demo was incredibly impressive and futuristic, but Microsoft never pursued a mainstream commercial release for HoloLens, or its HoloLens 2 commercial versions. These headsets remain very expensive for consumers and are seemingly aimed at enterprise endeavors.