Microsoft has a problem: lack of demand for its AI products

Because they so much want to be a service business than a software business. Microsoft execs are losing sleep over becoming the next IBM, not realizing they are already there and have been for a long time.

Their main problem is that they never really learned how to compete on merit, just on first-to-market and all kinds of legal (and illegal) tricks.

To be pedantic, IBM is a service company

This follows from the parents statement.

That's the point.

And IBM could have been AWS a decade earlier had they so chose.

I’m actually somewhat stoked about generative AI from a “good enough” perspective, because at this inflection point where a lot of countries and organizations are looking for Microsoft alternatives (digital sovereignty, etc), this is the best time to be able to build and deploy alternatives with the productivity advantages (if any) AI might provide.

Big Tech thinks they have a moat, when it’s really diffuse power being made available via genAI to build software good enough to replace them.

Big tech's moat is mostly built up around perceived security (not actual security) and abuse of monopoly positions, AI is going to make it easier for them to maintain this because it serves as an addictive component for the users, or so they hope. In practice it only appeals to the lowest common denominator, which is exactly how they built their empires in the first place. AI allows non-experts to pretend they are experts with confidence, and to produce output they claim as their own to which they have no real title. As a democratizing principle that's great, but as a quality-of-service-provided item it could easily become a disaster and I think MS et-al are betting that they will be able to 'fake it until they make it' on the quality front to avert that disaster.

So far, I'm not seeing it. All I see is a massive leap forward in the first two years that still had some fundamental problems and a lot of fancy packaging of the same broken stuff since then. We're looking at band-aids here, not actual progress.