As we go through a major economic reshuffling, the question that keeps coming to mind is: What won’t change in a decade? We are still on the early side of a major capital, demographic and geopolitical reorientation that will take a better part of a decade to sort out. During this period, companies will be constrained by capital and workers. The Cloud, APIs, and Automation will be a major part of the equation.
As baby boomers retire in significant numbers starting this quarter, we are experiencing a lot of things all at once. The first is that we no longer have workers sufficient enough to replace the retiring baby boomer population, as GenZ is the smallest generation we have. The second is as baby boomers retire and sell their small businesses there is immense room for automation to take foot which has not happened yet. Many SMBs still use on-premise tools that haven’t been updated to take advantage of the current generation of Cloud powered tooling.
As baby boomers retire and move their $79 trillion dollars of wealth to safer asset classes the capital structure is going to change. We are entering an era of expensive capital where interest rates will be significantly high for years. The result of this is there just won’t be enough capital to do any meaningful R&D through VC-based companies. So companies will be driven to efficiency and to make do with less. Automation and APIs will take on major roles at companies. This does not mean additional SaaS tooling but tooling that does work on behalf of companies. In the words of Clayton Christensen, a Job to Be Done.
So what won’t change in a tremulous decade ahead? The Cloud. If anything, the Cloud is still in the early adoption phase and has significantly further to go.
The Bay Area startup tech stack is MacBooks, Google Workspace, Slack, iPhones, and either AWS or Google Cloud. The rest of the world seems to be Microsoft Windows, Microsoft Office, Microsoft Teams, Android, and an on-site Sharepoint server. AWS has the most to lose as Azure catches up.
My wife recently needed Parallels with Windows installed on her MacBook to use Arcgis. I thought, what the hell, and decided to install Parallels on my own machine because I’ve heard so much about how much better Excel for Windows is than the Mac version. (Yes, I got excited about Excel, so sue me...) So I did it. And having played with Windows for the first time in a decade and a half I have to say I finally get Microsoft’s strategy after seeing this parallel universe.
Microsoft is playing a long game. But their game is to tie everything, and I mean everything, to Microsoft Azure. GitHub, Office, Excel, VSCode, Windows, the Power Platform. Everything at Microsoft seems to have a long game of connecting to Azure consistently. Excel pulls data from Azure, making it an alternative to tools like Tableau. GitHub Actions use Azure for compute,.VSCode seems to be connecting more and more to Azure for easy deployments. Windows seems to have easy corporate deployment options via Active Directory on Azure.
If you are in the Bay Area bubble with the Apple, Google, and AWS tech stack, we may be missing out on one of the significant technological shifts. I am betting the winner, in the long run, will be Microsoft. Microsoft has a huge distribution advantage. Say what you will about Steve Ballmer, but he built a high-power enterprise sales team at Microsoft. Buying a single unified package from Microsoft will, over time, be cheaper than buying piecemeal software from different vendors. This is why Slack lost. But everyone in the bay was scratching their head at why Slack lost because we were looking at Google as the 800-pound gorilla, not Microsoft, which is now the 1200-pound gorilla.
So what is the long-term trajectory? I think from a technological standpoint, Azure will consistently be behind AWS. Microsoft is a close follower, not a leader. So if you want the newest, then AWS will still likely be the primary Cloud provider to use. However, if your company is conservative and doesn’t care about newness, then Microsoft will be just fine. There will be deals put in place that give companies both Azure, Office, and Teams at a rate below what others are offering, and companies will pay for it.
This is all speculative, of course, and Amazon being one of the most innovative companies of our generation, will hopefully give Microsoft a run for its money. But at this point, the two Clouds I am betting on for production, compliance-oriented workloads are Azure then AWS.