IT Essentials: A pretty little house of cards

Dismissals at Microsoft highlight a canker at the heart of tech

Why is the tech industry so prone to bubbles?

Four centuries ago, Dutch merchants paid fortunes for tulip bulbs for the simple reason that everyone else was doing the same. Prices soared, logic wilted and eventually the bubble burst.

Artificial intelligence is starting to feel like the modern tulip. Hype, investment and expectations are increasingly outlandish, and vendors are pumping in billions of dollars to make the market work - and, perhaps more importantly, to push adoption whether customers want it or not.

I’m not saying the emperor has no clothes; AI has legitimate, game-changing use cases (watch out for an interview we’ll be publishing with Citizens Advice about an example next week). But does it deserve to have the GDP of a small country thrown at it, especially when that investment comes at the expense of IT professionals?

Tech companies have attributed nearly 20,000 job losses to AI this year alone, almost half of them of them at Microsoft this week. And those aren’t just people being directly replaced with bots. Some – most, if they were following Microsoft’s recent AI mandate – will have already been using the technology as a productivity enhancer.

These people aren’t being let go purely because of performance, but because Microsoft needs money to fund its AI experiments. That’s 9,000 professionals out of a job because of an investment that has yet to prove its value. It’s sunk cost on a whole new level, and gives those already wary a new reason to worry about AI.

The AI bubble is different to others in the industry’s recent past. Dot-com, crypto, blockchain and NFTs were all driven by speculation from people looking to get rich quick, whereas the money for AI – which, unlike the others, actually has a value proposition – is mostly pouring in from tech giants.

That makes this house of cards more of a skyscraper with strong foundations. It’s not likely to go all tulip-shaped (barring the threat of model collapse), but that doesn’t mean it’s immune to gravity. When expectations rise faster than reality, even solid structures can develop cracks.

We questioned Microsoft directly about AI value at our event last week, asking whether AI PCs are 'just’ another iteration of the endpoint or signal a wider shift in enterprise IT. Click here to read Penny Horwood’s coverage of the panel.

I talked to British Cycling’s Stephen Brown about how the organisation lost its legacy and got back in the saddle, while John Leonard dove into SAP’s efforts to scale sustainability by treating itself as “patient zero.”

John also talked to Dr Laura Gilbert, former head of the government’s AI incubator, about how lofty public sector ambitions risk running into the sand unless a culture clash between technology and government can be addressed.

And finally, the latest episode of our Ctrl Alt Lead podcast looks at how RLB CDO Matt Sharp spun out the construction giant’s tech business into a wholly owned, revenue-generating subsidiary in under a year.