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Microsoft’s Strategic Reboot: Nadella Brings Back Rolf Harms to Navigate AI Transformation

• By John K. Waters
• December 01, 2025

As artificial intelligence continues to redefine the tech industry, Microsoft CEO Satya Nadella is turning to a trusted strategist to help recalibrate the company’s financial and product roadmap. Rolf Harms, a longtime corporate strategist who played a pivotal role in Microsoft’s cloud pivot, has been named an adviser on AI economics to guide the company’s high-stakes transition into an AI-centric future.

Harms will work closely with Nadella and senior leadership to evaluate how Microsoft should reshape its pricing, infrastructure investments and product lines for the AI era. The goal is to overhaul the business model in the era of AI and build what Nadella calls an "AI Factory" that has Copilot assistants and software agents embedded into 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.