deal architect

A conversation with Satya

Satya Nadella of Microsoft has been in the press quite a bit recently with his comments that we have moved to the age of digital agents and they will cause the end of SaaS and broadly other business applications, which he says essentially only provide skin deep services front-ending databases – create, replace, update, delete (CRUD)

Whenever I hear “end of” or “death of” something, it triggers for me two other thought leaders:

• In 1989, Francis Fukuyama, then deputy director of the State Department's Policy Planning Staff predicted the fall of Communism and the world beyond in an article titled “The end of history”. He was mocked by world leaders like Margaret Thatcher and history has certainly not ended with Hamas and Latin gangs causing chaos and Putin and Xi among others having evolved a new form of capitalistic communism
• In 2003, Nicholas Carr stirred up our industry with his Harvard Business Review article “IT doesn’t matter” and a book similarly titled. He was similarly mocked and the reality is CIOs have become even more strategic with large digital transformations, security challenges, and now with management of hyperscaler clouds and with massive AI budgets.

In their defense, both Fukuyuma and Carr were pointing to inflection points, not “endings”. So I would read Satya with a similar lens – he is pointing to a transition point, not a wall we are about to crash into.

And Satya is only pointing to the obvious. As I wrote in From BOPS to FAANG to the Magnificent Seven enterprise application vendors and their services partners have gradually but precipitously slipped in market leadership over the last 3 decades.

Satya has certainly earned the right to opine on the trajectory of the industry. Watch this fascinating conversation with Bill Gurley and Brad Gerstner. Satya has taken the Azure cloud business from $1 to 66 billion in revenues. He has added $3 trillion to Microsoft’s market cap. His early investment in OpenAI was brilliant. He is humble enough to talk of the “winner’s curse” where competitors can sneak up, duplicate success in a heartbeat. But the really intimidating part for his competitors is towards the end when they talk about model scaling and over 60 data centers across the globe and massive capex spend of nearly $70 billion in 2025. No wonder Satya mostly names his Mag 7 compatriots (he alludes to the Mag 8 to include OpenAI) like Elon, Jensen, Sam and Mark in his comments, not any of the application vendor execs.

I have met Satya a couple of times, and would love the opportunity to take the conversation further with more of an application and business use case perspective : who would train the new world of agents, where would the training data be sourced from, where are we going to provision the humongous energy needed to run power hungry GPUs and data centers etc.

Here are 5 areas I would love to discuss with him given the changes the new US administration is likely to bring to the global economy, and based on research we did for the fiction book we have just released, The AI Analyst

• Tariffs will likely lead to more manufacturing, varied logistics and related robotics and sensors in the US. Immigration changes will lead to more automation opportunities in farming, construction and other sectors. Healthcare is going to see plenty of scrutiny. There is already a debate on H-1B visas and impact on IT outsourcing. Most of the agents today in the markets are back office and IT-centric, and mostly Western economy focused. How are they going to help in operational areas on the shop floor, the operating room, the fields etc.? How are they going to be able to help with the exotic taxes, payment protocols, customs and other compliance requirements being dreamt up by BRICS and other fast growing economies?
• Polestar, the AI/Automation company in our book whose CEO, Barry Roman disappears, is a next-gen tech vendor which combines agentic AI with humanoid robots, drones, UAVs etc. Not just a software focus. Polestar has an expansive definition of its verticals as each of the 800+ occupations the Bureau of Labor Statistics tracks. Their solutions automate limbs, eyesight and other human faculties, not just cognitive skills. They sell solutions including warehouse bots and GPUs “as a service” but are very flexible in allowing customers to scale their use up or down. Is he seeing tech vendors who can come close with the unique domain expertise and faculties needed for each of these occupations? That unique worker productivity is where the buyer ROI is acutely seeking.
• The book also has a next-gen technology buyer in a NYC financial institution, Sheldon Freres which knows how to monetize its mountains of unique vertical industry data. The tensions and shifts in economics between buyers and vendors of technology are brought out quite vividly in the book. As Patrick Brennan, the analyst character summarizes “Given how expensive GPUs and good AI talent is likely to be for the next few years, enterprises will prioritize unique products and market-insight projects, like drug discovery, mineral insights, product design advantages, trading patterns, etc. Smart customers will protect that data for themselves, train their own large language models, or LLMs, and commercialize that data asset. Vendors will continue to generate proposals, job descriptions, demand forecasts, etc. with their AI—clearly useful stuff, but not deserving significant premium pricing. We need to be associated with the first group of customers, the smart ones.” How are vendors going to adjust to a coming marketplace where their customers have the monopoly on deep domain specific training data and want to be compensated for it?
• How are we going to source energy for our massive inference, quantum and other computing while monitoring our emissions? Our utilities have barely been able to keep up with growing EV demand. Even in Germany which has invested trillions over 50 years on wind and solar, renewables barely meet half of their total energy needs. Where does he see next-gen nuclear in the mix? What about carbon capture and hydrogen harvesting? Do we need a new breed of utilities which are as ambitious about capex spend as the Mag 7 have become? At this point our utilities appear to be a major bottleneck and their infrastructure is incredibly dated.
• Technology buyers are also going to be consulting with a new breed of analysts like Patrick. His firm, Oxford Research doesn’t just produce “Golden Circles” (their version of Magic Quadrants) which a copilot called Curmudgeon helps generate. They also have labs which test products and their security vulnerabilities. Their focus is not just IT, but energy and other STEM disciplines and they have a global reach. As Patrick tells his colleagues at an Oxford offsite “COVID, the Ukraine war, climate change, and massive digital transformations have made many vertical edge applications viable—telemedicine and personalized medicine in healthcare, EV battery management and billing in utilities, intelligent returns and reverse logistics around eCommerce, direct-to-consumer and related last-mile, small-lot logistics in consumer sectors, CPQ for industrials to handle complex outcome-based pricing which bundles products’ spare parts, all kinds of monitoring and maintenance services . . . the list is virtually endless.” The conversation around AI is increasingly going to be with much savvier business executives, not just about technology speeds and feeds. As Tom Siebel of C3.ai recently said “Silicon will get commoditized. It always gets commoditized. Infrastructure will get commoditized. It always gets commoditized. What doesn't get commoditized in the long run are the applications and that's where C3 AI plays.” And to my knowledge, even Tom does not have anywhere near the depth of vertical capabilities I describe above.

Would love to get Satya’s perspective on the coming changes in our industry from his perch. I loved his demeanor in the Bill and Brad show. It was an unusually long session but he came across so comfortable, confident and articulate. A true industry leader.

The Mother of all Disruptions

Two Wednesdays ago, I was getting some of my daily steps on the 14th deck of the Celebrity Ascent which had sailed from Barcelona. I greeted “good morning” to a gentleman passing me. He stopped and said “Not a good, but a great, morning”. I presumed he was a fellow Floridian as we were headed to Ft. Lauderdale and we started a quick conversation. He was actually from California and he poured out what exactly he thought about his Governor and his state. Over the next couple of days, I had many similar conversations with others we had met on the ship about the US elections. I would preface the conversations with a simple question "Are you glad or sad?" Most said glad about the election results, sad about the cruise ending.

I am a registered Independent and tend to have low expectations of politicians in Washington, DC. I had written this blog post My 10 asks of the next POTUS in early August and had been disappointed that neither candidate had focused much on policy matters. As it is now becoming clear, Kamala spent too much on celebrities and campaign cosmetics and Trump on rah rah rallies. Entertaining but content-light.

My 10 points had called for

• Reduce our National Debt which has spiraled in the last decade
• Deliver trade surpluses after decades of deficits
• Make us an energy innovator with next-gen nuclear, carbon capture etc
• Get serious about “affordable” healthcare and delver much better outcomes
• Tie immigration to our talent needs – we have a process which works but that we have ignored
• Take care of our aging baby boomers
• Quit spilling our young blood in faraway places
• Be fluent in STEM – our leaders need to celebrate and highlight the wide US STEM leadership
• Celebrate the nuclear family – I have a nuanced point of view on why we have created our distorted population pyramid
• Re-prioritize common sense – we have paid too much attention to activists and ideologues

Clearly, I have tall expectations which call for disruptors to divert the trajectory in each area. However, I figured I would mostly hear celebratory talk from Trump till he took office in late January.

So, I have been blown away by how quickly he is assembling his core team . I like many of them – Elon, Vance, Vivek, Burgum, Tulsi, RFK Jr, Rubio, Lutnick, Kristii, Hegseth,Wright. Many are youngish, entrepreneurial and importantly they are STEM savvy. They can clearly be disruptors. Match them to my 10 “asks”.

In response, I have also heard an equal and opposite reaction to them from many defending the status quo.

My career has thrived on disruption in the tech sector. I helped clients replace mainframe applications with client server flavors at PwC and Gartner. At Deal Architect I helped a number of clients with due diligence around offshore development in emerging economies around the world. I have helped clients move to cloud applications, evaluate hyperscalers replacing propriety data centers and outsourcers, evaluate benefits of automation from robotics to now Gen AI. I have seen global economies ebb and flow in my travels across 75 countries. I have seen verticals dramatically transform over the last few years, many with brand new competitors. It shows in the massive changes in vendor portfolio over the last two decades of Deal Architect and in our family budget – especially in telecoms, financial services, travel and retail.

Disruptors are by definition bulls in a china shop. They leave behind winners and losers. They inevitably face resistance to change. But life and business goes on, and usually gets better.

I have learned to present pros and cons, logically not ideologically, when I invited to. It definitely helps that I have spent time with countless execs for books like “Business as Unusual”. I have learned from others talk about a ‘Fail Faster” culture. A CEO once told me “Never offer a Plan B. Burn the boats behind you.”

We are entering a phase of great disruption. Like most, I am anxious. But I am also excited.

Exxon Mobil in an "energy magic quadrant”

I have spent a lifetime watching new market segments emerge, mature, get disrupted, morph and consolidate. The energy sector is going through a massive disruption and renewal.  If I were building a 'magic quadrant" I would factor wind, solar, tidal, nuclear fusion, oil and gas, hydroelectric, biomass, geothermal and other alternative energy sources. My view is we need all of the above so we don’t have to become dependent on tyrant politicians or businesses. I wrote recently energy independence is as important as a focus on emissions.

And as I have in many tech sectors, I would be listening to pitches and doing a lot of research around each. And sure enough there would be bad-mouthing, with players calling the other evil and worse. My job is to ignore that noise.

I have been talking to a number of oil industry executives and listened to a couple of interviews Darren Woods, Chairman and CEO of Exxon Mobil has done recently including one below. It is one of the largest publicly traded international oil and gas companies.

Here are some of his remarks (slightly edited) about his company, his competition and his thoughts on public policy. He is feisty at points, but generally, comes across as a geek and an economist, something I like when I listen to vendor pitches.

• We've been doing this for 100 years. When we first started out, we were basically making kerosene for lighting. When the electric light came on, we were moving into gasoline. We've moved into chemicals. And so, this industry and our company have been evolving since its inception.
• We are a company that knows how to manage and manipulate hydrocarbon molecules. What we're trying to manage with the energy transition, it's essentially a hydrocarbon, CO2 carbon management challenge. And that's right up our alley.
• The more folks we engage trying to solve this (transition to low-carbon) problem, I think the better off the world is going to be. I've seen a big difference just in the last several years with the number of different companies, big thinkers, focused in this space.... I mean, two years ago, it was wind and solar, period. Today, it's wind and solar, and you got carbon capture and hydrogen and biofuels and ammonia.  (Btw, he did not touch on the potential of many other sources I made above. As a CEO, he sees the competitive landscape differently than I do as an analyst)
• Ultimately, I think, by 2040, every vehicle in the world could be electric. And so, you would not have gasoline sales. Oil demand would (still) be what it was back in 2013/2014 time frame. We were pretty successful business in 2013/2014 . So, our view (is EVs are) not going to make or break this business or this industry.
• What's driving growth in demand for oil is chemical products, which play a really important role in people's lives today. The other big driver is industrial fuels, transportation fuels, and so heavy duty.
• Europeans are making a strong case for green hydrogen which is made through electrolysis. Blue hydrogen is developed primarily through methane, and then capturing the CO2 that comes out. The US has abundant methane, we've got abundant places to store CO2. And so, the answer for hydrogen in the US I think, is going to be blue hydrogen. In Europe, they don't have the same abundance of methane, they don't have the same co2 capture capacity. So, electrolysis and green hydrogen makes more sense for them. And so rather than coming out with a dictate that says it's got to be green hydrogen versus blue hydrogen is let the market figure it out.  What we will find as you go around the world, that the natural endowments, the advantages that you see, the technology progress, you see is going to manifest itself differently.
• I think political leaders ought to be focusing on how we get to a solution and working collaboratively. Not only with NGOs, but with businesses that have the experiences and the skills and the understanding to figure out solutions that help meet all of society's needs, not just one aspect.
• Don't incentivize one technology because you think that's a better answer than the other. Put incentives out there for all technologies and let the productive capacity of the market work, let the technologies of companies go to work to solve those problems. We are an advocate for a uniform price on carbon across the economy is because it incentivizes every individual player, irrespective of the industry or in respect of the technology that you support. You put your effort into finding a solution to capture that value, and reduce CO2. It's too complicated, it's too difficult to predict exactly what the solution is going to look like. Instead, we should put the incentives out there and let the market do what the market does.
• We've been doing this for 100 years. In the technology space, people recognize that we're serious, we have capabilities, and we're at the table, trying to bring solutions to that. We have a reputation for doing big projects, at scale, convening industries, bringing together different parts of governments, other commercial enterprises to come up with big picture solutions.
• We could spend forever debating what was said 30 years ago or we can focus on what are we doing today to try to make progress in this very complex space. I'm very proud of what we're doing today. And I think we will make a big difference; we will be an important part of the solution.

The next energy transition

Mankind has been through multiple energy transitions. Our ancestors burned wood, used peat bog and other biofuels. The Romans were particularly ingenious at using water and wind power. Coal fueled the Industrial Revolution in the 1800s. The 1900s belonged to oil and gas especially as humans became much more mobile.

We are in the midst of another major energy transition as we all move to low-carbon futures. To me, the exciting thing is we will likely end up with a cocktail of energy sources – wind, solar, tidal, gas, nuclear fusion, upgraded biofuels, hydroelectric and geothermal combined with storage in the form of hydrogen fuel cells and electric batteries. And I could make that list much longer.

We should be celebrating this coming abundance. Instead, we are vilifying one source or another, using FUD to try and accelerate the transition to our favorite flavor. My projection - there will likely never be a single solution. Different countries will take their own paths. Just look at how they have been evolving in the last few decades, each with their own version of energy independence

• Germany deserves a lot of credit for maturing modern versions of wind and solar (wind mills and photovoltaic cells have been around far longer). And yet the majority of its energy still has come from its coal and from Russian gas. Going forward it will continue with its wind/solar but diversify with LNG logistics and a hydrogen future.
• The US image is dirty – yet between 1990 and 2020 its greenhouse gases stayed steady, even as its GDP went up 5X. The largest single contributor was that many of its utilities switched from coal to much cleaner gas. And that gas had its own remarkable story thanks to entrepreneurs like George Mitchell who contributed to the US version of energy independence
• France gets 2/3rd of its electricity from nuclear power. While much of the world conjures up images of Chernobyl and other disasters, the French reacted to the OPEC oil crisis in the 1970s with the brutally realistic assessment of “No oil, no gas, no coal, no choice” and embraced nuclear and continues with it.
• Norway has the highest per capita adoption of electric vehicles in the world. And these EVs are the “greenest” in the world. Over 90% of its electricity comes from hydroelectric sources. It is a country blessed with plenty of deep valleys and rivers. It is doubly blessed with plenty of North Sea oil and gas which it mostly exports – valued at over half of all of its exports.
• Iceland, Kenya and the Philippines (among others) get much of their energy from geothermal. Factoid – after solar, geothermal is the second most abundant source of energy available to humans.

Update - someone asked me what about the BRICS countries and others like Indonesia and in Africa. They have been trying out their own version of energy independence. Brazil pioneered ethanol from its cane decades ago. China has invested heavily in modern hydroelectric. Their challenge is they are still too heavily dependent on fossil fuels, particularly coal. They will have to innovate their own path to low carbon. They cannot pretend the rest of the world will make up for them. Their emissions more than offset the improvements we are seeing in some of the countries named above.

I have personally been dismayed by the demonizing of the oil and gas sector. In fairness, the industry has done a poor job marketing its contribution to our lives. Did you know over 6,000 items we use every day from lip balm to carpeting get their start in crude oil?

I worked in the oil patch in the 80s in Texas, Saudi, Holland, Bahrain among other places. It is an incredibly complex and brave industry. I say brave because they work in some of the most forsaken, hostile, risky places on earth. And have mind-bogglingly complex protocols for safety on rigs, tankers, refineries etc.

But importantly here’s why we will continue to need that sector to combat climate change. They have some of the only companies in the world that can run multi-billion $ projects, plan 20 years out, have tons of chemists, physicists, quantum computing wizards etc.

I have talked to some oil execs recently and it’s impressive what they are thinking about carbon capture/storage, LNG logistics, green hydrogen, geothermal etc. Low carbon is a definite focus.

The Ukraine crisis has reminded us once again of the essential need for energy independence. It is AND, not OR as we worry about emissions. Vice versa, for the BRICS and many other economies it cannot just be a focus on independence, it has to balance their massive emissions.

Go back to what I said earlier. In no previous transition has mankind had so many choices in energy sources. It’s a reason to celebrate, not bicker. That should be the best middle finger we can show Putin.

Beyond wind turbines and solar panels

Renewables like wind and solar are enjoying their day in the sun, but it’s nice to see more traditional and other energy sources also seeing plenty of innovation. I am a firm believer in a broad portfolio of solutions – a balanced energy strategy leaves you less vulnerable to embargoes and supply chain chaos.

Here are recent examples on New Florence

The new nuclear movement

Enhanced geothermal systems

Pumped storage hydroelectric power

Giant kite as energy for ships

Green methanol

Gravity as energy storage