Microsoft will reduce its dependence on OpenAI as it adds its internal AI models, besides those developed by third parties, into its product, Microsoft 365 Copilot.
This is an attempt to solve cost and performance problems that the GPT-4 version of OpenAI presents to enterprise users for 365 Copilot.
Microsoft is building proprietary smaller AI models, such as Phi-4, and fitting open-weight models to fine-tune 365 Copilot in-house.
Key Background:
Microsoft is diversifying the approach to artificial intelligence and trying to cut its dependency on OpenAI, a joint development partner in its recently launched Microsoft 365 Copilot product. The company is combining multiple internal and third-party models of AI for its flagship AI assistant. This strategic shift will help in cost and speed in OpenAI technology along with the further efficiency in Microsoft 365 Copilot.
Originally, Microsoft’s March 2023 launch of 365 Copilot highlighted the use of OpenAI’s GPT-4 model as a significant selling point. However, sources familiar with the matter commented that Microsoft is working on alternatives, such as incorporating smaller, homegrown AI models and customizing open-weight models. These changes aim to make 365 Copilot more cost-effective and agile, ultimately benefiting enterprise customers who have expressed concerns about pricing and utility.
This reflects the wider efforts by Microsoft to diversify its AI offerings. Though it is a major investor in OpenAI, Microsoft has shifted strategy to avoid relying too much on one supplier. The company continues to work with OpenAI on frontier models, which are highly advanced AI systems, but balances this with other models to meet the varying needs of its enterprise users. According to a Microsoft spokesperson, the company is using a range of models from both OpenAI and its internal sources to maximize the user experience.
Microsoft’s management, including the CEO Satya Nadella, is closely following all these developments, which can save costs that might eventually be passed on to consumers. Apart from Phi-4, Microsoft has been fine-tuning other models to accelerate its products’ speed and efficiency. This is being done across other business units of Microsoft, such as GitHub, which recently took on AI models from companies like Anthropic and Google to complement the OpenAI GPT-4.
Although all the best efforts are being made to optimize Copilot, its adoption among enterprises is still cautious. A survey conducted by Gartner states that most of the IT companies are in the pilot phase of implementing 365 Copilot. Analysts at BNP Paribas Exane, however believe that Microsoft is witnessing increasing adoption with expectations that over 10 million paid users will be using 365 Copilot at the end of the year. In addition, Microsoft also disclosed in November that 70% of Fortune 500 companies already use the tool, so this means everything is on the right path for this AI-powered productivity assistant.
