Honeymoon Is Over As Microsoft Looks for OpenAI Alternatives

Microsoft is reportedly looking for alternatives to OpenAI to meet its Copilot needs, with cost and speed being the motivating concerns....
Honeymoon Is Over As Microsoft Looks for OpenAI Alternatives
Written by Matt Milano

Microsoft is reportedly looking for alternatives to OpenAI to meet its Copilot needs, with cost and speed being the motivating concerns.

Microsoft has invested some $13 billion in OpenAI, with the startup’s AI models serving as the backbone of Microsoft Copilot, which the company is incorporating into its various platforms.

According to Reuters, however, Microsoft is growing increasingly concerned “about cost and speed for enterprise users.” In response to its concerns, the Redmond giant has been working to add its own home-grown AI models, as well as third-party options, to Microsoft 365 Copilot—a move that would have seemed far-fetched not long ago.

In a statement to Reuters, Microsoft said it continues to rely on OpenAI for “frontier models,” the term used to describe the most advanced AI models.

“We incorporate various models from OpenAI and Microsoft depending on the product and experience,” Microsoft said in the statement.

An Inevitable Outcome

There have been reports for some time of Microsoft and OpenAI’s cooling relationship. The issues seemed to start when OpenAI’s board surprised the industry when it fired CEO Sam Altman, a decision Microsoft was not happy with. The company offered to hire Altman, and any other disgruntled OpenAI employees, while simultaneously pressuring the board to re-hire Altman.

Since the boardroom coup, Microsoft has seemingly increased its efforts to develop its own AI models, releasing a number of smaller models. In addition, Microsoft CEO Satya Nadella has reassured investors that the company has everything it needs to continue innovating, indicating it had rights to use and build on OpenAI’s models. As Reuters points out, the original agreement stipulated just such a clause.

OpenAI’s boardroom drama should serve as a warning example to startups looking to attract investment from industry giant. As a general rule, successful companies don’t want to deal with unnecessary drama, and will find other solutions if such drama exists.

While Reuters’ sources blame cost and speed as the main reasons for Microsoft’s efforts to diversify, it’s hard to imagine that the seeds of its discontent weren’t sown when Altman was fired.

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