Among the seven U.S. stock companies, Microsoft is far ahead in AI applications and is widely recognized by the market as the first technology company to use AI to drive business growth.
A typical example is GitHub, the storage platform. Using OpenAI's technology, Microsoft's GitHub platform is equipped with GitHub Copilot, a popular AI programming assistant.
However, Microsoft's ambitions are not just to build a hot product, and Microsoft is also reportedly actively pushing customers using GitHub Copilot to rent Azure cloud servers — a business that can make a lot more money than a single product.
In 2018, Microsoft spent $7.5 billion to acquire GitHub. Since the acquisition, it has been expected that GitHub will bring more revenue to Azure.
However, Microsoft has been careful about monetizing GitHub, and has never required companies that use GitHub to create Azure accounts.
Now, however, thanks to GitHub Copilot's outstanding product power, Microsoft has finally begun to dare to market Azure to GitHub's customers.
According to a July 2023 survey by software company JetBrains, 42% of respondents out of more than 30,000 software developers said they use GitHub for ** reviews, up from 36% a year ago.
Swami Chandrasekaran, head of artificial intelligence and digital innovation at KPMG, told ** that the company had 500 developers in its tax services department try out GitHub Copilot last year, and the result was an average 10% increase in coding efficiency, which equates to saving about 180 hours per developer per year. KPMG plans to roll out Copilo to the rest of the firm.
However, GitHub Copilot, which seems to perform well, is actually not profitable. GitHub Copilot costs $10 per month, but there are reports that this feature loses more than $20 per user per month (some users even lose more than $80 per month). In other words, for every $10 that GitHub Copilot earns, it loses $20.
The root cause of the loss comes from the high cost of developing and operating AI models. Unlike conventional software development and operations, where the more users, the lower the cost, AI models may require intensive new calculations for each of the user's needs.
However, Microsoft has its own way of making money.
As more and more companies move to GitHub to use GitHub Copilot, Microsoft has begun to aggressively market security tools and other advanced services that require Azure accounts to customers, according to some Microsoft sales pairs. They believe that Copilot has become an important driver of Azure adoption.
For example, a person familiar with the matter told ** that Goldman Sachs has long used a mix of ** storage platforms such as GitHub and Gitlab. Recently, however, Goldman Sachs has aggressively increased its spending on GitHub, having purchased Copilot assistants for more than 10,000 software developers at an annual subscription cost of about $2 million.
Goldman Sachs also increased its spending on Azure by more than 20% in the second half of last year, and is expected to spend more than $10 million a year on Azure, according to people familiar with the matter.
Considering that Amazon AWS is currently Goldman Sachs' main cloud service provider, Goldman Sachs' current practice of voting with money undoubtedly confirms that Microsoft is successfully encroaching on the territory of its biggest rivals.
In the first half of 2023, Azure accounted for 20% of global cloud server sales, reaching $24 billion, up from 19% in 2022, according to a survey by research firm IDC. AWS's market share increased from 33 in the same period6% slipped to 315%。Google Cloud's market share is basically flat at 66%。Another research company, Canalys, also reported a similar market share trend in the first half of 2023.
In the face of Microsoft's powerful offensive, it is naturally impossible for the two major competitors of Google and Amazon to sit still.
Although the two companies were not as lucky as Microsoft, they failed to bet on a peerless unicorn like OpenAI. But Google and Amazon are stepping up their investments in Microsoft-OpenAI alliance rivals, such as Gitlab, another major storage platform.
As the largest storage platform after GitHub, Gitlab's revenue growth has slowed from 75% as of April 30, 2022 to 32% as of October 31, 2023 over the past two years due to the downturn in the enterprise software market. Analysts estimate that GitHub's revenue is about twice that of Gitlab.
Although the scale is a little smaller, the competitiveness is still there. In response to GitHub's rapid growth, Google and Amazon are ramping up their support for Gitlab. Executives from both companies told Google that Google is providing its own AI model support for some of Gitlab's new generation tools, while Gitlab is in early talks with Amazon to make it easier for software developers to use both companies' AI products at the same time.
Some analysts believe that GitLab may be an attractive acquisition target for cloud service providers, and it is a tool to counter Microsoft GitHub. The most likely candidate is Google, which owns gitlab for about 25% stake. According to people familiar with GitLab's business, Google Cloud is now one of Gitlab's most important cloud service providers.
Ashley Kramer, GitLab's chief marketing and strategy officer, said the company's own AI** assistant is expected to be adopted quickly, and another tool will be rolled out to track the productivity of different coding groups within the company.
She also said that some of Gitlab's customers moved from GitHub because they found the latter's software running and testing platforms inefficient.