Microsoft Aims to Diversify AI Models in 365 Copilot

Microsoft is currently making strides to incorporate both its own internal artificial intelligence models and those from third parties into its prominent AI product, Microsoft 365 Copilot. This initiative aims to diversify the technologies used and reduce the overall costs associated with its services, according to sources familiar with the developments.

Historically, Microsoft has relied heavily on OpenAI for the AI models powering 365 Copilot. The company has actively been reducing its dependence on this partnership, especially after initially promoting its exclusive access to OpenAI's models. When Microsoft unveiled 365 Copilot in March 2023, the integration of OpenAI's GPT-4 model was a significant highlight.

Concerns regarding the escalating costs and performance speed for enterprise clientele have prompted Microsoft to minimize 365 Copilot's reliance on OpenAI. Insiders, who wished to remain anonymous, highlighted these growing apprehensions.

A spokesperson from Microsoft confirmed that OpenAI will remain a partner regarding the most advanced AI models available, known as frontier models. The existing collaboration allows Microsoft to tailor OpenAI’s models for its own applications.

In a statement, Microsoft mentioned that it utilizes a variety of models from both OpenAI and its own resources based on specific products and user experiences.

Meanwhile, OpenAI has chosen not to comment on these developments. To enhance its offerings, Microsoft is training its own smaller models, including the new Phi-4, and is also customizing other open-weight models to improve the speed and efficiency of 365 Copilot.

The overarching goal of these efforts is to lower operational costs for Microsoft in maintaining 365 Copilot, with the hope of transferring some of these cost savings to end users.

Microsoft’s executives, including CEO Satya Nadella, are closely monitoring these initiatives. This strategy aligns with changes seen in other divisions within Microsoft, which have also adjusted their use of OpenAI models in recent months. For instance, GitHub, a subsidiary of Microsoft, has started implementing models from Anthropic and Google as alternatives to OpenAI’s offerings.

The consumer chatbot Copilot, which was upgraded in October, is now powered by Microsoft’s in-house models as well as select OpenAI models.

Microsoft 365 Copilot serves as an AI assistant integrated into its suite of enterprise software, including widely used applications such as Word and PowerPoint. However, the product is still proving its value to enterprise clients.

Microsoft has not disclosed details concerning the sales figures for 365 Copilot licenses. There are ongoing concerns regarding its pricing and overall effectiveness. A recent survey conducted by Gartner involving 152 IT companies indicated that a large proportion had not advanced their 365 Copilot projects beyond the trial stage as of August.

Despite these hesitations, analysts at BNP Paribas Exane have reported a notable increase in adoption rates and project that Microsoft may secure over 10 million paid users for 365 Copilot by the year's end. Additionally, Microsoft revealed in a blog post that 70 percent of Fortune 500 companies are already utilizing 365 Copilot.

Microsoft, AI, Cost