Microsoft CEO Satya Nadella believes the company needs to completely rethink its business model for the age of artificial intelligence, and he’s turning to the executive who inspired Microsoft’s cloud computing transformation 15 years ago to help him navigate what he calls a critical platform transformation that will determine the tech giant’s survival.Nadella has appointed Rolf Harms as an advisor on AI economics. Rolf Harms is the same executive whose 2010 white paper, “The Economics of the Cloud,” gave Microsoft a cultural assessment and paved the way for cloud success. In an early November memo to Microsoft executives obtained by Business Insider, Nadella wrote that the company “needs to quickly reimagine the new economics of AI across the company, just as we once did with the cloud.”“This platform transition is all about building a new AI factory and family of copilots and agents that will drive adoption and usage across the full stack,” Nadella wrote in the note. The move comes amid growing questions about whether AI companies’ large infrastructure investments will pay off. Microsoft helped fuel these concerns by taking its foot off the pedal on AI spending earlier this year, but the company recently doubled down on its results with major new deals with OpenAI and Anthropic.
Move to cloud computing provides blueprint for Microsoft’s AI transformation
Harms’ 2010 white paper is considered a turning point in cloud computing, showing why customers will ultimately use cloud services at scale to save money despite security and availability concerns, and helped justify Microsoft’s investment. At the time, people within Microsoft complained that Harms was “making bombshells to the organization,” to which Harms responded, “They’re already there. I’m just helping you find them.”In a letter to employees in July 2025, Nadella acknowledged the “uncertainty and seeming contradiction” of thriving by objective standards while undergoing layoffs, calling it “the mystery of success in an industry with no franchise value.” He emphasized the need to respond to changing customer needs by creating new categories with new business models while maintaining current business.
Microsoft CEO Satya Nadella fears repeating old mistakes
This urgency reflects serious concerns about Microsoft’s long-term survival. At a town hall in September, Mr. Nadella told employees he was “obsessed” with Digital Equipment Corp., which once controlled minicomputers but disappeared after making a strategic mistake. The Verge reported that Nadella warned that “some of the biggest businesses we’ve built may not be as important going forward.”Harms will continue to report to Scott Guthrie, Head of Cloud + AI, while working closely with Nadella and the executive team to advise on adapting to the new economics of AI, from infrastructure to platform technology to applications. In his annual letter, Nadella reframed Microsoft’s mission from building a “software factory” to becoming an “intelligence engine” that allows anyone to create their own tools.Microsoft declined to comment when asked about the memo.Microsoft CEO Satya Nadella recently revealed that the company is moving from “per user” pricing to “per agent” pricing as artificial intelligence (AI) systems increasingly perform autonomous work alongside human employees. Nadella explained on the Dwarkesh Podcast that Microsoft’s business is transitioning from being an end-user tools company to an infrastructure provider that supports AI agents that can independently complete tasks and make decisions. “Our business, which is currently an end-user tools business, will essentially become an infrastructure business that supports the work of our agents,” Nadella said. “The idea of a per-user business is per-agent, not per-user.”
