No Priors: Artificial Intelligence | Technology | Startups
00:17:31 · swyx, Sarah Guo, Satya Nadella
[00:17:31] S2: I think the SEC is gonna have to have accounting standards for token expertise. [00:17:37] S1: You're talking about the equilibrium state and a stable equilibrium where companies have this compounding value and can see terminal value for themselves. Another challenge to, you know, the considered equilibrium of, okay, there are applications and workflows that are sort of common to a vertical or a horizontal. And this was like the generation of SaaS companies. And, you know, Microsoft has lots of SaaS properties as well. Then And there are things that are very specific to every enterprise that they're differentiated against. I'm sure you have heard much and participated in much of the debate about the end of software because all these workflows are cheap to generate now. Do you think the equilibrium looks different between what agents get built in enterprises versus in their vendors in the future? [00:18:23] S0: Yeah. So I think what's happening there is, see, we we had a particular way we captured, I would say, workflow in apps, right? Because we built a data model, right? We schematized some part of some business process. We then built a bunch of business logic. Yep. And then we put a bunch of UI on top of it. So that's kind of what every SaaS company- [00:18:47] S1: And a little configuration. [00:18:48] S2: For like twenty years, that
00:18:48 · swyx, Satya Nadella, Sarah Guo
[00:18:48] S2: For like twenty years, that [00:18:49] S0: was- Right. And that was it. So interestingly enough, now you kind of get to relitigate that vertical stacking, right? So I still think, for example, that data model that you build underneath every SaaS application is super good, right? Like, why reinvent it? My general ledger better be a general ledger. I don't need new schema creation. In fact, that entity relationship is actually pretty good, robust thing that I want to feed. [00:19:18] S1: And you want it to be stable.
00:19:19 · Satya Nadella
[00:19:19] S0: That's right. Yeah. Then same thing with business logic. Right? If if you look at we have this product called Power BI. Right? It is like dashboards galore people created. The beauty underneath that dashboard is a very rich semantic model, right? Someone took the pain to create a dashboard and do all the measures. And you want that? That's business logic, right? I want that to be available to me. So I think the challenge of the SaaS business model is we packaged one way. We now have to learn how to unbundle these things and rebundle in new ways and discover new business models, right? I mean, if you look at it, what's happening today with Microsoft March is a great example. Right? We have this thing called WorkIQ. In fact, what we are realizing is, oh my god, like, if you look at it, in fact, there's a historical parallel to it, right? We sold first Exchange and SharePoint. And, you know, before Teams, we had a thing called Link Server and what have you. And we thought, oh, that's all gonna move to the cloud. But little did we realize that the number of people who will use servers in the cloud is 10x, 100x, right? Because people were not buying servers, they were just buying a subscription. The same thing is now happening with M365 because with WorkIQ, we have exposed what is perhaps the most important database in a company that never got used as a database because it is only captive to our apps, right? Was all email operated on it, Teams operated on it, Word, Excel, PowerPoint, SharePoint. But now, like, this is one of the coolest things I get to do with WorkIQ. I go to a GitHub repo and I say, hey, I attended a bunch of design meetings last week related to this repo. Can you capture all that and tell me what changes I should make? I mean, think about that, right? It literally can go look at all those transcripts, come back with a plan to change your code base. Right? Previously, you could never have thought of using M365 for something like that. So the value creation opportunity now in the agent world is, in fact, 10x more. But it does require us to have, for example, there's going to be usage around M365, right? Which is going to be perhaps more than even the end users. And we have to even rearchitect. Like, in fact, what I use to serve an inbox or a mailbox cannot be used to serve an agent. And so that's sort of what we are doing.
00:21:47 · Sarah Guo, Satya Nadella
[00:21:47] S1: I don't believe in, like, permanent business models for any of these domains. But in the near term, do you have a prediction between, you know, outcomes based pricing, token based pricing, enterprise bundles? [00:22:00] S0: Yeah. The way I think about this is always we've had like, let's even take the per user price. [00:22:06] S1: Mhmm.
00:22:07 · Satya Nadella
[00:22:07] S0: The per user pricing is really an artifact of someone creating a budget needing certainty. Right? Because it's the most important thing. Like, somebody wants a budget. Mhmm. They need a per user. And and per user is just a set of entitlements to usage. Right? That's kind of what it is. And so the way is is the first bundling will be take some usage, bundle it into per user stacks, and, you know, then sell subscriptions. So subscriptions, I think, are gonna be there. Per user is gonna be there. Then the next big thing will be consumption. So people will say, I want consumption. And it's also possible that people will say, I don't even want to pay for any of the subscriptions or the consumption's outcome. But remember, most people love outcomes until they have an outcome. Because once you have an outcome, it's like giving away royalty. Right? I mean, I've to customers who love outcome based pricing. I say, I'm all in until they oh my god. Like, what are you talking about? You're sharing in my outcome? No. No. No. I want you to go back to per user pricing, and I want you to consumption price. Right? So I think that debate will go on. But and all all all of these business models have a particular time and a place versus one to rule them all. And if anything, if you're a SaaS vendor or you're a platform vendor, having that flexibility. And quite frankly, we face this with GitHub, right? We just recently announced upper user pricing on GitHub. Because little GitHub Copilot was constructed at a per user level before we understood even the intensity of usage of agents. It was an interactive way for a developer to use CodeComplete, maybe task. It was not like, oh, I launched 10,000 agents that are going on all day. So that is what the adjustment is about. So now that we really want, there will always be a per user, but there will have to be a consumption meter.
00:24:02 · Elad Gil
[00:24:02] S3: How do you think about the durability of SaaS more generally? One thing I've observed is in a lot of enterprises internally, there will be teams that almost have agent euphoria. They're so excited about the explosion of things they can build that they're trying to rebuild a lot of applications or going to their SaaS vendors and saying we're not gonna work with you anymore or we're considering an internal project. And it seems like in six to nine months, maybe some of those people will come back and say, actually, we we can't rebuild everything. How do you think about what's durable in this world and what isn't?