Raj Shah exits DIUx

After almost two years at the helm of the Pentagon's innovation shop, Raj Shah is returning to the private sector.

Shah, whose background is in venture capital, served as managing director of the Defense Innovation Unit Experimental, known as DIUx, as the office expanded and transitioned to the Trump administration. Shah joined DIUx in May 2016, and oversaw the expansion of DIUx from a single Silicon Valley outpost to an effort with offices in Boston and Austin, Texas. A DOD spokesperson confirmed the departure on Feb. 23.

"The nature of warfare is changing, and it's being driven by technologies that whose development is being led in the commercial center," Shah said at the 2017 Reagan National Defense Forum. "The Pentagon used to be a monopsony buyer – buying bespoke stuff for ourselves – that world is changing."

Shah stressed that as technologies with military applications become more and more available, the onus is on the U.S. to take a lead role in funding and shepherding startups because potential adversaries are all too willing to take on that role themselves.

"The challenge and driver here is that our adversaries are not waiting," Shah said at the Reagan Forum. He noted that Chinese sovereign wealth fund investment in robotics and other technologies is accelerating.

"You can make…observations of why they're doing it," he said. "But if we think these things are going to be military-relevant in the future, then [China's] getting a seat at the table early…that's a big deal"

Current focus areas for DIUx include artificial intelligence, space, IT, autonomous systems and countering biological threats. The innovation shop already has awarded in excess of $100 million in contracts for more than 45 pilot projects. The agency is expected to be funded at $54 million in 2018 and the Pentagon is seeking $71 million for DIUx in 2019.

"There is no doubt in my mind that DIUx will not only continue to exist, it will actually grow in its influence and its impact on the Department of Defense," Defense Secretary Jim Mattis said in an August 2017 visit to the unit's Silicon Valley office.

During the Obama administration, the DIUx chief reported directly to the secretary of defense. Under a recent reorganization mandated by the 2017 National Defense Authorization Act, DIUx leaders will now report up to DOD's undersecretary for research and engineering.

Shah's exit comes just weeks after one of its funded companies, REAN Cloud, scored a major cloud contract with the Pentagon. DoD signed a five-year $950 million cloud deal with the Amazon reseller, enabling DOD agencies to quickly onboard cloud services using "other transaction authority," a process that streamlines acquisition speed. The OTA contract between REAN and DOD was modeled after a $6.6 million DIUx cloud migration pilot in 2017 conducted on behalf of the U.S. Transportation Command.

Shah's departure has been long expected, two Silicon Valley sources told FCW, and the Pentagon is in the midst of a search for a new managing director. The DOD spokesperson declined to tell FCW how close the unit is to landing a replacement.

Navy Capt. Sean Heritage, the DIUx military deputy, is serving as acting managing director while a replacement is sought.