Microsoft Chairman and CEO Satya Nadella has said the software industry is entering a phase where traditional development models are no longer sufficient, urging developers and organisations to adopt a fundamentally different approach powered by artificial intelligence.
Speaking at the Building India’s AI Frontier keynote in Bengaluru on Thursday, Nadella noted that AI is transforming how technology is conceived, built and deployed and those who adapt quickly will lead the next wave of innovation.
Impact, not activity, should drive technology
Nadella stressed that the purpose of technology has always been to empower people and institutions, and AI now allows that mission to expand dramatically.
“We’re not building for building’s sake. We’re building to have impact,” he said, pointing to tangible shifts already visible in customer-facing systems, workplace productivity and operational processes.
According to him, the real value of technology lies in how rapidly it helps organisations innovate and achieve measurable outcomes.
A reversal of the traditional development mindset
One of the core changes, Nadella explained, lies in how developers approach the software development life cycle (SDLC). Instead of starting with detailed specifications, he said teams in the AI era must begin at the other end: with evaluation.
“You start with the test, not the spec,” he said, adding that this inversion demands a significant mindset shift. Developers must first define the real-world result they want to influence, including the task, the metrics and the evaluation framework and then design the workflow backwards from that goal.
This approach, he said, ensures that products are anchored in practical value rather than theoretical planning.
New skills and the rise of ‘Context Engineering’
Nadella also highlighted the need for updated tools and capabilities to support AI-first development. Among these is what he termed “context engineering”, a discipline built on data engineering but aimed at preparing and structuring information optimally for AI systems.
Its purpose, he said, is to ensure intelligence models receive the right context and structure to produce reliable, meaningful results.
Towards a new AI-driven SDLC
Calling the current transition “critical”, Nadella said the industry must now imagine a fresh model of software creation shaped around AI at every stage.
“We need a new way to think about the frontier of the classic SDLC,” he said. “A shift to an AI-driven SDLC is going to be essential.”
"We are now going to skill 20 million people across India in AI skills," he said, adding that initiatives such as the government's E-Shram programme demonstrate how AI can uplift unorganised workers.
He also highlighted India's growing influence in the global developer ecosystem.
"India is slated to become the number one community in the world with GitHub by 2030," he said, praising the "engagement and the type of projects that are coming out of this place, the contributions from India."
(With inputs from ANI)