Microsoft Diversifies Microsoft 365 Copilot AI Power Beyond OpenAI

Microsoft is diversifying the AI models behind its Microsoft 365 Copilot, incorporating internal and third-party options to reduce its reliance on OpenAI, Reuters reported on Monday, citing sources familiar with the matter. The move is intended to manage costs and improve speed for enterprise users.

This move signifies a shift in Microsoft's strategy, marking a departure from its prior emphasis on OpenAI integration. When Microsoft 365 Copilot launched in March 2023, its use of OpenAI's GPT-4 model was a key selling point.

Microsoft's motivation for diversifying its AI model sources stems from concerns about cost and processing speed for enterprise users. A Microsoft spokesperson confirmed the company's ongoing partnership with OpenAI for "frontier models," the most advanced AI models currently available, but also noted the flexibility afforded by their agreement to customize OpenAI models.

"We incorporate various models from OpenAI and Microsoft depending on the product and experience," Microsoft stated in a statement.

In addition to developing its own smaller models, including the latest Phi-4, Microsoft is customizing open-weight models to enhance the speed and efficiency of Microsoft 365 Copilot, according to Reuters. The aim is to reduce the cost of running the service and potentially pass savings on to customers.

This strategy aligns with similar moves by other Microsoft business units. GitHub, acquired by Microsoft in 2018, added models from Anthropic and Google as alternatives to OpenAI's GPT-4 in October. Its consumer chatbot, Copilot, also now utilizes in-house models alongside those from OpenAI.

Despite these efforts, Microsoft 365 Copilot faces challenges in demonstrating its value to enterprises. While Microsoft has not disclosed specific sales figures for licenses, there have been concerns about pricing and overall usefulness. A Gartner survey in August revealed that the vast majority of IT companies had not progressed beyond pilot programs for Microsoft 365 Copilot.

However, analysts at BNP Paribas Exane observed an acceleration in adoption, predicting over 10 million paid Microsoft 365 Copilot users by the end of the year. Microsoft also reported in a November blog post that 70% of Fortune 500 companies are using Microsoft 365 Copilot.

Microsoft's CEO, Satya Nadella, is reportedly closely monitoring the company's efforts to diversify its AI model sources for Microsoft 365 Copilot.