Artificial intelligence (AI) is reshaping how users and businesses operate, and software giants Microsoft (NASDAQ: MSFT) and ServiceNow (NYSE: NOW) are key winners in this transformation, due to their strong market positions and their integration of AI tools according to ECP Asset Management’s principal, investments, Annabelle Miller.
“Microsoft and ServiceNow are two companies which are leveraging AI to boost their own productivity and that of their customers’. This will deepen their competitive moats as they capture a greater share of enterprise IT spending.
“Successful companies are leveraging existing user bases and capital to integrate AI into their service offerings, moving beyond large language models to focus on agentic AI and internal deployment for cost savings before rolling it out to customers, much like Amazon did with AWS.
“Businesses with best-in-class product development, proprietary industry and customer data which are already engrained in enterprise customer workflows, like Microsoft and ServiceNow, are likely winners in this race. Not only because they have the user base, but the capital to reinvest in integrating AI into their product offerings,” Ms Miller says.
Microsoft, for example, is embedding its generative AI assistant, Copilot, across its product suite Microsoft 365, Windows and Azure. ServiceNow's platform too is using AI for managing and automating enterprise workflows.
In contrast, businesses that do not have strong moats could see their products becoming commoditised as AI spreads through economies. Ms Miller says that these businesses’ products could become increasingly viewed as a generic, undifferentiated, and easily replaceable, as those companies lose their competitive advantages.
“Some companies who have very commodity driven business models will be displaced by AI. But there's always going to be winners and losers in any technological shift. The losers are essentially going to be commoditised. But what we are also seeing is winners emerging from using agentic AI to widen their competitive moats and really reach further into the labour budget to capture more of the IT share of enterprises globally,” says Ms Miller.
“We have exited a few businesses in the past where we thought they were at greater risk of commoditisation. Our investment philosophy focuses more on those companies like Microsoft and ServiceNow where they have existing competitive advantages that can be leveraged through AI both internally and across their broader customer base,” she says.
“For those companies, it’s not just about deploying AI in their products but integrating AI into existing workflows through a combination of agents and models to improve productivity.
Microsoft has integrated AI tools into its suite of ubiquitous Office enterprise products to increase productivity and reduce administrative burden.
“The Office tools are now AI enabled. For example, you can automatically summarise a Word document into data points and even translate text if it’s in another language. These everyday tools will enable users to be more productive,” she says.
Ms Miller also singles out ServiceNow’s focus on the back-office workflows that drive enterprise efficiency. “ServiceNow has developed an AI control tower, which is a command-and-control hub that provides the ability to monitor and manage every AI agent, model and workflow across the enterprise. This embeds a layer of compliance and governance controls across the enterprise to ensure data privacy and meet regulatory requirements as enterprises move to incorporate the use of AI tools in workflows.”
“Internally, ServiceNow is realising huge cost savings by automating service desk calls too, reducing call volumes by up to 60%. Moreover, ServiceNow’s AI tools are delivering significant performance uplift in sales productivity, with the company seeing a 20 to 30 per cent higher win rates on deals over one million dollars,” says Ms Miller.
