Cloud Power: Big Tech's Grip on AI and Startups

Collusive agreements among top firms are not otherwise very common to AI but are growing increasingly common as the field grows.

(Photo:Pixabay.com)

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Cloud hegemons like Google, Amazon, and Microsoft are planning to control the entire Artificial Intelligence (AI) innovation network. The Big Tech companies have a significant impact that extends far beyond acquisitions.

In the AI age, this will further expand because seemingly unrelated acquisitions – like Microsoft's $19.7 billion acquisition of Nuance, which was announced in 2021 and completed a year later – can be driven by the desire to gain access to talent or technology, or they can be made as a means of expanding even further and into new business lines.

For medical transcriptions, Nuance provided a cloud-based service; Microsoft did not offer an equivalent product in this market. Interestingly, these days, Nuance products are available on Microsoft's Azure cloud as part of the Software as a Service (SaaS) offering.

An Absolute Domination: Issues That Are Overlooked

1. Dominating Startups

Big Tech firms are using corporate venture capital investments to direct the development of AI and gain exclusive access to the projects that startups are working on.

For example, the relationship between Microsoft and OpenAI and Microsoft’s more recent investment in the French startup Mistral. Since most startups obtaining substantial tech funding are still in the early stages of R&D, such operations routinely evade regulations.

If the Big Tech cloud firms also own a stake in such startups, as in the case of Microsoft with OpenAI, it also gets a share of its profits on which taxes can be mostly evaded given that these startups are engaging expansively in innovation and are at their nascent stage.

2. Dominating From the Cloud

An associated perspective is the control that large tech corporations wield through cloud credits, which goes beyond ownership.

For Big Tech, cloud credits equate to incredibly modest additional expenditures. Credits are akin to venture capital or angel funding that is allocated for particular purposes, encouraging startups to develop AI applications on Big Tech and its affiliate companies' models.

Expanding their marketplace by giving credits to startups, like applying for credits through Microsoft Startup Hub, enables startups to not only use their cloud but also most likely end up offering their services on it.

This becomes a source of direct revenue as well as long-term consolidation for companies like Microsoft.

3. Deals Between Big Tech

Collusive agreements among top firms are not otherwise very common to AI but are growing increasingly common as the field grows. While it's true that they are frequently kept under wraps, but such "strategic partnerships" are becoming common. Oracle announced in 2023 that it will run and oversee its Oracle Cloud Infrastructure services within Microsoft's data centres.

What’s In Store for India?

As India’s economy sees a significant shift towards AI, the consequences of competition law are also growing in importance. In addition to changing market dynamics, AI-driven technologies are posing difficult regulatory and techno-legal challenges.

Recognising this, the announcement by the Competition Commission of India (CCI) to carry out market research on AI is indicative of the increasing awareness of the technology's influence on competition and its possible anti-competitive consequences in India – a step in the right direction.

Only time will tell what the results of this survey be like and will go a long way in deciding the CCI’s position in cases where competition to a certain extent was compromised for the sake of innovation.

Summing Up

In the rapidly expanding multibillion-dollar cloud computing market, there is fierce competition between the two American tech behemoths Amazon and Microsoft. Interestingly, Google lags behind these market leaders currently.

The dominance over startups have increased, as witnessed in the case of Inflection.ai as well. This venture had previously benefited from venture funding from Microsoft and the tech giant has now also gained acquisition of the AI startup.

Last year, Alphabet criticised Microsoft’s impending arrangements with many European cloud companies and the anti-competitive cloud computing tactics therein. This saga will continue and most of the time, these issues remain overlooked. Regulators need to be more careful about the operational tactics of these behemoths.

Dominance over startups, the cloud, and the deals between the tech giants give them the ability to weaponise interdependence and control the entire AI and other digital technology landscape, as well as the innovation network and potentially growing markets.

(Sovik Mukherjee is an Assistant Professor in Economics, Faculty of Commerce and Management, St Xavier’s University, Kolkata. This is an opinion piece, and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)