Microsoft looks to cut costs by integrating in-house A.I models
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Why is Microsoft replacing OpenAI and Anthropic with its own AI models?
Time now for our daily tech and business report. In a cost-cutting move, Microsoft is starting to replace OpenAI and Anthropic in its software products with its own models. For more, we turn to the KCBS RingCentral Newsline to speak with Bloomberg's Brody Ford. Thanks so much for being with us this afternoon.
Thank you for having me.
So does this come as a surprise?
I don't think so because a lot of the biggest companies in the world are grappling with this realization that deploying AI at scale can be really expensive. We're at the point where the technology has kind of proven itself that it can be meaningful to businesses, to individuals. But when it's at the scale of a real enterprise, the amount of money you might end up spending is just gargantuan. And so Microsoft is doing what a lot of companies are doing, which is looking for alternatives to those kind of flagship expensive providers, OpenAI and Anthropic.
Okay, so before we get into more about their models, how up to this point has Microsoft been using OpenAI and Anthropic?
So Microsoft had a special relationship with OpenAI. They were an early investor. They're a partial owner. And so they currently get free access to OpenAI models to weave them through their products and resell them. over time, they've had a bit of a troubled marriage. And so Microsoft has turned at times to anthropics models and they use them. And, you know, a lot of us at work might use apps like Word or Excel or PowerPoint. And when you go to use AI features in those apps, often through the co-pilot interface, that's when it would tap the AI models from some of these providers you've been talking about.
So do we know if the Microsoft AI models are similar to these two?
Oh, Microsoft certainly says so. They say that we're doing something that is equal or better quality at a lower cost. And that sounds beautiful, right? A lot of times users, what models underpin certain programs or applications, it's opaque to users. And so I don't have a great grasp over how do the people feel about this?
How are high AI deployment costs driving Microsoft’s cost‑cutting strategy?
Is this a better experience? Is it a worse one? Microsoft is optimizing for it to be a similar or better experience at a much lower cost. That is their North Star.
So will Microsoft then be competing directly with OpenAI and Anthropic? And if so, will that impact plans for IPOs? I mean, Microsoft's known for eating their competition.
That IPO bit you mentioned is interesting, and I think that's why a lot of readers have been interested in the story today is that. OpenAI and Anthropic are each premised on this kind of insane revenue growth. I mean, Anthropic in particular has grown at a scale. I don't want to misstate, but I think it's like the fastest amount of revenue growth accumulation anyone's seen in history. And to keep that going, you have to keep getting more customers using your stuff. But in the last month or two, we've seen a lot of big customers of the AI companies saying, wait, we are spending way more than we wanted to. We need to find ways to pare back this spending. So when those IPOs come out, what will the growth rate look like?
Will it be hit by incidents like this? That's what a lot of our readers are worried about today.
I've also heard there's been a lot of talk about the privacy concerns for enterprises and in using open AI and Anthropic. Do you think that Microsoft would have more privacy, if you will?
Our understanding is that this move wasn't necessarily fueled by that. Sometimes, though, companies will turn to alternatives in the open source models or sometimes the Chinese models, which can be quite cheaper and quite performant. Of course, the more of a kind of podunk shop you go to, the more that you're grabbing a model from a company that's maybe unproven. It's hard to imagine you're not increasing your security fears, right? So yeah, I think a lot of big companies will likely stay with some name brand providers. And yeah, if you're an IT person, you're probably comfortable using a Microsoft AI model in a way that you wouldn't be comfortable using something from like a deep seek.
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