The non-profit organisation that it was, OpenAI, gained investments from Microsoft right after becoming a “capped” profit company in 2019. This was not received well by a lot of people, including co-founder Elon Musk, who decided to leave the company a year before that. The open source AI company became closed and bid to mint money.
Microsoft looks like the clear winner in this AI battle. The $13 billion bet that the company has made on OpenAI, is reaping benefits for the tech-giant while competitors like Google and Meta are running for their money to keep up. But if we look even closely, and look at the recent developments by Microsoft that was announced at the Build Conference, all of that would not have been possible without OpenAI.
“Microsoft hasn’t released a single product in 30 years,” has been a joke that people make about the company. Even when it comes to Windows, the company has been only releasing updates to its systems, and not building anything new. The same is the case with Azure Cloud service.
Though Azure is one of the top players of the cloud game, the recent AI integrations through Azure OpenAI Service, as the name suggests, are just products built by OpenAI like GPT or DALL-E offered through the cloud.
What’s in it for OpenAI?
Recently, Musk claimed that Microsoft ‘controls’ OpenAI. The tech leader is clearly not happy with how OpenAI is turning out now — closed source and for profit. Who is the biggest beneficiary here? Microsoft. The company, by offering its cloud in exchange for the investment, is somehow controlling OpenAI and owning its services and has made OpenAI a “maximum profit company effectively controlled by Microsoft”.
Though Satya Nadella, CEO of Microsoft, denied Musk’s claims, his statement wasn’t very convincing. “The last time I checked, we were the only for-profit company comfortable with a non-profit company and a board controlling technology, and I would welcome others to do that as well,” he added.
After the initial investment of $1 billion in 2019, OpenAI was collaborating with Microsoft exclusively. Microsoft gained a lot, but what did OpenAI gain from this apart from the money and the fame from ChatGPT? Microsoft was clearly involved in building the technology at OpenAI. For example, the Spark of AGI paper by Microsoft Research explained how the company had access to the training process of GPT-4 before and after RLHF. It is possible that the company might be giving its own “human feedback in the loop”.
There is more. While Microsoft reported a quarterly profit of $18.3 billion in April, OpenAI is not profitable yet. According to reports, OpenAI’s losses have doubled to $540 million ever since it started developing ChatGPT. Though the revenue is pouring in, it might take a lot of time for it to get profitable.
Microsoft-GPT
One can say that what Microsoft was not able to achieve through its own research department is now being achieved by funding a non-profit company like OpenAI. Moreover, the cost of building such models is so huge that it is not wise to blame OpenAI for receiving funds from Microsoft.
On one side it looks like Microsoft is furthering AI research through OpenAI and on the other, it looks like it may just be exploiting the company. Microsoft has integrated Codex and GPT in every single offering that they have announced recently. They want to make everyone a developer, and to do that, they are making coding as easy as writing English through ChatGPT.
More than just improving its cloud, Microsoft has also found the best route to gather the data gold mine through ChatGPT. Since the chatbot runs on Azure Cloud, Microsoft has access to all the data given to ChatGPT by users. OpenAI currently claims that they are not using data to build better models. But there is a possibility in the future.
Moreover, OpenAI’s privacy policy clearly states that it “will share personal information of the users’ with our vendors and service providers”. Microsoft is clearly the biggest service provider of OpenAI. Microsoft is starting to treat and sell GPT as its own product.
What would Microsoft do without OpenAI?
The partnership and investment in OpenAI have positioned Microsoft in a unique place to enable generative AI capabilities across its entire stack, from Windows to Office 365. Copilots for everything seem to be Microsoft’s generative AI flag — and it was incredibly present at the Build conference. From Plugins to Copilot, Office 365 Copilot to Azure AI Studio, Microsoft Fabric, and much more, everything is built around OpenAI’s GPT technology. This is similar to Google I/O 2023, which like Microsoft Build, was just an “AI integration event”.
No one was actively choosing to use Microsoft products before OpenAI came into the picture. Though they host one of the biggest cloud services, integrating OpenAI made startups and companies rush towards it, giving AWS and Google a run for their money. Microsoft has acquired a 49% stake in OpenAI, while the other 49% and 2% are with the VCs and OpenAI, respectively. After integrating OpenAI Service on Azure, Microsoft shares rose by 8.3%, giving a boost to their sales.
This is how Microsoft sold itself OpenAI. The company solved OpenAI’s distribution problem. They also acquired the Microsoft brand in them somehow. Now that isn’t required anymore though. Microsoft has palmed off the work to build AI models to OpenAI and is running in the forefront of the dirty AI battle with AWS. OpenAI is the answer to Microsoft’s cloud question.
Google has its own Bard, Meta has its metaverse dreams, Microsoft has nothing apart from Windows and Office 365 products. One of the first voice assistants, Cortana, also is now a distant memory with the current space of AI chatbots. Everything else is now getting integrated with GPT or some OpenAI developed technology. Microsoft would have nothing if it did not have OpenAI.
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