OpenAI’s strategic partnership with Microsoft has been widely celebrated as a significant achievement. The launch of ChatGPT last year not only achieved remarkable success but also ignited fresh discussions and opportunities in the field of AI. Nevertheless, OpenAI now faces the dual-edged challenge of its affiliation with this industry giant, leading to both favorable outcomes and obstacles, as per insights from GlobalData, a prominent data and analytics company.
GlobalData’s most recent report, titled “In Focus: Generative AI Watch: Large Language Models (LLMs),” indicates that OpenAI’s association with Microsoft is encountering some turbulence. This is due to Microsoft Azure being locked in as OpenAI’s exclusive cloud provider, and Microsoft’s intention to market a new version of Databricks’ software, designed to facilitate AI applications for businesses, putting it in direct competition with OpenAI’s offerings. Additionally, Microsoft’s upcoming AI-driven collaborative tool, Copilot, will also rival OpenAI’s ChatGPT Premium.
Technology Analyst Beatriz Valle at GlobalData comments on this development: “Microsoft Azure serves as OpenAI’s sole cloud provider, supporting various aspects of research, products, and API services. This arrangement restricts OpenAI’s ability to collaborate with other public cloud providers, as some of its competitors have done. Furthermore, despite revenue growth from the premium ChatGPT release, substantial operational costs have led to OpenAI becoming increasingly reliant on financial supporters.”
The potential internal competition poses a particular concern for OpenAI. For example, customers currently paying $20 per month for the premium version of ChatGPT may opt for Microsoft’s $30-worth Copilot when it becomes available.
Valle adds: “OpenAI has recently introduced a robust enterprise version of ChatGPT, targeting market expansion. Nevertheless, Microsoft’s ongoing launch of OpenAI-powered business solutions on Azure, including Bing Chat Enterprise, presents a challenge. Microsoft’s strategy of seamlessly integrating Copilot with Office365 is attractive to its user base. The overlap in AI offerings might prompt some of OpenAI’s clientele to explore Microsoft’s integrated alternatives, potentially resulting in customer migration.”
Despite these challenges, OpenAI has experienced notable growth. Its solutions have been adopted by prominent entities such as Duolingo, Morgan Stanley, the government of Iceland, Be My Eyes, Waymark, and Stripe. Furthermore, OpenAI has made GPT-3.5 Turbo available for businesses to fine-tune using their proprietary data and has recently unveiled an enterprise version of ChatGPT.
Valle concludes: “OpenAI finds itself in a complex position, collaborating and competing with its influential supporter, Microsoft. However, it is still early days in the generative AI market, and it will take time to assess the level of adoption of offerings like ChatGPT Enterprise. In the interim, OpenAI remains somewhat vulnerable due to revenue imbalances stemming from extensive expenditures on cloud computing usage.”
