Toward the end of last year, Microsoft (NASDAQ:MSFT) took an informal poll of some its senior researchers to determine what they thought the key technology drivers would be in 2016. With so much emphasis placed on CEO Satya Nadella's "mobile-first, cloud-first" mantra, it seems logical that Microsoft's internal tech gurus would allude to one of, if not both, of these critical areas as a key driver of growth in 2016.
Surprisingly, the overwhelming response had little to do with the cloud. According to Microsoft's top minds, 2016 will be the year that artificial intelligence (AI), sometimes referred to as "machine learning," begins to affect our day-to-day lives. Some of the biggest players in tech are tackling AI. One of the first names that comes to mind is IBM (NYSE:IBM), thanks to its cognitive computing wonder Watson.
Microsoft intends to firmly establish itself as the king of machine learning in 2016, and assuming market estimates prove correct, the battle for AI supremacy will be well worth the effort.
Microsoft recently introduced an odd little app called Mimicker for Android devices that acts as an alarm clock. What makes Mimicker a bit different is the app requires users to perform a particular function -- take a picture of a specific object or correctly repeat a tongue-twister, among others -- to get the app to stop beeping.
Mimicker is just the latest in a series of apps that at first glance seem like head-scratchers. There's also an app to measure mustaches, an Android smartphone cover that learns a user's habits and improves its functionality as a result, and an AutoTag feature to seek out and automatically tag Facebook "friends," among others.
Obviously, the tech gurus working at Microsoft Garage, the home of its far-flung development projects, have too much time on their hands, right? Maybe not. Each of the seemingly innocuous apps is actually a step closer to AI, in that they share the capability to improve with each use: essentially "learning" a user's habits and idiosyncrasies to enhance its capabilities to improve functionality.
Microsoft's machine learning initiative is to develop the "backbone" of an "invisible revolution," which it defines as "technologies interacting so seamlessly they become invisible." A Microsoft executive expects AI will be in widespread use – with or without firsthand knowledge -- in as little as five years. For Microsoft shareholders, five years is a well-timed objective, given recent AI estimates that suggest the market is ready to skyrocket.
What's at stake
Within six years industry pundits expect the global AI market will reach $40 billion. With so much at stake, it's no wonder IBM invested billions of dollars last year in AI-related acquisitions, Watson and cognitive computing business units, and formed a number of industry alliances. Based on last quarter's earnings results, it appears IBM's machine learning efforts are beginning to bear fruit.
CEO Ginni Rometty's "strategic imperatives" are a group of forward-thinking technologies that IBM is banking its future on. The cloud, Internet of Things, and AI are critical aspects of IBM's strategic imperatives and now make up 35% of its total revenue. IBM doesn't break out Watson-specific sales, but in Q3 of 2015 its strategic imperatives as a whole accounted for only 27% of revenue.
There are ancillary benefits to AI as well. Much of the machine learning consumers come in contact with will utilize the cloud -- something right in Microsoft's and IBM's wheelhouses. In Microsoft's case, each step in the AI process will also provide it with still more user data, which in turn can be utilized to better target its products and services.
Microsoft's suite of software and its installed global customer base could give its AI efforts a leg up, too. The machine-learning battle is on, and Microsoft is quickly making its case to be one of the key players in what is expected to become a multibillion-dollar market.