Amazon – Size 12s pt. II.

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Alexa leaves Cortana out in the cold.  

• HP’s integration of Alexa into its all-in-one PC is yet another sign that Microsoft’s Cortana is really struggling for relevance in the cut throat world of the digital assistants.
• HP’s new version of its HP Envy all-in-one 34” version is the first PC to have the Alexa assistant hardware built in and it is unlikely to be the last as ASUS and Acer have also announced that they will also integrate Alexa into their products.
• This is a damning indictment of Microsoft’s own digital assistant Cortana which is built into every Windows 10 PC by default.
• This is because adding cost to a PC by building in discrete hardware to run a digital assistant, strongly implies that HP and other PC makers see little value in Cortana.
• This makes sense as I have long believed that Cortana is a refugee on PCs.
• It was originally designed for Windows Phones and consequently has been programmed to deal with the kind of requests from those devices.
• On the PC, the use case is quite different, and Cortana would be far more useful being fully integrated into Office and other commonly used applications.
• This has not been fully executed and the integration of Cortana with the smart home is non-existent.
• Furthermore, this also implies that users are unlikely to want to use Cortana to invoke Alexa and would prefer, and critically be willing to pay for, the ability to invoke Alexa directly.
• Amazon also recently announced Alexa for business which I view as Amazon stomping all over Microsoft’s patch despite their alliance that should see them working together (see here).
• Adding Alexa directly into PCs will help Amazon gain penetration in the enterprise, completely excluding Microsoft’s Cortana.
• Although, it appears that Amazon is completely shortcutting its partner, I think that this could backfire as AI will be critical to this function in in this area, RFM has estimated that Microsoft is ahead of Amazon.
• Consequently, I can see an eventual collaboration where Microsoft’s AI is used to drive Alexa’s services in the enterprise.
• The only problem here is that this could result in cross over between Microsoft Azure and Amazon Web Services who are fierce competitors in the cloud.
• Hence, a deepening of this collaboration looks increasingly unlikely unless there is a firewall between voice being used as a user interface for knowledge workers and operations being run in the cloud.
• Although Amazon appears to be getting the better of Microsoft when it comes to its digital assistant, I still cannot stomach the valuation leaving me with a strong preference for Microsoft’s shares.