Microsoft is gearing up for what CEO Satya Nadella sees as a once-in-a-generation transformation, and he is bringing back one of the company’s most influential strategists to help drive it.
Nadella has tapped Rolf Harms, the economist and strategist behind Microsoft’s pivotal “Economics of the Cloud” paper in 2010, to serve as his advisor on AI economics, a role that signals how sweeping the company’s shift toward artificial intelligence could be.
In a memo circulated to senior executives earlier this month, Nadella said Microsoft must “rapidly rethink the new economics of AI across the company — just as we once did with the cloud,” describing the moment as a fundamental platform shift. He emphasized that Microsoft is building a modern “AI factory,” with Copilots and autonomous agents sitting on top of massive investments in compute, data centers, and model infrastructure.
Harms’ return to the center of Microsoft’s strategic planning is steeped in history. Fourteen years ago, he coauthored “Economics of the Cloud,” a white paper that forced Microsoft to confront the financial realities of a future dominated by hyperscale computing. At the time, Harms was a director of corporate strategy, and the paper challenged internal assumptions so aggressively that employees complained he had dropped “bombshells” into their organizations. Nadella recalled in the memo that Harms’ response was simple: “They’re already there, I’m just helping you find them.”
That document ultimately became foundational to Microsoft’s cloud computing dominance. It justified early investments in global data centers, offered a quantitative roadmap of how cloud adoption would evolve, and made the case that customers would eventually embrace large-scale cloud services for cost savings and operational efficiency. Its arguments cleared internal resistance and helped set the stage for Azure’s rise.
The parallels with today’s AI moment are hard to miss. Companies across the tech sector have embarked on massive spending sprees to secure advanced chips, build new data centers, and train increasingly powerful models — even as analysts question whether the economics make sense. Microsoft briefly slowed its AI infrastructure spending earlier this year, a move that heightened concerns about demand and profitability. In recent months, however, it has accelerated its commitments again, signing expansive new agreements with OpenAI and Anthropic.
Nadella’s memo to executives made clear that Microsoft cannot treat AI as an add-on or incremental upgrade. He wrote that AI represents a shift that is “much more capital and knowledge intensive” than the cloud transition. Harms’ new role will involve working directly with Nadella and the company’s most senior leaders to reexamine everything from infrastructure scaling and platform economics to how applications should be designed and monetized in an AI-first world.
Harms has remained important inside Microsoft’s hierarchy. He is now a corporate vice president in the Cloud + AI group led by Scott Guthrie, and he will continue reporting to Guthrie while taking on his expanded mandate. Business Insider previously profiled Harms as one of the quiet power players behind Microsoft’s AI strategy, tracing his influence from the cloud era into the company’s next frontier.
Nadella said Harms will help Microsoft understand not only how existing businesses will be transformed by AI, but also which entirely new product categories might emerge. The goal is to avoid repeating early mistakes from the cloud era and ensure the company has a clear, data-driven blueprint for the enormous financial and structural commitments that AI now demands.
If the cloud revolution redefined Microsoft once, the company now appears to be preparing for a second reinvention — with the same strategist helping guide the way.
