In this month’s Channel Digest: It’s clear that AI is no joke and beyond the hype, its maturing into the real deal for the channel across investments, acquisitions, and strategic initiatives.
AI is the hottest topic across the industry. It is also the biggest theme within the countless releases the IT Europa news desk receives each day. Yet, like cloud hype of the 2000’s before it, as the rise of AI shifts from potential to practical there is still a lot of hype, vapour-ware and subtly rebranding of the old into the emperor’s new clothes.
The AI Gold Rush: Investments, Acquisitions, and Market Impact
Some of the recent big announcements underscore the sheer scale of the impact that AI is having on the broader IT industry.
Google parent Alphabet is in discussions to acquire Israeli cybersecurity startup Wiz for approximately $23 billion, which would be its largest acquisition to date. With just $350 million in sales and a valuation of around $12 billion, the startup claims to work with 40% of Fortune 100 companies. On paper a bad deal but the secret sauce is its AI-driven real-time threat detection has made it a rising star in the cyber security space.
In 2023 alone, the AI sector witnessed substantial investments and acquisitions, reflecting its burgeoning significance across industries. Inflection AI secured $1.3 billion from prominent investors including Microsoft and Nvidia to develop advanced AI clusters. Metropolis, an AI-driven parking startup, raised $1.1 billion through a mix of equity and debt financing, facilitating its acquisition of SP Plus. Accenture announced a $3 billion investment aimed at bolstering its AI capabilities and talent over three years, targeting enhanced client services. Additionally, Databricks raised $685 million in a Series I funding round, pushing its valuation to $43 billion and furthering its AI-enhanced data analytics initiatives.
Databricks – a real innovator in the big data processing space – allegedly lost about $900 million in 2021/2022 fiscal years but has also rebranded itself into the AI space to gain more funding and an astronomical valuation compared to its actual revenues.
Its not punching down on Databricks or any of the other AI wunderkinds’ that are currently riding the wave but with all the hype comes a recognition that AI has few qualitative case studies that can show a tangible benefit for MSPs.
Microsoft's Bold AI Strategies and Financial Implications
The other clear trend is that key suppliers see AI as a landgrab and don’t want to be left behind. For Microsoft, it’s the 1848 California gold rush when it comes to copilot. Recent stories we have covered include Arrow enhancing its ArrowSphere Cloud platform by introducing Copilot for Microsoft 365 to its channel partners in EMEA, along with an enablement program to assist resellers in maximizing Copilot's potential. Top Microsoft partners, including Softcat and Advania UK, have adopted Copilot technology to further their AI initiatives, with Softcat integrating Copilot for Microsoft 365 and providing licenses to all employees. Additionally, Cognizant has committed to the technology by purchasing 25,000 M365 Copilot seats, 500 Sales Copilot seats, and 500 Services Copilot seats to enhance productivity.
These are just a short selection of stories. However, the soft whispered comments when you speak to MSPs and a few vendors about Copilot is its high cost of between $20 to $30 a month – depending on SKU. It is debatable whether this price tag is justified but it’s an understandable counterbalance to Microsoft’s massive investment in AI.
Alongside its $13bn investment on OpenAI, according to news agency Reuters, Microsoft has significantly increased its capital expenditure, spending $10.7 billion in the last quarter, primarily on data centers, computing, and networking infrastructure to support its AI initiatives. This marks a rise from the previous quarter’s $7.8 billion, reflecting Microsoft’s aggressive strategy to meet the growing demand for AI services. Despite strong revenue growth, including an 8% increase to $56.2 billion and a 27% rise in Azure sales, there are investor concerns about the high costs and slower-than-expected financial returns from these AI investments.
Challenges and Opportunities for MSPs in the AI Era
Microsoft are the most visible of the channel suppliers trying to get AI into the mix but there are a couple of issues that partners need to consider. The first is the dreaded ‘lock in’. At present, there are a few initiatives that aim to promote interoperability between different AI camps, but the two dozen groups are also disjointed. Big -hitters like the Open Neural Network Exchange (ONNX), developed by Facebook and Microsoft to provides a common AI model format, enabling cross-framework integration has been widely adopted due to substantial tech industry support. However, ONNX lacks support active support from Google and Apple – which is common of many of the other frameworks and initiatives.
The other is skills. AI can help with everything from automation to SoC operation but people with the requisite skills to implement it effectively are thin on the ground and expensive.
Yet this criticism is minor compared to the scale of the potential change that AI will undoubtable have on the IT service provider community. At a recent a IT Europa event, exhibitors including Threatlocker, Kaseya, Connectwise, Pax8 and Sophos all showcased operational AI process and technologies that have been productised for MSP use – and they were not alone. For the first time, vendors are putting time saving benefits as hard numbers behind the marketing messages and this should be applauded.
The underlying message for MSPs is that AI is coming whether you like it or not. Getting your feet wet early, experimenting, gaining skills and feeling comfortable about where it works and where it is not yet ready will be a significant focus for many over the next few years.
