Microsoft's Approach to the AI Platform Shift

If you recently listened to Microsoft's Chief Partner Officer Nicole Dezen 's interview on Vince Menzione 's Ultimate Guide to Partnerships podcast, you know that she emphasized Microsoft's priorities on AI, security, and co-pilot.

In Microsoft's Q4 earnings report, CEO Satya Nadella outlined the company's strategic approach to navigating the shift towards AI platforms, emphasizing innovation, security, and cost management in response to market demands. He mentioned that the transition to AI platforms is like the previous shift to cloud computing—both require significant investments in knowledge and capital.

Strategic Focus Areas:

• Driving Innovation: The company aims to innovate across its product portfolio, which includes both infrastructure and applications. This is to maximize opportunities while scaling the cloud business. Emphasis is placed on prioritizing security as a fundamental aspect.
• Managing Cost Structure: The company uses customer "demand signals" and the time it takes to realize value as key metrics to dynamically manage costs. The goal is to generate sustainable, long-term operating leverage.

Products Highlighted and Customers Reach/Mentions

Microsoft's big product portfolio can be overwhelming to outsiders, but partners who understand its structure and target customers are better equipped for success. This section summarizes key Microsoft products and their target customers mentioned in the earnings report, providing valuable insights for partners' internal business cases.

1. Azure Datacenter Footprint: Expanded across four continents. (1) AI Accelerators: Added AMD, NVIDIA, and Azure Maia. (2) Cobalt 100: Customers include Elastic, MongoDB, Siemens, Snowflake, and Teradata. (3) Azure Arc: 36,000 customers, including ABB, Cathay Pacific, and LALIGA. (4) SAP and Oracle Workloads: Atos, Coles, Daimler Truck AG, Domino’s, Haleon. (5) Azure VMware Solution, (6) Azure AI: Over 60,000 customers, including H&R Block, Suzuki, Swiss Re, Telstra, Freshworks, Meesho, and Zomato. (7) Phi-3: Customers include BlackRock, Emirates, Epic, ITC, Navy Federal Credit Union. (8) Models as a Service: Customers include Adobe, Bridgestone, Novo Nordisk, Palantir.
2. Microsoft Intelligent Data Platform Broad capabilities spanning databases, analytics, business intelligence, and governance. Integration with AI services. (1) Azure AI customers using data and analytics tools: Growth of nearly 50% year-over-year. (2) Microsoft Fabric: 14,000 paid customers, including Accenture, Kroger, Rockwell Automation, Zeiss.
3. Developer Tools GitHub Copilot: Adopted by 77,000 organizations, including BBVA, FedEx, H&M, Infosys, Paytm. Copilot Workspace Power Platform: 480,000 organizations used AI-powered capabilities; 48 million monthly active users.
4. Future of Work Copilot for Microsoft 365: Customers increased over 60% quarter-over-quarter, including Capital Group, Disney, Dow, Kyndryl, Novartis, EY. Team Copilot and Copilot Studio: 50,000 organizations, including Carnival Corp., Cognizant, Eaton, KPMG, Majesco, McKinsey. DAX Copilot: Used by over 400 healthcare organizations, including Community Health Network, Intermountain, Northwestern Memorial Healthcare, Ohio State University Wexner Medical Center.
5. Business Applications Dynamics 365 Contact Center: Customers include 1-800 Flowers, Mediterranean Shipping, Synoptek. Dynamics 365 Business Central: Trusted by over 40,000 organizations. Microsoft Teams: Teams Premium has surpassed 3 million seats, customers include dentsu, Eli Lilly, Ford.
6. Devices Copilot+ PCs Windows 11: Adoption by companies like Carlsberg, E.ON, National Australia Bank.
7. Security Copilot for Security: Over 1,000 paid customers, including Alaska Airlines, Oregon State University, Petrofac, Wipro, WTW. Defender for Cloud: Surpassed $1 billion in revenue, customers include Dell Technologies, Deutsche Telekom, TomTom.
8. LinkedIn Premium sign ups: Increased 51% this fiscal year. Added AI-powered LinkedIn Premium experience.
9. Search, Advertising and News: Enhanced user engagement and value through Bing, Edge, and Copilot, leading to a 19% year-over-year revenue increase. Leveraging Gen AI for innovative search and browsing experiences, including a new dynamic search response feature. Copilot has driven significant engagement, with over 12 billion images created and 13 billion chats conducted. Microsoft has paid $1 billion to news and entertainment publishers over the past five years. Advertisers benefit from AI-driven tools like Performance Max and Copilot in the Microsoft Ad Platform, which optimize and troubleshoot campaigns using natural language.
10. Gaming Game Pass: 18 new titles, including Call of Duty: Black Ops 6. Game Pass Ultimate: Stream games on Amazon Fire TVs. Fallout TV show on Amazon Prime.

Tactical Focus: What does this mean for Microsoft partners?

To further understand the implications for Microsoft partners, we recently discussed key takeaways from #MCAPS during a Women in Cloud (WIC) Inspire 2024 session led by Chaitra Vedullapalli and Karen Fassio. Based on the strategic approach discussed in today's earnings call, I'd like to refocus on these takeaways:

• Focus on AI, Security, and Copilot Partnerships: Microsoft is prioritizing these areas, with an 82% increase in designations and plans to double specializations. Align your business with these strategic priorities.
• Leverage New AI Skilling Resources: Microsoft has introduced new resources to help partners upskill and stay competitive. Utilize these resources to enhance your AI expertise and remain competitive in the market.
• Understand the Substantial Investment in Customer Transformation: Microsoft is investing $40 million in incentives to drive customer transformation and support partner growth. Leverage these incentives to fuel your solution sales.

Special gratitude note: Thank you Gregory Lehrer for teaching me the discipline to listen to earning reports and sharing my insights.

Credits: This article has been grammar checked and edited by ChatGPT.