In other words, why would they sell AI as a sort of commodity instead of using it to provide an end product like IT consulting which is extremely profitable?
In other words, why would they sell AI as a sort of commodity instead of using it to provide an end product like IT consulting which is extremely profitable?
Microsoft just said as much in their quarterly filings and unrelated to AI, Cook said they couldn’t meet all of the iPhone demand because of capacity issues at TSMC
And to address the point about consulting, at the cloud providers themselves, the consulting departments were - even at AWS when I was there working at ProServe from 2020-2023 - considered a loss leader until 2022 to get companies to bring more work onto AWS. If you don’t take into account all of the credits that AWS gave companies toward ProServe, that divisions loss would be even higher.
Even at third party consulting companies a lot of the revenue comes from credits given to the customers from AWS and Microsoft. I purposefully didn’t say Azure. Microsoft has been playing this game for longer than Azure has been a thing.
That being said, consulting is a low margin race to the bottom business if your consultants email address isn’t @amazon.com (been there done that) or @google.com.
Google’s sales staff and SAs and other go to market to chase large deals are still not on par with AWS ProServe or Microsoft’s. It takes a lot of work to build up a good consulting department and no matter what, you still end up - unless you are a cloud provider -going with the Americans are the face for the customer and low paid folks from India do all of the work.
Consulting for cloud companies - either internal or external (where they give credits to customers for third party partners consulting) isn’t about the money they make on consulting, it’s about ongoing spend on their cloud providers and they can also afford to lavish credits on companies. The cloud provider have real profitable businesses
With products you hope to make $X * N units sold. Staffing to build product + make those N sales takes something like log(N) sold units.
At least that's the dream. Consulting requires little upfront capital investment. Products often require a constant, but large, upfront capital investment
beernet•9h ago
pera•8h ago
raw_anon_1111•6h ago
Besides selling consulting services involves a lot of relationship building and knowing the business vertical.
farseer•8h ago