Do worker bees need Copilots?

Welcome to Runtime! Today: Microsoft rolled out its second wave of Copilot feature upgrades ahead of a pivotal year for its AI strategy, AWS throws Intel a lifeline, and the latest funding rounds in enterprise tech.

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Flying blind

Microsoft 365 (you know it as Office) is a central part of the work day for hundreds of millions of people around the world. Over the last couple of years Microsoft has invested billions in the notion that those users need and want an expensive digital assistant riding shotgun as they prepare pitch documents and send follow-up emails, and it's not clear how many of their bosses agree.

Microsoft kicked off "Wave 2" of its Copilot push Monday with the introduction of several new features that it thinks will make customers more productive at work. The new additions "help you break down these silos between your work artifacts, your communications, and your business processes," Nadella said in a recorded presentation.

• Copilot Pages will allow subscribers to collaborate on content generated by Copilot, creating a new "page" where different members of a team can save responses to Copilot prompts and work together to refine them.
• Copilot for Excel is now generally available, adding new ways to work with unstructured data inside the application that probably runs more finance departments than anything else.
• And Microsoft is jumping on the "agentic AI" bandwagon with Copilot agents, which allow users to automate several steps in a business process such as responding to an invoice.
• "If 2023 was the year of the Microsoft Copilots, 2024 is all about Microsoft trying to make good on its Copilot-related promises," wrote Directions on Microsoft analyst Mary Jo Foley in her recap of the announcements.

The problem for Microsoft is that it doesn't just have to deliver on those promises with must-have technology; it needs to convince CIOs and business leaders to pay for it. A Microsoft 365 Copilot subscription still costs $30 per user per month on top of their existing Microsoft 365 subscriptions, which can cost $54.75 per user per month at the biggest enterprises.

• One of the bigger trends in enterprise software over the last few years, after the end of zero interest-rate policies forced a pullback in tech spending, is the shift away from subscription-based pricing to consumption-based pricing.
• Microsoft, on the other hand, is trying to push a new and expensive subscription service on customers who understand the value of their Microsoft 365 subscription, but don't understand the value of a Microsoft 365 Copilot subscription.
• By comparison, Salesforce is charging $2 per conversation for chatbots built around its agent technology, which could be very expensive in production but at least allows customers to test the technology relatively cheaply at the outset.
• Wells Fargo analysts thought the new Copilot features helped make the subscription price "more digestible," according to Seeking Alpha, but even that suggests Microsoft still has a ways to go.

Microsoft has always talked about its AI investments as a long-term strategy, but at some point it will need to show some results outside of its early generative AI wins in coding and as OpenAI's training partner. With 400 million users according to Nadella, Microsoft 365 is its most visible piece of enterprise software and a key part of its bet on this technology.

• And the market still seems to be having trouble understanding why their employees need the basic content-generation-and-summarization product at the heart of Microsoft 365 Copilot.
• Nadella said that the number of people using Copilot at work "doubled quarter over quarter," but stopped short of providing any details around how many people that actually involved.
• Several of the features discussed Monday won't be available for a few weeks, which means it will probably be well into 2025 before we know if "Wave 2" has taken hold.

Lost and foundry

In an otherwise dark year for Intel, its fledgling foundry business got a big vote of confidence Monday from perhaps its largest data-center customer. AWS and Intel announced that Intel will manufacture two chips for the cloud leader as part of "a multi-year, multi-billion-dollar framework," they said in a press release.

Intel will build "an AI fabric chip" for AWS using its most advanced manufacturing technology as well as a custom version of its flagship Xeon server processor designed for AWS. AWS designs several chips used across its cloud, including Graviton, Trainium, and Inferentia, but is an enormous buyer of Intel's Xeon server processors, which run most of the cloud instances used by its customers.

Intel also announced plans this week to turn that foundry business into an independent subsidiary of the company, which could lead to an eventual spin-off. Intel's combined design and manufacturing prowess dominated the tech industry for the better part of two decades, but years of self-induced errors and renewed competition have forced it into a difficult position that will involve thousands of layoffs.

Enterprise funding

World Labs launched with $230 million in funding to support AI legend Fei-Fei Li's new venture, which will work on "spatial intelligence."

Second Front Systems raised $70 million in Series C funding to help the U.S. military and government agencies purchase and use SaaS applications.

TeamBridge scored $28 million in Series B funding as it builds out HR software for companies that employ hourly workers.

Orb raised $25 million in Series B funding for its billing software, which helps SaaS companies shift to per-usage billing strategies.

Aembit landed $25 million in Series A funding to expand its non-human identity management software, which could become very important as a security tool against the rise of agentic AI.

11x.ai raised $24 million in Series A funding to build "digital workers" for back-office tasks.

The Runtime roundup

Amazon announced that employees will have to return to the office five days a week, delighting recruiters across the country.

AWS transferred control of the OpenSearch project to the Linux Foundation, giving the open-source fork created after Elastic's 2021 licensing decision a neutral home.

Cisco laid off about 5,600 employees after making employees wait about a month to see who was affected by its second major layoff of the year, according to TechCrunch.

Alibaba is still recovering from an outage caused by a fire at a Singapore data center last week, awaiting access to an area of the building that is still sealed off.

Thanks for reading — see you Thursday!