OpenAI Is Nabbing Microsoft Customers, Fueling Partners’ Rivalry

(Bloomberg) -- Last spring, drugmaker Amgen Inc. announced plans to buy  Microsoft Corp.’s Copilot AI assistant for 20,000 employees. It was a timely endorsement of the software company’s multibillion-dollar bet on generative artificial intelligence, and Microsoft touted its new Copilot customer in three separate case studies.

Thirteen months later, Amgen employees are using a rival product: OpenAI’s ChatGPT. 

Amgen expanded its use of ChatGPT earlier this year  after seeing the technology improve and hearing from employees that it helped with such tasks as research and summarizing scientific documents.

“OpenAI has done a tremendous job making their product fun to use,” said Senior Vice President Sean Bruich. Copilot is still a “pretty important tool,” he added, but more so for use with Microsoft products such as Outlook or Teams.

OpenAI’s nascent strength in the enterprise market is giving its partner and biggest investor indigestion. Microsoft salespeople describe being caught flatfooted at a time when they’re under pressure to get Copilot into as many customers’ hands as possible.

The behind-the-scenes dogfight is complicating an already fraught relationship between Microsoft and OpenAI. 

Since investing almost $14 billion in OpenAI, Microsoft has backed rival AI startups, started building its own AI models and is balking at signing off on its partner’s restructuring plan. OpenAI has inked deals with rival cloud computing partners and spent much of the past two years building out a suite of paid subscription products for businesses, schools and individuals. The startup recently agreed to acquire AI coding assistant Windsurf, which competes with Microsoft’s GitHub Copilot.

It’s unclear whether OpenAI’s momentum with corporations will continue, but the company recently said it has 3 million paying business users, a 50% jump from just a few months earlier. A Microsoft spokesperson said Copilot is used by 70% of the Fortune 500 and paid users have tripled compared with this time last year.

Gartner analyst Jason Wong said many companies are still testing Copilot with relatively few employees, leaving room for various software vendors to win customers. But for now, he said, it’s “kind of a showdown” between OpenAI and Microsoft.

This story is based on conversations with more than two dozen customers and salespeople, many of them Microsoft employees. Most of these people asked not to be named in order to speak candidly about the competition between Microsoft and OpenAI. 

Both companies are essentially pitching the same thing: AI assistants that can handle onerous tasks — researching and writing; analyzing data — potentially letting office workers focus on thornier challenges. Since both chatbots are largely based on the same OpenAI models, Microsoft’s salesforce has struggled to differentiate Copilot from the much better-known ChatGPT, according to people familiar with the situation.

Asked about ChatGPT’s traction, Microsoft’s chief of workplace AI initiatives, Jared Spataro, said “awareness in the consumer space doesn’t necessarily translate into fit for use in the commercial space.” Microsoft’s “sweet spot,” he added, is taking the best technology available and fine-tuning it for business use. An OpenAI spokesperson said his company is benefiting from customers’ desire for direct access to the latest expertise and technology.

Microsoft’s ubiquity should theoretically give it an advantage. The Windows operating system dominates the workplace, and the company is baking AI into the world’s most widely used suite of productivity apps. Traditionally, Microsoft salespeople have been able to persuade customers to buy the newest whizbang because it works well with their existing software, cybersecurity defenses and procurement practices.

The company’s salespeople knew ChatGPT dominated the consumer chatbot market, but expected Microsoft to own the enterprise space for AI assistants thanks to decades-long relationships with corporate IT departments. But by the time Microsoft began selling Copilot to businesses, many office workers had already tried out ChatGPT at home, giving the chatbot a first-mover advantage.

It doesn’t help that OpenAI updates often take weeks before showing up in Microsoft software, thanks in part to bureaucratic snarls, the people said. Spataro said Microsoft does its own testing on each OpenAI release to ensure it’ll improve user experience and maintain security standards. “Not every change that is being made to the models actually is net positive,” he said.

With many office workers already familiar with ChatGPT and convinced that it’s a better product, some companies are letting employees test both assistants. New York Life Insurance Co., another Microsoft customer, is rolling out ChatGPT and Copilot to all 12,000 personnel. After monitoring the trial and seeking feedback, the company will reevaluate which tools it wants to use for the long run.

“There’s a lot of different roles and day-to-day tasks that these individuals do,” said Chief Data and Analytics Officer Don Vu. “And so our thought was, ‘Let’s roll out both tools, let’s take some time to evaluate kind of the usage, traction, adoption and network effects of all of these, and let’s see what really sticks.’”

Vu and other IT executives acknowledge that Copilot’s deep integration with Microsoft apps gives it a potential advantage. Over the years, upstart products from the likes of Zoom Communications Inc., Slack and Box Inc. have struggled to compete with Microsoft’s unified bundle of offerings. While noting there’s a strong constituency for ChatGPT, Gartner’s Wong said buying Copilot is generally the “path of least resistance.”

Finastra Group Holdings Ltd. opted for the Microsoft chatbot and has found it necessary to encourage ChatGPT fans to at least try Copilot. Adam Lieberman, the company’s chief AI officer, said people eventually come to appreciate the tool’s functionality and integration with existing apps. “If you’ve used ChatGPT at home,” he said, “you may be a little less familiar with some of the other tools.”

Microsoft’s salespeople are quick to tell potential customers that Copilot, at $30 per month per user, is usually a lot cheaper than ChatGPT Enterprise, which Gartner says has gone for as much as $60. “Pricing is good — I think that that always factors in,” Finastra’s Lieberman said of Microsoft’s Copilot.

Copilot’s price advantage may not endure, however. OpenAI has introduced a pricing model based on usage rather than a flat fee, according to the company spokesperson, potentially lowering per-employee costs and fueling adoption. OpenAI is also offering discounts to customers that agree to buy additional AI products, The Information reported last week.

The rivalry isn’t stopping Microsoft from notching big wins. Employees were told during an internal event earlier this month that multiple dozen customers including Barclays Plc., Accenture Plc. and Volkswagen AG each have over 100,000 paying users of Copilot, according to people familiar with the presentation. Chief Executive Officer Satya Nadella lauded the progress so far but also made clear that the company needs to get hundreds of millions of people using its family of AI apps. 

That could be tough if customers keep opting for OpenAI.

Bain & Co. Inc.,  another longtime Microsoft customer, has deployed ChatGPT to about 16,000 employees, the vast majority using it regularly. Only about 2,000 personnel use Copilot, mostly for assistance on work with Microsoft programs like Excel.

Employees just haven’t responded as well to Copilot, said Chief Technology Officer Ramesh Razdan. “It’s improving, but I don’t think it’s at the same level as ChatGPT.”

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