Microsoft commits $2.5 billion and 6,000 employees to new AI implementation unit

Microsoft is investing $2.5 billion into a new group focused on assisting clients with AI implementations, becoming the latest tech company to commit hefty resources to helping businesses understand and adopt emerging artificial intelligence technologies.

With the new venture, called Microsoft Frontier Co., the software vendor said Thursday that 6,000 employees will be embedded with clients, in a practice that's become 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's been leading Microsoft's Asia business, will be its president.

The announcement comes 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.

Alongside its technology peers, Microsoft has sunk tens of billions of dollars into building data centers that run generative AI models. Microsoft has also released a variety of AI services, with mixed results. 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.

Microsoft's stock has slumped 21% this year, by far the worst performance among the mega-cap tech companies. 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."

"Do they snap to one model from OpenAI or one model from Anthropic, or a family of models?" Althoff said in an interview. "Do they take it from a technology first mindset? How do they look at their existing business processes and operations?"

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.

Althoff said the company has had the most success when it takes a "very methodical approach towards working with customers to build out an intelligence platform" that protects their intellectual property and allows them to take advantage of "any model in the ecosystem."

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