Microsoft commits to AI integration, but delivers no particulars to differentiate from rivals

In his latest AI positioning statement, Microsoft CEO Satya Nadella said Monday that everything must revolve around Azure. The company is labeling this change, which came with various internal executive shifts, CoreAI. 

Analysts, however, agreed that the statement reflected no meaningful changes to Microsoft’s AI strategy. The bluntest assessment came from Ryan Brunet, a principal research director at the Info-Tech Research Group: “This is classic Microsoft. It’s very much the same old garbage.”

Nadella said in his statement that AI is going to have to reshape Microsoft, in the same way that it is reshaping enterprise IT operations globally.

“More so than any previous platform shift, every layer of the application stack will be impacted. It’s akin to GUI, internet servers, and cloud-native databases all being introduced into the app stack simultaneously. Thirty years of change is being compressed into three years,” Nadella said. “This is leading to a new AI-first app stack — one with new UI/UX [user interface/user experience] patterns, runtimes to build with agents, orchestrate multiple agents, and a reimagined management and observability layer. In this world, Azure must become the infrastructure for AI, while we build our AI platform and developer tools — spanning Azure AI Foundry, GitHub, and VS Code — on top of it.”

Info-Tech’s Brunet said part of the challenge with Microsoft is that they offer so many different options, many overlapping, that “it can feel like a very fragmented offering that can be very confusing. They are trying to make their infrastructure and offerings feel less fragmented.”

He said that he sees this as Microsoft’s way of leveraging the Azure cloud “to make it easier to stitch their pieces together.”

A Brunet colleague, Thomas Randall, director of AI market research at Info-Tech, said that CIOs should expect some price tag pain from the change.

“The pricing for CoreAI is not yet apparent. CIOs will likely face higher operational and usage costs, particularly as AI projects expand. We’re still looking for what clear ROI Copilot licenses give organizations, for instance,” Randall said. Although “CoreAI will aim to be developer friendly, CIOs will still need to hire or upskill for skilled implementation teams to manage AI.”

IDC sees the move likely shifting many Microsoft offerings around in terms of internal structure.

“It is very likely to have significant changes to the products and services from Microsoft. As genAI, agentic AI and copilots become embedded in Microsoft’s products and services, enterprises and their workers will need to adapt to the increasing level of automation within these products,” said Dave Schubmehl, the research VP for AI at IDC. “In turn, this should increase the opportunity for increased ROI and productivity if adopted and used correctly.”

Industry executives also mostly saw the move as a continuation of the AI strategy Microsoft has pushed for years.

Eric Lin is currently the VP of Applied AI at Dynamo AI, but was Microsoft’s AI product manager until December 2022. He argued that the Azure positioning was key.

“Microsoft wants to position Azure as the go-to hub for orchestrating all these different agents into one place. Enterprises should expect the need to invest into technical teams to integrate this kind of infrastructure into their genAI roadmaps,” Lin said. “If there was previously any doubt around whether agentic AI is here to stay, this is one of the strongest enterprise signals we’ve seen so far.”

Tristin Shortland, the chief innovation officer for the Infinity Group, also saw the Microsoft move as offering little to nothing new.

“This announcement is largely an internal operational change for Microsoft and doesn’t change their AI-first approach and intention to create agentic AI to solve problems,” Shortland said. “So as long as the CIO is aware of the latest strategy and vision, it shouldn’t change their thinking, but might reinforce the direction Microsoft are taking, if they are in any doubt.”

From a technology perspective, he sees the Microsoft statement as making it explicit that computer interactions are going to have to change.

“We will eventually see natural language as a more common way of interacting with systems, via AI, so I expect to see some fundamental shifts in what we consider a ‘user interface’ today,” Shortland said. “It is likely that some apps will cease to exist or be consolidated. For example, we currently have separate productivity applications based on what we are trying to achieve, but this might not be the case moving forward.”

Rob Rosenberg, who was EVP/general counsel for Showtime Networks until Feb 2023, and today runs his own legal practice focusing on technology issues, saw the announcement as interesting for its competitive context: “This wasn’t surprising given what we have learned over the past 30-60 days about the changing relationship between Microsoft and OpenAI – they are evolving from collaborators to competitors in many areas.”

Nadella also used the announcement to detail various internal structural changes.

“We are creating a new engineering organization: CoreAI – Platform and Tools. This new division will bring together Dev Div, AI Platform, and some key teams from the Office of the CTO — AI Supercomputer, AI Agentic Runtimes, and Engineering Thrive, with the mission to build the end-to-end Copilot & AI stack for both our first-party and third-party customers to build and run AI apps and agents,” Nadella said. “Jay Parikh will lead this group as EVP of CoreAI – Platform and Tools, with Eric Boyd, Jason Taylor, Julia Liuson, Tim Bozarth, and their respective teams reporting to Jay.”