ChatGPT’s generative AI domination since its release in late November has led many in the tech industry to predict Microsoft’s current stranglehold on the technology will continue well into the future – and that Microsoft will inevitably be the leader in the cloud.
GenAI requires supercomputing-like power, the ability to store and tap into monstrous amounts of data, close links to a company’s existing technology infrastructure, and straightforward tools to help users get the most out of it. Those requirements are well beyond the capabilities of all but a few companies, meaning businesses will need to turn to the cloud for them.
That’s behind the assumption Microsoft, with its comprehensive suite of products, cloud prowess and lead in generative AI will emerge on top.
Not so fast, say those who think Amazon will continue to be the cloud’s top dog. They point to the company’s significant lead in cloud market share, and a quiet but fierce focus on genAI tools honed for enterprises.
Microsoft or Amazon — who’s right? Let’s look at the reasons either could end up dominating the cloud and genAI.
Why Microsoft believes genAI will make it the cloud leader
Those who point to Microsoft have a straightforward argument: Microsoft is already the market leader in business apps for enterprises, including Microsoft 365 (formerly Microsoft Office), Teams, Microsoft Dynamics 365 ERP — the list can seemingly go on forever.
Every one of those products will ultimately include Microsoft’s genAI tools, which the company brands as “copilots.” According to Microsoft boosters, these tools will make enterprises far more efficient. For example, Microsoft claims, the Microsoft 365 Copilot will allow Excel to autonomously break down your corporate sales according to type and sales channel and create a chart visualizing the data. Word’s copilot could take that data and create marketing materials. And PowerPoint’s copilot could build a presentation based on the Word documents and Excel data, including relevant stock photos.
In Teams, Microsoft says, a copilot could conceivably build a table of pros and cons about a topic being discussed, list all the decisions made in a meeting about it, and suggest follow-up actions.
Performing those tasks requires access to company data, and backend tools to tap into that data for all of Microsoft’s copilots — and that means the cloud. Microsoft has a suite of AI cloud tools called Azure AI that allow companies to use their own data for AI and build their own machine-learning tools. Many companies, including the NBA, CarMax, H&R Block, and others, are already doing it.
Even though we’re still in the very early days of genAI-cloud marriage, Microsoft’s cloud revenue is already seeing growth. The company, in its most recent earnings report last month, reported cloud revenue, driven by cloud-native AI workloads, hit $110 billion for the fiscal year; that’s an increase of 27% over last year’s results.
Microsoft CFO Amy Hood explained: “The average annualized value for our large, long-term Azure contracts was the highest it’s ever been, driven by customer demand for our innovative cloud solutions today, as well as interest in AI opportunities ahead.”
Why Amazon thinks it will remain king of the cloud
Amazon tacitly acknowledges Microsoft has won the PR war about genAI. It has no announced plans to target its tools at general consumers, as Microsoft has done. So there’s no real buzz about its AI plans.
But that doesn’t mean Amazon doesn’t have them.
It means, instead, that the company is aiming its generative AI tools directly at companies using the cloud. There’s good reason for doing that. It already has a substantial lead over Microsoft in the cloud — 32% versus Microsoft’s 22%, according to Statista — and it wants to play to its strengths.
Victor Raymond, CEO of Triumph Technology Solutions, an Amazon Web Services (AWS) partner, acknowledges, “OpenAI was first to market in how search is being revolutionized.” However, he believes Amazon’s use of genAI in the cloud is better for business than Microsoft’s tack. Generalized search isn’t the point of business cloud use of genAI, he says.
Instead, Raymond argues, the point is using a business’s own data.
He explains: “Where I think AWS really is winning now and it’s going to win in the future — being able to take advantage of these large language models with your own data. Where OpenAI doesn’t give you that opportunity… that’s where AWS always wins, being able to get granular with what you want to do. It’s very customizable, where some of the other solutions that are out there from our competitors — Azure, Google — they’re not as customizable compared to what is available on AWS now.”
Amazon believes so much in that model it’s developed a $100 million program to help customers develop and use genAI tools on their own data. AWS AI experts will serve as free consultants to businesses.
The Motley Fool puts it this way: “The program will provide no-cost workshops, engagements, and training to teach businesses how to use some of the most powerful AI tools available on AWS, like CodeWhisperer, which serves as a copilot for computer programmers to help them write software significantly faster.... The free training and access to expert engineers could make AWS an attractive on-ramp into the world of AI for many organizations.”
So who will win?
Ultimately who’s going to come out on top? Obviously, it’s too soon to know for sure; genAI, despite all the recent hype, is still in its infancy.
If I were a gambler, though, I’d bet on Microsoft. Amazon may be able to hang onto existing customers with AWS tools and free consulting. But I think Microsoft’s dominant genAI presence, and the fact it will be embedded in all the company’s products, give Redmond a better chance of gaining new customers.
I don’t expect Microsoft to grab the lead next year or even in the next few years. But after that, I think Microsoft will come out on top.
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