The newest member of the corporate workforce never sleeps, never asks for a raise, and can be cloned before lunch. It can also confidently make the wrong decision thousands of times before anyone notices.

That helps explain why some technology leaders have started talking about AI agents as employees, co-workers, or interns rather than software. Once an agent can update records, issue refunds, send communications, or act across multiple enterprise systems, deploying it no longer looks much like installing another application.

Recent Harvard Business Review articles have pushed that analogy further. One argues that agents should be treated like a new workforce, with defined roles, authority, sources of truth, supervision, and audit trails. Another recommends giving agents names and job descriptions, onboarding them, evaluating their performance, and increasing their responsibilities after they prove themselves.

But there is a catch: People may start believing the metaphor.

A separate HBR study of 1,261 managers found that when AI was framed as an employee rather than a tool, managers with experience working around AI agents took less personal responsibility for results and assigned more responsibility to the AI. They also escalated more problems and caught fewer errors. In the study, 31% of respondents said their companies already framed AI as a teammate or employee, while 23% said agents appeared on organizational or work charts.

For IT leaders, the answer may therefore be to borrow freely from the employee-management playbook — without extending the metaphor too far.

Don’t put software on the org chart

Amy Loomis, group vice president at IDC, draws a hard line around one word: responsibility.

Humans, she says, have obligations to their companies and to one another, and they bring an understanding of corporate culture and values that an agent can mimic linguistically without possessing.

That makes calling an agent a co-worker potentially more than harmless anthropomorphism. The label suggests a peer relationship and can encourage people to cede judgment to a system that’s very good at giving what was requested, Loomis says, but not necessarily at recognizing what was actually needed.

“Accountability is something that has qualities associated with it that are uniquely human,” she says. “Agents may be given permission to access data, but the accountability for what they do with that access lies with the person who gave the agent access, not the agent itself.”

That distinction still leaves plenty to borrow from employee management. It makes sense to give an agent traceable access and tightly scoped permissions — and to institute a kill switch to prevent the agent from having continued access. But Loomis finds it more effective to think in terms of giving an agent an operations charter rather than a human identity: define what the system does, what it may access, and what humans remain responsible for.

In other words, give the agent a security badge. Just don’t put its picture on it.

The employee metaphor has a job to do

Raja Iqbal, founder of agentic AI governance company Ejento AI and co-author of the HBR article “To Scale AI Agents Successfully, Think of Them Like Team Members,” is closer to Loomis than the headline suggests.

Iqbal says the metaphor is intended to put CIOs, CISOs, and other technology leaders into the right “cognitive posture.” Thinking about an agent as a team member, he argues, can remind an enterprise to impose familiar management disciplines: a unique identity, clear human oversight, defined authority, spending limits, approved information sources, and an audit trail.

If another term produces the same discipline, he’s fine with that too.

In fact, Iqbal explicitly rejects synthetic employees with human personas and seats on the org chart. That creates exactly the accountability problem critics worry about: “Bob did it” becomes an excuse even though Bob is software.

“The metaphor is dangerous when it’s decorative,” Iqbal says. By that, he means companies get into trouble when they adopt the human trappings — names, personas, or the language of colleagues — without also imposing the supervision, limits, and accountability that make the analogy useful.

His preferred distinction is simpler: the agent needs a technical identity so the enterprise can reconstruct what it did, while a human must remain responsible for those actions. “The identity is the audit primitive, and the human owner is the accountability primitive,” he says. Put more plainly, the agent identity answers what acted; the human owner answers who is accountable.

The employee analogy becomes more useful again when deciding how much freedom an agent should receive. Iqbal recommends graduated autonomy. An agent might begin with a human approving every action, progress to performing low-risk actions independently, and eventually receive bounded autonomy if its observed performance justifies it. A serious error can send it back down the ladder — or out the door entirely.

That sounds a lot like a probation period for a new employee. It’s also simply good software governance for a probabilistic system.

At DXC, professional agents are software

Russell Jukes has had plenty of opportunity to test that distinction. As chief digital and information officer at DXC Technology, he oversees AI in an IT services organization with roughly 115,000 employees.

“We think about [an AI agent] as a superpower, not as a person,” he says.

DXC separates agents into two categories. Personal agents work for individual employees and generally operate using the employee’s identity and access. Professional agents are enterprise systems built for broader workflows. On one of DXC’s major AI platforms, employees have so far created roughly 8,000 personal agents, compared with about 100 professional agents.

The professional variety receives much stricter oversight. It can have its own nonhuman identity, credentials, permissions, and authority boundaries. Activity passes through control planes that allow DXC to see what agents are doing and, when necessary, shut them down.

Jukes thinks many of these agents will eventually disappear from users’ view altogether. An agent might scan internal resource requirements overnight and recommend employees for projects. Nobody needs to greet it in the morning or consider it a colleague; they simply receive the result.

That’s where he parts company with the worker metaphor.

Jukes says he learned early on that AI cannot be deployed like conventional SaaS. His first attempt followed the familiar software model: make the application available, let employees use it within the prescribed workflow, and expect adoption to follow. “I did that, and nobody used it,” he says. The experience convinced him that AI requires a different approach, and he vowed to “never deploy AI like it’s SaaS again.”

Conventional SaaS is largely deterministic: the software constrains users to a defined workflow and produces predictable outputs. Agentic AI is different. It can interpret a goal, choose among tools and data sources, and decide how to get to an outcome. For Jukes, that means CIOs have to design the policies, permissions, data access, guardrails, and authority around the agent rather than simply deploy another application.

That also creates a clearer chain of responsibility. If a person approves the agent’s action, Jukes says that person owns the decision. If an autonomous agent behaves according to a business policy, accountability belongs with the people responsible for that policy. If the technology fails to operate as designed, responsibility moves to IT.

The agent itself never gets handed the blame.

Maybe treat it like an intern after all

Nina Tatsiy, global CIO of Quadient, an automation technology company, takes a position somewhere between Iqbal and Jukes. She calls agents interns, but deliberately uses the term as an analogy, not an organizational designation.

Agents must be managed as software, with security, governance, and technical controls, while recognizing that their probabilistic behavior requires additional supervision. “You have to do both,” Tatsiy says.

An intern does not receive every password and authorization on the first morning. Neither should an agent. It has to be onboarded, trained, watched, retrained when its environment changes, and eventually retired when it’s obsolete.

Quadient generally avoids giving agents human names. Tatsiy worries that doing so encourages people to see them as real colleagues capable of judgment.

“Overtrust is a problem,” she says, particularly because AI tends to state conclusions with such assurance. Tatsiy prefers using AI to challenge a hypothesis or surface questions people haven’t considered rather than allowing it to make the conclusion for them.

Yet the intern analogy has proved useful operationally.

In one accounts-payable deployment, Quadient had an agent effectively shadow human workers and learn from their feedback across different scenarios. Only after its performance had been tested across increasing levels of complexity did it begin providing recommendations. Humans still made the final decision.

The agent, in other words, earned more trust. It didn’t earn accountability.

Borrow from HR, but keep humans in charge

The emerging divide may therefore be less about whether agents are employees or software than about which parts of each management model IT leaders should retain.

Agents need individual technical identities, but not human identities. They need defined responsibilities, but not jobs in the human sense. They need monitoring and evaluation, but not annual performance reviews. They can receive progressively greater authority, but not progressively greater accountability.

And the stronger they become, the more important that distinction becomes.

Treating an autonomous agent like ordinary SaaS ignores the fact that it can interpret, choose, and act in ways conventional software cannot. Treating it like Steve from Accounting creates a different problem: sooner or later somebody may start assuming “Steve” knows what he’s doing.

IT leaders may indeed need to borrow heavily from HR as agentic AI spreads across the enterprise. They just shouldn’t start issuing employee badges.

Related reading:

• 6 ways to make AI accountability stick
• From chatbots to colleagues: How agentic AI is redefining enterprise automation
• Why AI adoption keeps outrunning governance — and what to do about it
• AI is spreading decision-making, but not accountability

Microsoft’s big lead over AI competitors like Google and others has vanished, and the company is now playing catch-up. As a result, Microsoft’s stock has tanked in the last year — down roughly 23% compared to a year ago, due mainly to its massive AI spending and an inability to monetize Copilot. 

The company clearly needs to do something. And last week it did, though not what you might expect. It laid off 4,800 people, a little more than 2% of its worldwide workforce, with its Xbox division hit hardest. And it’s not reducing its massive spending on AI data centers or other AI-related costs.

The New York Times explained the cuts this way: “It is Microsoft’s latest employee culling as it plows tens of billions of dollars into the infrastructure for building artificial intelligence.”

Was cutting back on gaming (while still going all-in on AI) the right move for Microsoft? To answer that, let’s take a look at the details of the company’s July layoffs.

A year of layoffs

The recent cuts come in the wake of larger Microsoft workforce reductions over the last year or so. In May 2025, the company laid off 6,000 employees, about 3% of its workforce. Then a few months later, it laid off 9,000 more, about 4% of its workers. In both rounds of cuts, the company’s gaming division was hit — though it wasn’t the primary target.

This year, in April and May, the company rolled out its first voluntary retirement program for US employees. Approximately 3,000 people took the money and ran.

Then came last week, when Microsoft primarily targeted gaming. When the cuts take full effect over the next year, 2,850 gaming employees will be let go. In addition, Microsoft is cutting loose several of its gaming studio brands, which will become independent companies or be sold to buyers.

The layoffs hit the two remaining gaming studios, Activision Blizzard, which makes the big-selling games Call of Duty and Candy Crush, and ZeniMax Media, which publishes series including Fallout and The Elder Scrolls. Three years ago, in 2023, Microsoft bought Activision Blizzard for $69 billion. That followed its purchase of ZeniMax Media in 2020 for $7.5 billion. Both seemed like sizable acquisitions at the time. 

Compared to Microsoft’s AI spending now, they’re chump change.

Follow the money

A memo sent to employees about the July layoffs by Amy Coleman, Microsoft executive vice president and chief people officer, made clear the layoffs were more about AI than they were about gaming. 

Of the cuts, she wrote: “The “why” is this: our business is changing because the world around it is changing. The way technology is built, deployed, and used is transforming faster than at any point in my time here. Our customers’ needs are shifting, the business models that serve them are shifting, and that means the work itself — what we do, where we focus, and how we’re organized — has to transform, too.

“Our customers are navigating this same shift, and they’re counting on us to help them through it.”

That last sentence is an oblique reference to the early July launch of the Microsoft Frontier Company, which will embed 6,000 engineers inside customers’ businesses to help them more effectively deploy AI. The cost: $2.5 billion.

That sounds like a substantial amount of money. But it’s only a drop in the bucket of how much money the company plans to spend on AI. In April, Microsoft told investors it would spend $190 billion on data centers and other AI infrastructure this year, a 60% increase over what it spent last year. At the same time, Microsoft said it would shrink its workforce.

Its latest layoffs are clear-cut evidence of that. It’s also evidence that the company recognizes how badly Xbox has performed, and that it needed to do something about it. 

In early June, Microsoft sent a memo to everyone in its Xbox division entitled “Next 100 Days: XBOX Reset.” The memo laid out the problems with its ailing game business and pulled no punches. It noted that beyond the $69 billion the company spent three years ago to buy Activision, “Over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue.” 

The layoffs and spinoffs were the first steps. They won’t be the last.

There’s no doubt this is just the beginning of Microsoft’s disinvestment in gaming. The issue isn’t just that the company’s investments haven’t paid off. It’s that Microsoft’s AI ambitions are so large and expensive that it can no longer afford to seriously fund gaming.

Ultimately, it was the right thing to do, at least from a business perspective. The future is AI. It’s not in gaming.

So, for the foreseeable future at Microsoft, when it comes to AI — the sky’s the limit. But when it comes to gaming, things look much less rosy.

For all its potential, generative AI, on the whole, churns out a lot of junk.

Yet employees are becoming ever more reliant on this “workslop” masquerading as high-quality material, says a recent Harvard Business Review blog. They become lazy and less productive, quality control goes off the rails, and integrity and trust begin to erode.

Experts urge enterprises to act now, before they lose control entirely.

“When slopification happens at scale and in sequence across a business’s processes, those processes themselves — and their outputs — start to deteriorate,” Matthias Holweg, professor at the University of Oxford’s Saïd Business School, and analyst Thomas H. Davenport argue in the post. “Eventually, people start to lose trust in the processes that they rely on to do their jobs.”

They call this organization-level phenomenon “knowledge decay.”

Three key challenges

Holweg and Davenport identify three key challenges to address when it comes to AI-generated content in the workplace, to ensure knowledge decay isn’t occurring: verification, validation, and entropy.

Verification requires “disentangling” authentic human content from AI-generated content that could contain glaring errors, they note.

This can be time-intensive and involve critical thinking and additional research, and in many cases the effort negates the gains gleaned from AI use. In the case of hiring, for example, in addition to using AI to write their resumes and CVs, tailoring their prompts to the AI ranking algorithms to ensure they rise to the top of the queue, some candidates are getting crafty, using AI clandestinely to generate responses to interview questions in near-real time.

All this taken together can result in candidates who are subpar or simply not a good fit for an organization. As a result, recruiters may then have to spend more time doing on-site interviews where AI access isn’t available, Holweg and Davenport contend.

Another issue is knowledge validation: confirming how and where humans have provided real value when AI is used in a workflow. For instance, a consulting firm can easily use AI to create standard written reports and PowerPoint slides, while their clients are paying for expert human insights.

“Human experts now have to justify not only the quality of the output submitted, but also that actual human intellectual work has produced it,” Holweg and Davenport emphasize.

Finally, knowledge entropy is like a “risky AI-based game of telephone”: As knowledge is passed through an AI again and again in an iterative process, it moves further away from the original “ground truth” data that was used to create it in the first place, they point out.

“The greater the number of iterations of content through an LLM, the more it will depart from the original,” Holweg and Davenport note. LLMs are probabilistic, “context-agnostic” statistical models that provide next-word-prediction outputs. They have “no conception of fact or truth and simply predict the most likely outputs,” they write.

And when, in some cases, large language models (LLMs) are trained on synthetic data created by other models, the authors write, bigger problems emerge. When this manufactured data subsequently repeatedly goes through the model, it can affect the its accuracy and variability. This is known as “generative inbreeding” or model collapse.

Steps enterprises can take to prevent AI slop

The two experts, therefore, argue for a “fundamental step change” in the ways models are architected, as well as in establishing explicit rules around how they are used.

Naturally, one of the first, and potentially the hardest, steps is restricting employee AI use: It should only be applied to scenarios where it truly adds value, the authors advise.

For instance, when employees or job candidates are allowed to freely design their CVs, they’ll likely use generative AI to “optimize” their work. To prevent knowledge decay, recruiters should rely on structured documents that require factual responses that an AI can’t generate, for example, asking a candidate about a specific role, projects completed, team members involved, suppliers served, and budgets managed.

When generative AI use is allowed or unpreventable, organizations should define what value is being added and establish clarity around the implications, Holweg and Davenport emphasize. “Content does not need to be entirely human-created, but if AI is being used, be clear why and how,” they write.

In one beneficial scenario, AI such as Copilot or Gemini embedded in standard office software makes it “virtually pointless” to manually create more versions of the content of reports and PowerPoint slides, Holweg and Davenport write.

In another example, in performance evaluations, managers can gather specific, detailed information from team members and customers, then use AI to synthesize that material, rather than generating a “tick-box report” of generic bullet points.

Enterprises should also consider how individual AI use impacts an overall process. For instance, in an interorganizational flow like a revenue cycle, everyone involved should know about and agree on how AI would be used and at what steps in the process. It’s not a question of whether AI is better at a given task, as it increasingly is in some scenarios, but whether it is taking over a task to make things more efficient, Holweg and Davenport write.

Ultimately, however, they posit, public LLMs add “little to no real value,” because they are generic and often contain mistakes. On the other hand, small language models (SLMs) and proprietary models trained on company-specific data can augment human work.

From an architectural perspective, enterprises should track the history of both structured and unstructured data and understand “ground truth” information. Materials like customer interviews provide critical facts, emotions, and context; if AI is used to alter or summarize these, enterprises must identify and record the underlying ground truth data and point back to verifiable, authentic content.

In the end, Holweg and Davenport emphasize, enterprises should establish pragmatic practices now, lest they repeat the mistakes of the past.

“If we fail to address the uncontrolled proliferation of generative AI in our business processes, we are likely to see a rerun of the ‘productivity paradox’ observed with the growth of corporate computing half a century ago,” they write.

Blending ‘human capital’ and ‘token capital’

Other experts also agree on the importance of blending the best of humans with the best of AI.

Microsoft CEO Satya Nadella describes this model as the incorporation of “human capital’ with “token capital.” The former is the human “knowledge, judgment, relationships, ingenuity, and pattern recognition,” while the latter is in built and owned AI capabilities. The opportunity is in melding the two in a learning loop.

In this loop, humans will guide AI systems, set goals, and identify patterns, so AI isn’t “running in circles,” Nadella wrote in an X post. Internal evaluations can determine whether AI is improving when measured against company-specified benchmarks, thus creating institutional memory that is “query-able,” using fewer tokens and saving enterprises money.

Nadella noted: “Every improved workflow generates a better training signal, which accelerates the accumulation of tacit knowledge unique to the firm.”

This article originally appeared on CIO.com.

Because generative AI (genAI) tools and services have become so ubiquitous (and popular), the costs of using them are going through the roof — leading to an insatiable appetite for tokens.

Tokens represent a common way to measure and price AI use. Much like letters and words in English, large language models (LLMs) grasp a sentence or query by breaking words into tokens.

With the AI explosion well under way, tokens are now “the fundamental units of data our models process, many representing a problem being solved,” according to Google CEO Sundar Pichai. (Google, by the way, processes about 3.2 quadrillion tokens a month.)

But as the price of all those tokens adds up, business and IT execs are looking for ways to cut costs while keeping corporate productivity up. Uncontrolled token use has already landed one company with an unexpected $500 million AI bill. 

There are a number of ways companies can rein in the price of AI at the model, infrastructure, silicon, and business levels. Here’s a look at how some of those savings might actually be achieved.

Switch to lower-cost models

One way of potentially saving money is by re-routing AI work to a cheaper model, Pichai said. At Google that would Gemini 3.5 Flash. It delivers “frontier-level capabilities at less than half the price of comparable frontier models.

“If companies use a mix of [Gemini 3.5] Flash and other frontier models, they could save a lot of money,” Pichai said.

Those kinds of models provide cheaper tokens, with reasoning that’s good enough for many users — if not as strong as mainstream Gemini 3.5 — to deliver useful results.

“There is sometimes overkill with the [LLMs],” said Deepak Seth, senior director analyst at Gartner. “I don’t always need a large language model which has been trained on the works of Charles Dickens and Shakespeare and Harry Potter.”

Hyperframe Research principal analyst Steven Dickens can’t stop using Amazon’s Quick, which costs $20 a month, for personal tasks. “It is great personal ROI as it has not only made tasks faster, but unlocked tasks I would never have even attempted previously,” Dickens said.

Don’t forget the hardware and software part of the equation

The token crisis isn’t new, said Dheeraj Pandey, CEO of DevRev, who likens what’s going on now in the AI market to the disruptions that emerged with the arrival of cloud computing and virtualization years ago. 

“We let chaos reign and then we had to rein in the chaos,” Pandey said. “The word that people started using was server consolidation and virtualization.”

The answer to the token problem, he said, is the same: “Anything in systems can be solved with caching and indirection.”

DevRev, for example, is building a memory layer between AI agents and primary data sources, such as Salesforce or ERP records; that can cut token load and make data movement more efficient. The layer holds a knowledge graph with answers to common agent questions and runs on cheaper CPUs, avoiding more costly GPU cycles.

Sending agents straight at systems like ServiceNow and Salesforce “will burn a lot more tokens. It’s also not precise. And finally, it’s not safe enough where I can roll it back in case an agent has committed a mistake,” Pandey said.

Network automation firm NetBrain uses a different method: It uses conventional computing to map a network’s layout then feeds only key information to models for planning and reasoning, where AI excels. “So you don’t have to spend all the tokens,” said Netbrain CTO Song Pang.

Focus on prompt efficiency

Staffing firm ManpowerGroup has found that prompt efficiency can be an effective tool for improving token use, both internally and externally for clients.

For example, users accessing its internal labor-market tool initially needed 10 follow-up questions to drill into a query. A year later, more efficient use of prompts has brought that number down to an average of four, said Max Leaming, head of data science and AI solutions at ManpowerGroup. 

“They’re using fewer tokens and they’re simply more efficient,” he said. “And that in large part has to do with your ability to prompt efficiently.”

Go local

New AI hardware that generates free tokens at home could ease some of the cost crisis.

At GTC Taipei earlier this month, Nvidia and Microsoft unveiled RTX Spark, an agentic AI desktop PC that runs agents and 120-billion-parameter models locally on Windows. The goal is “to deliver unmetered intelligence to every home and every desk with Windows,” Microsoft CEO Satya Nadella said in a statement.

Some companies are looking to reduce cloud AI costs by putting their own hardware in data centers, with vendors such as HPE and Dell providing servers installed in independent facilities. (On-premise AI is gaining ground amid sovereign AI and geopolitical concerns, including the recent conflict in the Middle East, where large data centers were struck with missiles.)

“There are local, region-specific and multiple vendor AI solutions. All of those things can help mitigate the risk. But they’re not going to eliminate it,” said Max Goss, senior director analyst at Gartner.

Use forward-deployed engineers

Reducing token costs is something that may fall to forward-deployed engineers (FDEs) in customer environments, said Taimur Rashid, managing director of AWS’s Generative AI Innovation Center.

“I expect these teams to be able to architect systems that have those cost requirements in mind, whether it’s use a different model or a different use case that doesn’t increase the per-token cost,” Rashid said.

Companies may spend heavily on token consumption, “but if you’re generating revenue, as long as the economics work out, then you’re at peace,” Rashid said.

The use of FDEs is gaining ground as IT decision-makers look to both rollout successful AI deployments while also keeping an eye on costs.

Change the measure of success from tokens to outcomes

Even with the current emphasis on reducing token use to save money, the metrics used to measure AI success are likely to shift, Gartner’s Seth said. At some point, token-based pricing will move more toward an outcome-based model, where the unit of value is outcomes, not fragments of words.

“Some companies are moving towards outcome-based pricing,” Seth said. “When people start realizing the real cost of tokens, then companies will start looking at token efficiency.”

Hot AI companies can’t stop talking about forward-deployed engineers (FDEs), which are now very much in vogue. 

FDEs, in case you haven’t heard, are hired by companies looking (hoping?) to successfully deploy AI tools and services. It’s one of the hotter professions in a world still trying to understand the impact of AI on careers.

So, what exactly are FDEs — are they techy lone rangers like the ones OpenAI, Google and Microsoft are hiring? Turns out it’s not so much about individual engineers who swoop in to design and roll out AI deployments; it’s more about a team of engineers working together at customer sites.

At least, that’s the view at Amazon Web Services (AWS).

In fact, according to Taimur Rashid, managing director of the AWS Generative AI Innovation Center, the FDE concept pre-dates the current generative AI (genAI) gold rush. The same kinds of engineering teams were needed for the earlier machine-learning and cloud eras to help companies with deployments.

Rashid recently talked about how AWS sees FDEs as a profession in a conversation with Computerworld. And he weighed in on the desired job skills the company seeks in this increasingly AI-centric era.

What is an FDE? “We view it as a team. It’s a cross-functional team that has engineers, scientists, strategists, and folks that can piece technology and business together. In some cases, we do have to have security engineers in there, too. 

“I see them as anesthesiologists. They have to prep so many things, monitor things throughout. We see ourselves as a frontier deployment team helping customers adopt all forms of AI, whether it’s genAI, agentic AI, even emerging trends like physical AI. We’re helping these companies become frontier themselves.”

How does an FDE engagement begin, and how is it structured? “Where we see the forward deployed model is when customers come in — for example, we have our executive briefing center in Seattle and in Arlington, VA. When customers share what they’re trying to do, very quickly a customer’s like, “What’s the quickest way I can go and build something with you?” 

“We’ll forward deploy our people in, we’ll embed them in your business and we’ll go through these 45-day sprints that we typically design. Through those successive sprints, we’re building stuff together, we’re proving value, and then they can expand that to a much broader engagement.

Where do FDEs actually sit? Client side, internally, or in-between? “It’s mixed, and it largely depends on what the customer’s preference is. We’ve seen models where the customer has been very adamant that, ‘We want your teams with us in our business.’  In those cases, we forward deploy the majority of the teams on site. 

“We have models where customers are fine with you being wherever you’re based, as long as you’re still embedded virtually. And then there’s a hybrid. We deploy anywhere from five to seven people. Sometimes, the baseline is actually three.”

Will cost savings be the job of an FDE, or someone else on the team? “I expect these teams to be able to architect systems that have those cost requirements in mind, whether it’s use a different model for a different use case that doesn’t increase the per-token cost…or think about ways where you can use semantic caching. I personally think you may have a high spend in token consumption, but if you’re generating revenue, as long as the economics work out, then you’re at peace.”

What challenges have you gone through deploying FDEs in the real world? “One of the challenges worth highlighting is when customers get really excited about us forward deploying resources, what they end up realizing is [that] they’re not set up to absorb that right away. They realize they have to go through … process-related things, security access — all those operational things. 

“One very good example is the Commonwealth Bank of Australia. They said: “Prioritization’s a big thing, and if you forward deploy and you’re 100% dedicated, how do we ensure that our teams are also equally 100% dedicated?’ When you’re sitting in your office, you’re distracted by your day-to-day. So they said, ‘Why don’t we create a neutral ground in Seattle? You fly your people, we’ll fly our people. We’ll give them three weeks of dedicated time so they have no distractions.’”

Have you gone into projects where they want AI but have no security or governance ready? “I’ve been through this before, certainly. We do see customers that have security processes and capabilities, but it’s not as tight as it should be in the age of AI. Governance is the biggest area where customers right now have the biggest gap. I’m talking governance around agents. In the past two months, almost 100% of the conversation around agents is not about capability. It’s all about governance. 

“That is a big area right now where forward deploy teams are helping with governance education, and building the scaffolding for that.”

How does software engineering fit into the FDE model? “One of the greatest learnings is that as we forward deploy resources and get customers to take AI and integrate it into their systems, the knowledge of software engineering is so important. Today, a customer can use one of the Claude models and scan their code base and look at vulnerabilities. 

“The tough part is not assessing those vulnerabilities, it’s remediating [them]. Remediating [them] requires software engineering experience, because you have got to merge code, test it, deploy it. We largely see that the frontier software development teams are smaller and they’re managing agents that are doing various tasks across the software development lifecycle.”

AWS has many models at your scale, open source, closed — it’s more complex than what other AI vendors offer.  How do you nail down the talent? “It’s massive, and when you look at not only scale, it’s the complexity of the stack. We take an approach where we fundamentally do three important things: No. 1, we want to ensure people understand concepts; they have to understand pre-training, post-training, reinforcement, fine-tuning. 

“Secondly, we make sure that our teams are well versed in their first-party services. The third thing is that by design, AWS has always been about choice. We say, ‘Let’s do 80-20 here. What is 20% of those specialties that we need to have, which can cover 80% of what most customers are trying to do?’”

What skills should software developers learn to move into FDE work — the top three or four things? “We look at three categories. First category is entirely functional. Are they more engineering specific? Are they science specific? Are they security specific? Our litmus test is not only knowledge of the function, but the actual hands-on work that they can do with it. Secondly is around domain. I focus on what is their domain understanding across the whole AI lifecycle? The third thing is cultural. We are looking for folks that are okay at dealing with ambiguity, being good at stakeholder management, and having that startup mindset. 

“This AI transformation’s not for the faint of heart.”

There’s a rush for FDEs from OpenAI, Google, and others. What’s different about what you look for? “I don’t know entirely what the others are looking for, but I’ll tell you what we have been looking for in the past. When we hired solution architects, it was about systems level understanding. But what I see more and more is hands-on experience, cultural mindset, all these things are very important. If I had to pick one thing that is going to be very important in the talent that we either upskill or future talent that we hire, it has to be the application of AI towards software engineering and system integration tasks.

You’re upskilling AWS talent as well? “We do. You will see some publications coming out in the next couple of weeks around how do we do this across our software teams and how does that translate to customer-facing roles.”

When it comes to AI deployments, IT leaders are often caught in an awkward middle space, trying to reconcile conflicting directives from senior management with constantly changing AI models, capabilities, and costs; data governance and security needs; and the limitations of their own team.

“Very few real benefits can be attained by simply purchasing an AI product and giving it to employees. Vendors have been overselling that fallacy for the past three years,” said Nader Henein, a Gartner VP analyst.

“The reality is that strong AI value and consistent ROI are almost always a result of deep and intentional integration of AI capabilities into existing workflows. For that you need specialized teams, which do not come cheap, and organizations have been recruiting those teams in a variety of ways,” Heinen said.

Among the options available to IT leaders looking for help with AI deployments are traditional IT consultancies, AI-specific consultancies, and independent contractors. Large enterprises with deep pockets can consider acquiring an AI firm and integrating its technology and expert staff. The use of open source to reduce vendor lock-in is a strategy that can sit on top of those others, an approach that Capital One has used. 

But the option that has been getting the most attention recently is bringing in forward-deployed engineers (FDEs), teams of experts from AI vendors that embed with a customer’s in-house engineers to oversee AI rollouts within the enterprise environment. Both OpenAI and Anthropic have recently announced FDE offerings, for example, and Microsoft is partnering with consulting giant EY in a new FDE program for agentic AI deployments.

Engineering teams employed by AI vendors have key strengths, such as understanding their models better than anyone else, having experience integrating those models into different types of enterprise environments, and knowing about upcoming model capabilities before they’re announced. But they also have the obvious drawback of vendor lock-in. Even if future rollouts are not within their contracted deliverables, those vendor employees could subtly influence a client’s future AI efforts. 

Flavio Villanustre, CISO for LexisNexis Risk Solutions, cautions IT executives to move into FDE programs carefully. 

FDEs “are financially incentivized to grow customers’ use of a vendor’s AI products and to create stickiness with that vendor’s services,” he said. “While FDEs may be a reasonable value-added service by the AI vendor, customers should always find other unbiased expert opinions that can evaluate competitive solutions across multiple vendors.”

This is particularly important at a time when “investor-subsidized AI token business models are starting to show cracks,” Villanustre said. “Also, in the current rapid pace of innovation in this field where AI vendors are constantly leapfrogging each other, retaining the agility to move from one vendor to the next could create significant competitive advantages.”

Analysts, consultants, and other industry experts who spoke with Computerworld about FDEs echoed Villanustre’s caution, citing concerns around hidden costs, confidentiality, observability, and vendor lock-in.

Long-term costs and vendor lock-in

A key issue that IT executives need to consider is how long the FDE teams will be needed. The enterprise will likely need an ongoing series of AI deployments synced with the current AI model(s). If help is needed today, why would that change tomorrow?

Enterprises tend to overlook those longer-term costs, said John Sangyeob Kim, an AI engineer at software development vendor Solidroad.

“Deployment is maybe 20% of the total cost. The other 80% is keeping the system running through model upgrades, data drift, and edge cases that only appear after months in production,” Kim said. “Most contracts price the first part and assume the rest. Deployment isn’t the hard part of enterprise AI anymore. The next eighteen months are.”

And whether it’s intentional or not, FDEs will naturally favor their own product portfolio — it’s what they know best.

“FDEs from model labs are good at making their own models work in your environment. They are less suited for multi-model systems, because their incentive is to keep you inside their ecosystem,” Kim said.

Sanchit Vir Gogia, chief analyst at Greyhound Research, said IT leaders should look at the FDE model as a strategy involving ongoing operational power. 

“Whoever shapes the deployment pattern shapes the enterprise’s future muscle memory. Whoever owns the evaluation layer owns the truth layer. Whoever controls the integration logic controls the dependency map,” Gogia said. “This is why the FDE model matters. It is not just another delivery option. It is the frontier AI vendor moving closer to the customer’s workflow, operating model, and decision architecture.”

That proximity cuts both ways, Gogia noted. “FDEs are embedded inside the customer’s [environment], but they are also connected to the vendor’s commercial center of gravity. Their instinct will be to build around the model family, tooling assumptions, deployment patterns, and product roadmap they know best. This is perfectly natural. It is also precisely why CIOs must be cautious,” he said.

Allowing AI vendor employees an outsized say in enterprise deployment decisions could lock in model vendor dependency, which in turn will fuel high prices that can’t be fought effectively.

“FDEs can accelerate deployment and deepen dependency at the same time,” Gogia said. “Frontier AI vendors are no longer content to sell access to models. They increasingly want to shape how enterprises deploy intelligence. That is a larger prize.”

What happens when the FDE team leaves?

FDE post-departure risks are severe and often underappreciated, according to Justin Greis, CEO of consulting firm Acceligence and former head of the North American cybersecurity practice at McKinsey.

For one thing, the FDE team learns a massive number of operational details from the enterprise deployment. Although NDAs and confidentiality contracts protect any data accessed, they often don’t regulate observed processes and procedures. 

“The learnings are absolutely going to be taken from client to client,” Greis said. “Whoever helps deploy AI will learn far more than what appears in the statement of work. They will learn the real workflows, the undocumented exceptions, the data-quality gaps, the approval bottlenecks, the security workarounds, and the places where the business depends on a few people knowing what to do when the process breaks. That knowledge may be as sensitive and precious as the data itself.”

Another critical but often overlooked issue is how much meaningful control will IT have over the project if and when the FDE team leaves.

“The danger is not using outside help. Most companies will need outside help,” Greis said. “The danger is using outside help in a way that leaves the enterprise less capable and more dependent when the engagement is over.”

It is precisely those operational decisions that IT often neglects, said Solidroad’s Kim.

“The best predictor of success is not the vendor. It is whether one internal engineer truly understands the system before the implementer leaves. What matters is who owns the evaluation loop after the demo,” Kim said.

“What happens to our prompts, scorers, and guardrails when the model version changes? If we paused this engagement tomorrow, what would actually stop working, by design or by accident?” Kim asked. “Where do you want the enterprise’s AI learning, control, and dependency to live after the engagement is over?”

Kim argues that observability — the ability to understand and manage all elements of a complex enterprise environment — is a critical function to which IT often gives insufficient attention. Determining whether the project uses the enterprise’s observability stack or the vendor’s observability stack is crucial.

“If the implementer is using their observability stack, that is fine during the build, but you need a plan to migrate it to something you own before they leave; otherwise the visibility walks out of the door with them,” Kim said. “If they are using yours, that is the best case. It means they are working inside the system your team will operate long-term.”

A major problem crops up when they are using neither the enterprise’s nor the vendor’s observability stack. “Neither means they are building the system without any production observability layer at all, and you inherit a system you cannot see into. The first time something breaks in production, you have no traces, no failure history, and no way to tell whether the issue is a model regression, a data problem, or a code bug,” Kim said.

“If observability was not a priority during the build, evals and regression testing usually weren’t either, so you are inheriting a system you cannot measure and cannot safely change. That’s the worst possible handoff position,” he said.

Weighing the alternatives

While the FDE approach is not new, it is just now beginning a surge in popularity, and there are a finite number of such specialists available. That means not all companies even have the option of using FDEs.

This availability disconnect is especially prominent for non-US deployments, where on-site FDEs are rarer, said Gartner’s Henein. “Where is the development happening? There may not be FDEs available in that region,” he said. 

There are plenty of other places enterprises can turn to for AI help. Ishraq Khan, CEO of coding productivity tool vendor Kodezi, encourages IT executives to consider a wide range of options but notes that all approaches have major drawbacks.

“Traditional consultancies are usually stronger at governance, process, compliance, and organizational coordination. They know how large enterprises operate politically and structurally. The downside is that many move slower and often lack deep frontier AI specialization,” Khan said.

Gogia from Greyhound Research put it more colorfully: Traditional IT consulting firms “know how to get legal, risk, security, finance, HR, and business units into the same room without anybody setting fire to the carpet. For regulated enterprises, that matters,” he said.

Specialized AI consultancies have a different set of strengths, Khan said. “AI-native consultancies move much faster and are often more technically current, but many are still immature operationally. Some can build impressive demos without fully understanding long-term maintainability, governance, or production reliability.”

Greis from Acceligence commented on two other options for bringing in outside AI help. Using an independent contractor “can be great for eval design, architecture reviews, red teaming, agent design, or getting a stalled team unstuck,” he said, but it can increase the risk of “key-person dependency,” where a single external person is the only one who understands the system.

As for purchasing an AI firm and onboarding its employees, a practice known as “acquihiring,” Greis said it can work well when the AI capability and expertise being brought in are truly strategic for the acquiring enterprise. But there is a risk that the acquired team will be smothered by the parent company’s bureaucracy: “You buy a speedboat, bolt it to an aircraft carrier, and then wonder why it stopped moving,” he said.

Finally, an open-source strategy can give companies flexibility and reduce vendor dependence, but “many companies underestimate the operational burden that comes with it,” Kodezi’s Khan said. “Open source only helps if the organization has the internal talent and discipline to maintain it properly.”

Bottom line: enterprises need to define their true objectives before deciding on an approach. Khan offered several key questions for CIOs to consider: “Who owns the deployment after implementation? Can we move providers later without rebuilding everything? What happens if the vendor relationship changes or disappears? Are we optimizing for short-term deployment speed or long-term operational resilience?”

In any scenario where outside firms have direct access to enterprise systems, IT needs to be kept fully in the loop. “The worst outcome is when an enterprise successfully deploys AI but no longer fully understands how its own systems operate underneath,” Khan said.

External help for AI deployments: 6 options

	Pros	Cons
AI vendor FDEs	+  Best expertise on the main model being used	–  Vendor lock-in –  Operational detail leaks
Traditional IT consultancies	+  Best understanding of change management, legacy integration, global rollout, governance, and operating-model redesign	–  Can be too slow, too expensive, or too generic
AI consulting firms	+  More practical AI deployment experience than traditional consultants +  Less vendor lock-in than model-provider FDEs	–  May not sufficiently understand enterprise-grade requirements: security, identity, auditability, compliance, incident response, cost controls, and long-term maintainability
Independent contractors	+  Useful for precision tasks: eval design, architecture reviews, red teaming, agent design, or getting a stalled team unstuck	–  Risk of ‘key-person dependency’
‘Acquihiring’ an AI firm	+  Works when the acquired capability is truly strategic	–  Acquired team can be smothered inside existing bureaucracy
Deploying open-source products	+  Reduces dependency on one model vendor +  Attractive for data sovereignty, control over enterprise systems, cost efficiencies, and regulated environments	–  Enterprise takes on full responsibility for security, patching, evaluation, deployment, monitoring, and lifecycle management

Related reading:

• Here’s one career emerging from the AI shift: ‘forward-deployed engineers’
• The forward-deployed engineer: Why talent, not technology, is the true bottleneck for enterprise AI
• The new AI lock-in

Cloud computing has reached a crossroads. The high cost and data sensitivity of AI workloads are raising the appeal of private clouds, even as neoclouds and sovereign clouds shake up the cloud provider landscape. New cyberthreats, shifting compute requirements, and management complexity are adding to cloud complications.

Download the June 2026 issue of the Enterprise Spotlight from the editors of CIO, Computerworld, CSO, InfoWorld, and Network World, and learn how to navigate the latest cloud strategy developments.

Cloud computing has reached a crossroads. The high cost and data sensitivity of AI workloads are raising the appeal of private clouds, even as neoclouds and sovereign clouds shake up the cloud provider landscape. New cyberthreats, shifting compute requirements, and management complexity are adding to cloud complications.

Download the June 2026 issue of the Enterprise Spotlight from the editors of CIO, Computerworld, CSO, InfoWorld, and Network World, and learn how to navigate the latest cloud strategy developments.

Enterprise IT leaders have always struggled with AI pricing, especially the need to pay for AI in a way that delivers ROI. But the typical IT exec may not be right person to decide how a company uses AI — and how it tries to deliver ROI — because so many line-of-business workers and partners are now experimenting with the technology on their own.

And if IT leaders don’t have a grip on how they want to use AI over the next year or two, it’s impossible to figure out how they want to pay for it. They likely hate the current method of paying per token. And other options, such as SAP’s push to charge per AI task completed, aren’t any better. 

To use a sales analogy, IT doesn’t want to pay a lot of money for leads, because there’s no way to know if those leads will generate any revenue — let alone how much. What IT leaders want is the tech equivalent of paying commission, where they only pay when a lead converts into a paying customer. And even then, they only pay a percentage of the final sale. That guarantees ROI for the enterprise.

The problem: no AI vendor would ever go for it because that approach puts too much risk on them. 

Finding a pricing model that works for both enterprise IT and AI vendors is all but impossible as long as IT is trying to deliver ROI.

Irfan Khan, president of SAP Data & Analytics, said the problem is challenging for both sides. “Everyone is scrambling to justify their investments,” and “the day one cost is not necessarily the day one value,” he said.

The problem is one of sequence. Pricing has to be negotiated and locked in long before a project starts. But with technology as new and experimental as agentic AI, there’s almost no solid information about what benefits it will (or will not) actually deliver. 

Beyond that, generative AI (genAI) and agentic AI systems might well deliver benefits that are harder to jot down in a spreadsheet. Let’s say the CFO wants to see a sharp rise in order fulfillment. But what if AI “manages to fulfill those orders more efficiently,” Khan said. “And what are the likely ripple effects of bringing more efficiencies into the process?”

Justin Greis, CEO of consulting firm Acceligence, frames the AI pricing disconnect in terms of market economics:

“The market is trying to force-fit AI into infrastructure-era pricing models, when AI is fundamentally closer to labor augmentation and business process transformation than compute consumption,” Greis said. “The core disconnect is: Enterprise IT buyers want pricing aligned to realized business value. AI vendors want pricing aligned to resource consumption and platform utilization. Those are very different economic models. 

“Token pricing is attractive to vendors because it is measurable, scalable, and predictable. But from the enterprise perspective, tokens are almost meaningless as a business metric. Nobody on the CFO side cares how many tokens were consumed if the process improvement never materialized.”

The competing pricing strategies overwhelmingly rely on just two factors: what delivers the most profit and which is the easiest to execute. Given human nature, the latter is usually the path most often taken.

It’s like one of my favorite jokes. A guy is heading to his car when he sees a man with a flashlight intently looking at the ground right next to a streetlight pole. 

“Can I help you? Are you looking for something?” the guy asks.

“Yes, I lost my car keys.”

“Silly question, but where do you last remember having them?”

“I was standing over there in that dark alley up the street. A cat screeched and I dropped my keys.”

“Wait a second — if you lost your keys over there, why are you looking here?”

“The light’s better over here.”

The lesson: taking the easy route usually beats realizing the actual objective.

Greis argued that not only would it be hard to persuade AI vendors to accept ROI pricing, but if they did  somehow agree, the unintended results could prove disastrous. 

“AI vendors cannot realistically absorb unlimited downstream business risk tied to variables they don’t control — poor internal adoption, broken processes, bad data, organizational politics, weak change management, or unclear KPIs. But the moment vendors are compensated primarily on outcomes, you create strong incentives for increasingly autonomous optimization behavior. That sounds great until organizations realize that AI systems may pursue the metric rather than the intent behind the metric,” Greis said. 

“We’ve already seen versions of this in recommendation engines, ad targeting systems, and engagement algorithms. The system learns to maximize the measurable outcome even if the methods become operationally risky, ethically questionable, reputationally damaging, or strategically misaligned. In enterprise environments, that could become dangerous very quickly. An AI system incentivized around reducing service costs might aggressively deflect legitimate customer issues. A model rewarded for sales conversion could push manipulative messaging or optimize for short-term wins at the expense of customer trust. A procurement optimization engine might lower costs while quietly increasing supplier concentration risk or degrading operational resilience.

“The more autonomous these systems become, the harder it is to separate ‘successful outcome’ from ‘acceptable behavior.’”

The best way to resolve this is potentially the most difficult. Every AI project must be approved by an AI committee whose members must ask the hard questions. What are you hoping to accomplish? If it works, specify and quantify your best-case scenario benefits. What are the most likely ways it could fail? What are the costs and disruptions most likely to happen if it fails in that way? Quantify those. 

The committee should have at least a couple of members who know exactly what these models can and cannot do to serve as a reality check. 

Next, require the LOB chief, or whoever the most senior exec involved in the project is, to share in the pain. Tie gains or losses to executive bonuses. Give those execs a reason to make sure their people are honestly and creatively thinking the project all of the way through. 

Only once that happens can a CIO know how to negotiate a fair and reasonable AI pricing deal.