Microsoft Corporation is broadening the range of artificial intelligence models powering Microsoft 365 Copilot, to diversify from its reliance on OpenAI’s technology and address cost.
The move marks a strategic shift for Microsoft, which has heavily relied on OpenAI’s GPT-4 model since the launch of 365 Copilot in March 2023. The tool, embedded in Microsoft Office products like Word and PowerPoint, has been a cornerstone of the company’s AI push.
Microsoft’s pivot stems from the high operational costs and speed challenges associated with using OpenAI’s technology for enterprise users, sources said. By integrating internally developed models and open-weight alternatives, Microsoft aims to improve 365 Copilot’s performance and reduce expenses, potentially passing these savings to customers.
“We incorporate various models from OpenAI and Microsoft depending on the product and experience,” a Microsoft spokesperson said, emphasizing the ongoing partnership with OpenAI for advanced AI models.
Microsoft has not disclosed how many licenses of 365 Copilot have been sold but noted that 70% of Fortune 500 companies are using the tool.
In addition to using OpenAI’s technology, Microsoft has been developing its own smaller AI models, such as Phi-4, and customizing open-weight models to enhance speed and efficiency.
The company is following a trend seen in other business units, like GitHub, which recently integrated AI models from Anthropic and Google as alternatives to OpenAI’s GPT-4.
Microsoft’s CEO Satya Nadella is closely monitoring these efforts, signaling the strategic importance of AI in the company’s future.
Despite the push for diversification, Microsoft 365 Copilot faces challenges in proving its return on investment to enterprises. Gartner research from August indicated that most of the 152 IT firms surveyed had not progressed beyond the pilot stage for implementing the tool.
However, adoption appears to be accelerating. Analysts at BNP Paribas Exane project that Microsoft could sell 365 Copilot to over 10 million users this year, a sign of growing demand for AI-enhanced enterprise tools.
Microsoft’s shift mirrors broader industry trends as companies seek to balance innovation with operational efficiency. While OpenAI remains a key partner, Microsoft’s diversification strategy reflects a pragmatic approach to sustaining its AI leadership while managing costs.
