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Nadella Taps Rolf Harms to Navigate High-Stakes AI Shift at Microsoft

• By John K. Waters
• 11/24/2025

Microsoft chief executive Satya Nadella has turned to a veteran strategist once accused by colleagues of lobbing "bombshells" into their teams as he pushes the software group to overhaul its business model for the age of artificial intelligence.

According to an internal memo circulated to senior leaders this month and reported by Business Insider and other outlets, Nadella has appointed Rolf Harms as an adviser on AI economics. Harms, a corporate vice president who reports to Cloud and AI chief Scott Guthrie, will work with Nadella and top executives on how artificial intelligence should reshape Microsoft’s spending, pricing, and product strategy.

Nadella told executives the company needs to rethink how AI economics work across all its businesses, much as it reconsidered its approach to cloud computing about 15 years ago, when Microsoft was still heavily tied to packaged software. He described the current wave of AI as a platform shift that requires building what he has called an AI factory, with Copilot assistants and other software agents embedded across the company’s products.

The appointment comes as Microsoft and other technology firms face questions over whether multibillion-dollar investments in AI infrastructure will generate adequate returns. Microsoft slowed its pace of AI spending earlier this year, which unsettled some employees and investors, before signing new and expanded partnerships with OpenAI and Anthropic to secure access to advanced models.

Harms is a familiar figure from Microsoft’s last major strategic pivot. As director of corporate strategy in 2010, he coauthored the “Economics of the Cloud” white paper, which argued that customers would eventually save money by shifting workloads to large-scale data centers despite concerns over security and reliability. The document helped justify heavy capital spending on what became the Azure cloud business, but also unsettled parts of the company whose existing products looked exposed. Some colleagues complained at the time that he was throwing "bombshells" into their organizations.

In his new role, Harms is expected to examine how similar financial logic should apply to AI, from the cost of training and running models in Microsoft’s data centers to the way the company prices software that embeds AI features. Nadella told staff that Harms’ responsibilities will extend beyond infrastructure to cover how existing product categories are likely to be reshaped and which new markets might emerge.

The AI rethink is unfolding amid job cuts and organizational change. In a July letter to employees, Nadella acknowledged the tension between strong financial results and repeated rounds of layoffs, describing it as a symptom of working in an industry where past success offers little protection. He urged staff to keep serving current customers while also developing new kinds of products with different business models.

Nadella has also publicly warned about the risk of repeating the mistakes of once-dominant technology companies that failed to adapt. At a town hall meeting in September, he cited the collapse of Digital Equipment Corporation as a cautionary tale. He said some of Microsoft’s largest businesses may no longer be central in an AI-driven market.

Part of the shift involves changing how Microsoft charges for its products. In a recent podcast interview, Nadella said the company’s long-standing “per user” model, in which organizations pay based on the number of human workers using its software, is gradually giving way to charging for AI agents that perform tasks alongside employees. He suggested that Microsoft is moving from being primarily a provider of end-user tools to operating more as an infrastructure and platform supplier for these agents.

In his annual letter, Nadella has described a broader strategic pivot, moving Microsoft from a “software factory” to an “intelligence engine” that provides tools people can use to build their own digital assistants and applications. Harms’ appointment is intended to ensure that the company’s financial structures align with that narrative, linking the cost of running large AI systems with ways to generate revenue from them.

Microsoft’s earlier cloud transformation was seen internally as risky but eventually reshaped the company’s fortunes, turning Azure into one of its main growth engines. By bringing back the strategist who helped make the original case for that shift, Nadella is signaling that he views the current moment in AI as similarly consequential for the company’s future, and that he is prepared to revisit established businesses if the economics do not add up.