Intel's CEO Resigns, Microsoft Data Denial, AI Growth, and OpenWrt's New Router Launch

[00:00:02] It's Monday, December 2nd, 2024, and I'm Dave Soap. Four things to know today.

[00:00:07] Inflation, tech trends, and economic resilience shape IT priorities for 2025 and beyond.

[00:00:13] Pat Gelsinger resigns as Intel CEO, what it means for the chip maker's future.

[00:00:18] Microsoft denies using 365 user data for AI training amid viral allegations.

[00:00:24] And OpenWrt enters the hardware market with a user-friendly open source Wi-Fi 6 router.

[00:00:31] This is the Business of Tech.

[00:00:36] The latest economic data reveals that inflation concerns have resurfaced as 2024 draws to a close,

[00:00:43] with the Personal Consumption Expenditures Price Index rising by 0.2% in October for the second consecutive month.

[00:00:51] The core measure, excluding food and energy, increased by 0.3%.

[00:00:55] The overall PCE rose by 2.3% yearly, while core PCE saw a 2.8% increase.

[00:01:06] Despite these inflationary pressures, the economy shows sign of resilience, with gross domestic product

[00:01:12] increasing at an annualized rate of 2.8% in the third quarter, unchanged from previous estimates.

[00:01:19] Personal Consumption Expenditures also rose by 0.4%, fueled by a 0.7% jump in disposable income.

[00:01:28] And Axios also presented an optimistic view, focusing on five economic trends Americans can be thankful for this holiday season.

[00:01:36] Despite a challenging year marked by inflation and recession fears, favorable conditions remain.

[00:01:42] Notably, inflation decreased from 4% last year to 3.3% this year, while the average Thanksgiving meal is less expensive than last year.

[00:01:51] Real rages have risen, with average hourly earnings increasing by about 9% over the past two years, outpacing the 6% price rise.

[00:02:01] The job market shows resilience, with layoff rates steady at 1.2%, consistent with pre-pandemic levels.

[00:02:10] Additionally, the pace of technological innovation, particularly in artificial intelligence, is positioning the U.S. economy for future growth,

[00:02:17] as highlighted by analysts at BlackRock, who suggest that AI investment could rival that of the Industrial Revolution.

[00:02:24] The entrepreneurial spirit is also thriving, with over 146,000 business applications filed in October, indicating continued innovation and job growth.

[00:02:35] And according to a report by Gartner, global spending on cloud services is projected to exceed $723 billion by 2025, marking a 21.5% increase.

[00:02:49] This year, spending is expected to reach nearly $600 billion.

[00:02:53] The largest segment of this market is cloud-based applications and software services, with spending on software-as-a-service approaching $300 billion next year.

[00:03:02] Infrastructure and platform services are also rapidly growing, with year-over-year increases expected to be 25% and 22%, respectively.

[00:03:12] Gartner highlights that enterprise adoption of artificial intelligence significantly drives this growth, as organizations seek integrated platforms to streamline operations.

[00:03:21] By 2027, it's anticipated that 90% of organizations will have hybrid cloud deployments, reflecting a trend toward modernizing data operations and utilizing generative AI tools.

[00:03:34] That's supported by a recent survey conducted by Spiceworks and Aberdeen Strategy and Research.

[00:03:39] It was revealed that a significant 64% of companies plan to increase their IT budgets in 2025, with only 4% anticipating a decrease.

[00:03:49] The survey, including responses from 803 IT professionals, indicates a growing demand for technology investments in security solutions, generative artificial intelligence software, and laptops.

[00:04:00] Notably, 92% of companies intend to implement cost-savings measures, reflecting a dual strategy of increasing spending while seeking efficiencies.

[00:04:10] The report also highlights a notable gap between IT staff and management perspectives, with 54% of IT professionals feeling their company is not investing enough in technology.

[00:04:21] As businesses prepare for the future, the need for skilled workers remains critical, particularly in cybersecurity and data analysis,

[00:04:28] with confidence in artificial intelligence skills notably low among potential candidates.

[00:04:34] Why do we care?

[00:04:37] Well, the convergence of economic resilience and technology trends presents an environment rich with opportunity, but with risks.

[00:04:45] The IT services industry must navigate these dynamics with precision.

[00:04:49] By focusing on areas of high client value, AI, hybrid cloud, and cost efficiency, while avoiding over-hyping speculative trends,

[00:04:58] businesses can position themselves for sustainable growth in a shifting landscape.

[00:05:02] So here's some observations.

[00:05:04] Rising inflation pressures suggest that IT service providers should anticipate possible client sensitivity to price adjustments,

[00:05:13] particularly for subscription-based models.

[00:05:15] The anticipated move to hybrid cloud by 90% of enterprises underscores the need for IT professionals skilled in multi-cloud management and inter-cloud integrations.

[00:05:26] While current economic data is positive, the persistent rise in core PCE suggests underlying inflationary concerns.

[00:05:34] A sudden tightening of monetary policies could impact discretionary spending, including IT budgets.

[00:05:41] And, as has been consistent, companies that rush into AI adoption without clear objectives may face wasted resources and disillusioned.

[00:05:51] IT providers should counsel clients on phased AI adoption to avoid such pitfalls.

[00:05:58] Are you and your clients tired of the time-consuming ticket tennis of coordinating meetings and help desk calls?

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[00:06:51] The big news of the day is a significant change for Intel, as CEO Pat Gelsinger has resigned without a permanent successor in place, affected immediately.

[00:07:02] Gelsinger, who dedicated over 40 years to the company, was known for leading the development of the successful 8486 processor.

[00:07:09] He will be temporarily replaced by David Zinsner and Michelle Johnson-Holsthaus, who will serve as co-CEOs.

[00:07:18] Zinsner currently holds the title of Chief Financial Officer, while Holsthaus oversees Intel's Client Computing Group and will take on the new role of CEO of Intel Products.

[00:07:28] The board of directors has initiated a search for a permanent successor as they navigate this transition.

[00:07:34] Gelsinger expressed pride in his contributions to Intel, reflecting on a challenging year that required difficult decisions to adapt to the current market dynamics.

[00:07:43] Bloomberg, however, reporting that the board has forced out Gelsinger amid growing concerns about his ability to execute a turnaround for the company.

[00:07:51] The board lost confidence in his plans to regain market share and compete with rivals like NVIDIA.

[00:07:57] In a decisive meeting last week, he was presented with a choice to either retire or be removed, ultimately opting to announce his retirement from Intel.

[00:08:07] Why do we care?

[00:08:09] Gelsinger exit signals the board's dissatisfaction with the pace and effectiveness of his turnaround strategy.

[00:08:15] Intel has struggled to compete with AMD and NVIDIA in advanced chip technology and lost its manufacturing edge to foundries like TSMC.

[00:08:25] The leadership vacuum could further delay critical decisions.

[00:08:29] There are risks in a co-CEO strategy as dual leadership structures often lead to unclear decision-making processes and internal power struggles.

[00:08:39] Without decisive leadership, Intel risks stagnating further.

[00:08:43] For IT services and businesses relying on Intel's products, it's essential to monitor how the company addresses leadership, product roadmap execution, and partnerships.

[00:08:53] I'd be worried if you rely heavily on Intel.

[00:08:58] Microsoft has refuted allegations that it collects data from its Microsoft 365 applications, such as Word and Excel, for artificial intelligence training.

[00:09:08] This statement follows a viral Tumblr post claiming the company used a feature called Connected Experiences to scrape user data.

[00:09:16] A Microsoft spokesperson clarified that customer data is not utilized to train large language models and emphasized that the Connected Experiences feature,

[00:09:25] available since April 2019, is designed to enhance productivity with tools like real-time grammar suggestions and co-authoring.

[00:09:33] Users can choose to turn this feature on or off within the settings of their office applications.

[00:09:39] The company reassured customers that they have full control over their data privacy settings.

[00:09:44] Why do we care?

[00:09:46] Understanding what products and features do is important in discussions with customers.

[00:09:51] This helps you stay updated on what you need to know.

[00:09:57] OpenWrt, in collaboration with the Software Freedom Conservancy, has launched its first hardware platform, the OpenWrt1.

[00:10:04] This Wi-Fi router debuted just before Black Friday's sales and features a dual-core MediaTek processor and a Wi-Fi 6 chip.

[00:10:13] It includes two Ethernet ports, a USB-C power source, and a USB-A port.

[00:10:18] Priced at $89.99, with $10 from each sale going to the Conservancy, the device is touted as a victory for the right-to-repair movement.

[00:10:27] The OpenWrt1 is designed to be user-friendly, with claims of being unbrickable,

[00:10:32] and has passed compliance tests from the U.S. Federal Communications Commission.

[00:10:36] This launch marks a significant milestone for OpenWrt, showcasing its evolution since its split in 2016.

[00:10:44] Why do we care?

[00:10:45] Well, the router represents a bold step for open-source advocates into the hardware domain,

[00:10:51] potentially shifting industry attitudes towards repairability and user empowerment.

[00:10:55] While its niche focus and technical branding may limit mass-market appeal,

[00:11:00] it aligns with trends in ethical consumerism and decentralized technology.

[00:11:04] The device is worth exploring for IT service providers and networking professionals,

[00:11:08] particularly for use cases emphasizing open standards, security, and cost-effectiveness.

[00:11:12] However, the hardware's limitations suggest it's best suited for specialized deployments,

[00:11:17] or as part of a broader strategy incorporating more robust solutions.

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[00:12:15] Thanks for listening.

[00:12:16] Besides Cyber Monday, it's National Bartender Day, National Skip School Day, and National Build Joy Day.

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[00:12:37] And I'll be talking about AI and how I use it on this week's show.

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