Microsoft: Move Fast and Build Things
Microsoft & SHAQ
Speed is lethal. When combined with size, it becomes an unstoppable force. SHAQ, with his 300-pound stature and the agility of a point guard, was a force to be reckoned with.
Microsoft is akin to SHAQ in the tech world. Its long-standing legacy in the enterprise sector, a duopoly in cloud infrastructure, and a vast network of developers ready to engage create a formidable barrier to entry. Yet, despite being a tech giant, Microsoft operates with the agility of a start-up, earning it the title of ‘Big Diesel’ of the enterprise world.
In recent news, Amazon announced a $4 billion investment in Anthropic, a competitor to OpenAI. However, Microsoft had already made its move nine months earlier, investing twice as aggressively in OpenAI. This demonstrates Microsoft’s foresight and proactive approach in the rapidly evolving tech landscape.
Open AI Investment
The decision to invest $10 billion in Open AI was a challenging admission for Microsoft - acknowledging that a newcomer had achieved a significant generational leap that Microsoft, despite its vast resources, couldn’t duplicate. The options were to either ignore reality (be an ostrich) or accept the sunk costs and fully commit to Open AI. Grasping the significance of this advancement, Satya Nadella took a daring step, one that only a select few CEOs in history could have taken. The investment in Open AI might be remembered as one of the most audacious investments by a market leader in history.
Move Fast and Build Things
Just last week, Microsoft unveiled the launch of Windows Copilot, with plans to make several more copilots widely available in the coming year. Office 365 boasts a staggering 400 million users, which is roughly equivalent to 40% of the world’s knowledge workers. The rapid introduction of new products, amplified by this immense scale, can significantly shift the needle, even for a giant like Microsoft. With conservative estimates, the 365 copilot could potentially generate an additional $10-15 billion in recurring revenue soon. See Goldman estimates below.
From Playing Defense …
A few years back, Microsoft conceded that it had ceded the mobile market, and consequently shifted its focus to products and services that are platform-agnostic. The presence of Azure as a beneficiary of the burgeoning cloud workloads somewhat eased this transition. However, this strategic shift was primarily undertaken to preserve its market share in the Office & Productivity suite for iOS and Android users.
… To Going on Offense
Nadella’s remarks suggest an offensive strategy aimed at regaining the users lost in the mobile transition. The early leadership in AI has given Microsoft the confidence to target the substantial profit pools of search, services, and even, one might venture to say, devices.
“We think there’s also an opportunity beyond work and life to have one experience that works across your entire life. After all, you’re a salesperson by the day, a musician by the night; a manager and a parent; a shopper and a creator. This requires a real re-think of a user experience scaffolding that cuts across devices, operating systems, and applications.”
Is AI an Enduring Advantage?
While Microsoft currently holds the reins as the AI frontrunner, the market is fully anticipating a countermove from Apple. Apple has the privilege of biding its time and formulating a measured response. Under Tim Cook’s leadership, Apple has proven to be a prudent follower. After all, the costs of switching for iOS users are considerably high. I, too, am keenly awaiting Apple’s countermove.
However, once Shaquille O’Neal had possession of the ball in the paint, he was virtually unstoppable. Could this be the scenario with Microsoft today?