Microsoft announced Thursday it is investing $2.5 billion into a new division called Microsoft Frontier Co., deploying 6,000 employees to work directly with clients on AI implementations. The software vendor said the move aims to help businesses understand and adopt artificial intelligence technologies through forward deployed engineering. The announcement follows Amazon's commitment two days earlier to invest $1 billion in a similar initiative focused on fast-paced AI engagements.
Microsoft Allocates 6,000 Employees to Client-Embedded AI Unit
The new venture, Microsoft Frontier Co., will embed 6,000 employees with clients in a practice known as forward deployed engineering. The division will contain existing Microsoft FDEs, technical consultants, support staffers and salespeople with experience in specific industries. Rodrigo Kede Lima, who has been leading Microsoft's Asia business, will serve as president of the unit.
Amazon Announced $1 Billion AI Initiative Two Days Prior
The Microsoft announcement came two days after cloud rival Amazon said it was putting $1 billion behind an FDE initiative to support fast-paced AI engagements. Leading AI labs Anthropic and OpenAI both established FDE groups in May, partnering with private equity firms, banks and consulting firms.
Microsoft Stock Declined 21% Amid AI Product Challenges
Microsoft's stock has slumped 21% this year, by far the worst performance among the mega-cap tech companies. The Microsoft 365 Copilot AI assistant has yet to gain anything approaching ubiquity in the business world, and the GitHub Copilot coding agent has ceded market share to newer players. One concern on Wall Street is that AI models that quickly compose code might threaten mature software companies.
Judson Althoff, CEO of Microsoft's commercial business, said the FDE effort stems from the realization that "customers are in very different places right now, and trying to really figure out AI." Althoff said customers are evaluating whether to use one model from OpenAI or Anthropic, or a family of models, and how to look at their existing business processes and operations.
Palantir Popularized Forward Deployed Engineering Model
Althoff credits data analytics software vendor Palantir with popularizing the FDE job title. The U.S. military, which keeps forward deployed forces abroad, has long relied on Palantir software, and the company sent FDEs to U.S. bases in Afghanistan, according to the prospectus for its 2020 direct listing.
Earlier this year, Accenture and EY both touted plans to ally with Microsoft on AI-centric FDE programs. Relative to Palantir, Microsoft supports "more models, we support more connectors to data, more integrations with open systems of record," Althoff said.
Microsoft has for years provided support and implementation services to customers. The company generated about $2.1 billion in revenue from enterprise and partner services in the March quarter, up 2.5% from a year earlier.
FAQ
What did Microsoft announce Thursday regarding AI implementation?
Microsoft announced Thursday it is investing $2.5 billion into a new division called Microsoft Frontier Co., which will deploy 6,000 employees to work directly with clients on AI implementations through forward deployed engineering.
Who will lead Microsoft Frontier Co.?
Rodrigo Kede Lima, who has been leading Microsoft's Asia business, will serve as president of Microsoft Frontier Co.
How much revenue did Microsoft generate from enterprise and partner services in the March quarter?
Microsoft generated about $2.1 billion in revenue from enterprise and partner services in the March quarter, up 2.5% from a year earlier.
