Microsoft's plan to keep its AI coding lead takes shape

Welcome to Runtime! Today: How Microsoft is trying to hold on to its position at the center of professional software development, Qualcomm gears up — again — to enter the server market, and the latest funding rounds in enterprise tech.

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SEATTLE — While Azure and Windows 365 print more money, GitHub and Visual Studio Code are two of the most important products in Microsoft's enterprise tech lineup. Both tools play a vital role in the day-to-day lives of software developers around the world and help funnel business to Microsoft's other enterprise software products, but there's no guarantee that they'll continue to play that role as a new generation of developers embraces "vibe coding" and new AI coding editors.

Microsoft responded to upstarts like Cursor and Windsurf this week by announcing plans to release the GitHub Copilot code extension inside Visual Studio Code under the open-source MIT license and adding a new coding agent to GitHub Copilot at its Build conference. The early days of AI coding are coming to an end, and competitive pressures from those upstarts — as well as AI coding tools from AWS, Google Cloud, and even frenemy OpenAI — threatened to dent Microsoft's momentum among software developers.

• Visual Studio Code is the most widely used coding editor in the world, and both Cursor and Windsurf's fast-growing AI code editors are actually forks of the open-source code behind VS Code.
• But those startups built their own frameworks for interacting with AI models, and that software is proprietary.
• By open-sourcing the Copilot extension and vowing to incorporate it into the core VS Code product, the most vital parts of VS Code will all be available as open source, which could allow users to customize it for their own environments and blunts criticism that Microsoft was giving GitHub special treatment within the VS Code ecosystem.
• Now "there are incentives to staying on the core code base that I think for some forks today, they may find that the differential capability that they're introducing is not worth maintaining a fork, and they should just contribute it back," said Amanda Silver, corporate vice president and head of product for Microsoft's Developer Division, in an interview with Runtime.

GitHub Copilot kicked off the AI coding era nearly a year before ChatGPT changed everything, and while it is still widely used inside professional software development organizations much of the buzz in those circles surrounds Cursor and Windsurf, which OpenAI is reportedly about to acquire for $3 billion. The launch of its new coding agent, which was first introduced in February, allows developers to assign tasks to the agent like they would to any developers on their team.

• The philosophy behind the agent was to create a more advanced system that could tackle harder tasks while preserving the "asynchronous flow that still works the way developers expect, it's not teaching you a new thing or moving you into a new space," said Kyle Daigle, chief operating officer of GitHub, in an interview.
• Developers using VS Code can prompt the agent with a natural-language command to start a project or assign an existing GitHub Issues task to the copilot, and the agent will work on that project in a new code branch that's completely separate from the organization's main code base.
• GitHub expects that developers will use the new agent for "low-to-medium complexity tasks in well-tested codebases, from adding features and fixing bugs to extending tests, refactoring code, and improving documentation," which includes some of the less-glamourous parts of developer life.

However, while the AI coding tools have certainly arrived, companies are still figuring out the best ways to introduce them into their organizations and manage their use. Generative AI has been sold to the bosses as a productivity accelerator, and it's increasingly clear that companies will need new metrics and frameworks to evaluate software engineers in the AI era, according to Nicole Fosgren, a partner in Microsoft Research and a well-known expert in developer productivity.

• Measuring developer productivity was already something of a minefield, and AI raises new questions that Microsoft is starting to evaluate, Forsgren said in an interview with Runtime.
• "How does [using AI tools] reflect in value? How is that reflected in performance? How are we seeing this reflected in satisfaction and joy and retention of developers? Because I think they're going to be increasingly important right as we start scaling through some of these systems," she said.
• Similar to how developers and operations engineers learned to work together through the DevOps movement, agentic AI development tools are going to force companies to update their organizational strategies as the nature of software development changes.
• And while most of those issues are more philosophical than technical, AI coding tools that keep both developers and managers happy could have the inside track.

Here we go again

This is an extremely interesting moment in the modern history of the server processor market, which hasn't seen this much disruption in decades. Intel is flailing, AMD is surging, and Nvidia's AI chips are dominating the conversation while all of the Big Three cloud providers have launched a custom Arm-based server processor.

So it seems about right that Qualcomm is ready to rekindle its hopes of breaking into one of the more lucrative markets in enterprise tech. The company announced Monday that it plans to launch a new server processor that connects directly to Nvidia's GPUs, almost seven years after it started shutting down its once-promising Centriq server processor.

Qualcomm didn't have a lot to say about actual launch plans or a road map on Monday, but it sounds like Saudi Arabia is going to get the first crack at the new chips. "As long as ... we can build a great product, we can bring innovation, and we can add value with some disruptive technology, there’s going to be room for Qualcomm, especially in the data center," Qualcomm CEO Cristiano Amon told CNBC Monday.

Enterprise funding

Sweep raised $22.5 million in Series B funding for its "agentic workspace," which connects Salesforce and Hubspot data to AI agents that can route leads or document processes.

Trustcloud landed $15 million in new funding as it develops a security tool that helps companies meet their governance, risk management and compliance requirements.

The Runtime roundup

Builder.ai, which had raised $500 million in funding to develop AI-powered no-code and low-code tools for building apps and websites, said it would declare bankruptcy after hitting a cash crunch, according to The Financial Times.

Oracle's cloud infrastructure service went down for several hours Monday in Europe, according to The Register.

Thanks for reading — see you Thursday!