News Analysis
The partnership between Microsoft and OpenAI — once central to enterprise AI — is starting to show cracks. OpenAI's models have powered Microsoft Copilot and other key products since Microsoft's $13 billion investment in the company in early 2023, which embedded generative AI across tools such as Word, Excel, PowerPoint and Teams.
But as both companies evolved, so too has the nature of their collaboration.
Microsoft’s OpenAI Partnership
Originally made in 2019 and strengthened with the 2023 investment, the partnership was built on mutual benefit. OpenAI’s models ran on Microsoft’s Azure cloud infrastructure, while Microsoft secured access to the AI technology behind Copilot, Bing AI and Microsoft 365. The alignment gave Microsoft a dominant position in workplace AI.
But by early 2025, signs of strain had emerged. OpenAI was scaling fast and exploring broader opportunities. Meanwhile, Microsoft was growing increasingly focused on reducing dependencies and gaining greater control over its AI roadmap. The result: rising strategic, financial and technical tension.
Then came the rumors. OpenAI was reportedly considering stepping back from the partnership. The implications were serious. Microsoft’s Copilot — used daily by millions — relied on OpenAI’s technology. Licensing agreements, once assumed to last through 2030, suddenly looked uncertain. And Azure’s AI services, widely adopted by enterprise customers, could face major disruption.
Behind the scenes, Microsoft had already begun preparing. It had launched internal efforts to build its own large language models and started testing systems from other AI vendors. Some of these models had begun to rival OpenAI's on key benchmarks. Engineers were readying Copilot for a quiet transition, and teams across the company were bracing for changes in user experience, compatibility and performance.
OpenAI, for its part, is still dependent on Azure for hardware resources, and now faces the prospect of losing one of its biggest channels for global reach and enterprise adoption.
For Microsoft, a split comes with both risk and upside. Moving away from OpenAI means more technical independence, reduced long-term costs and the ability to directly compete in a rapidly evolving market.
What Microsoft Could Lose
OpenAI’s technology is important to Microsoft right now, said Wipro’s Director of Enterprise Technology Chintan Mota, who is focused on automation, innovation and digital transformation.
Many of the “smart” features in Microsoft’s tools come from OpenAI’s models like GPT-4. Without OpenAI, Microsoft’s AI would not feel as advanced or helpful and would likely take a hit when it comes to credibility and trust.
Nevertheless, there is a notable difference, Mota added. ChatGPT feels more flexible and creative. Users can ask it anything and it will try to help, whereas Microsoft Copilot is more focused — it helps with specific tasks such as writing email messages, summarizing or working inside Word and Excel.
In other words, while Copilot is good for business tasks, ChatGPT is better for exploring ideas, Mota said. When it comes to trust, ChatGPT and OpenAI have more credibility in the industry compared with Microsoft's models.
“If OpenAI’s models were removed, people would notice right away,” Mota said. “The writing help in Word and the meeting summaries in Teams would not be as intuitive. Also, developers using Azure would lose easy access to powerful AI models they use today.”
However, for the moment any suggestion of Microsoft moving away is speculative, Mota added. Microsoft’s own AI is good for simple, structured tasks. But it is not as good at open-ended conversations, creative work or complex thinking. Microsoft would have to build stronger models on its own to match OpenAI's models capabilities.
Microsoft's Build or Buy Quandary
The problem that Microsoft is currently facing is historic, said Paul McDonagh-Smith, senior lecturer in information technology at MIT Sloan School of Management. To make or to buy? That was Microsoft’s AI question, he explained. In choosing to piggyback upon OpenAI´s models rather than build its own in-house, Microsoft could move quickly and secure an enterprise foothold.
At this point, though, Microsoft’s reliance on OpenAI is strategic dependence without full control. “Risks include model access risk, innovation lag, brand subordination and market power shifts if OpenAI continues to scale independently. Competitive advantage or Achilles´heel?” he said. “Time will tell.”
If OpenAI and Microsoft did separate, what would Microsoft’s AI landscape look like in a hundred days? McDonagh-Smith asked. While initially the prospects for Microsoft would not be great, that would change rapidly, he predicted.
“Microsoft would enter an emergency acceleration mode and deploy in-house models fast — it would be an AI ‘reboot´moment, resulting in increased AI ownership and reduced brand dependency on OpenAI,” McDonagh-Smith said. “Without OpenAI’s tech, Microsoft could design Copilot to reflect its unique strengths — deep Office integration, enterprise-grade security and customizability."
In this scenario, and to compete with ChatGPT for power users, Microsoft would have to make Copilot as open and feature-packed as OpenAI’s offerings. This would mean plugin and extension support, a rich developer ecosystem and advanced capabilities like multi-modal inputs or built-in code execution, McDonagh-Smith said.
Microsoft would need to stop lagging on model updates and give power users more control — it would have to break out of its enterprise comfort zone and embrace the fast-paced, open innovation that pulls power users to ChatGPT.
The Inevitable Future
And the future? Microsoft’s close alignment with OpenAI was a bold and calculated move, offering immediate benefits but also long-term strategic risks. McDonagh-Smith viewed this as a “super savvy shortcut” for now, but cautioned that it has an expiration date. If OpenAI continues to outpace the field with superior AI products while remaining independent, Microsoft could look like it is riding a partner’s coattails. The risk is clear: customers may bypass Microsoft altogether and go straight to OpenAI.
That concern is already reflected in the design of Microsoft’s AI offerings., Microsoft’s Copilot delivers a polished, unified experience powered exclusively by OpenAI’s models, said Dee Anthony, director at global technology research and advisory firm ISG. However, this seamlessness comes at the cost of flexibility. “You’re tied to one AI,” he said.
In contrast, Google is embracing an open ecosystem approach, allowing different AI models like Claude and Gemini to coexist within Workspace. While this strategy prioritizes choice and customization, it also presents integration challenges. Achieving the same level of polish as Copilot will be critical. If Google can pull it off, McDonagh-Smith’s prediction may come true sooner rather than later.
Conference
Sep
16
HR Tech Conference Las Vegas 2025
Register
Conference
Oct
27
Gartner HR Symposium/Xpo Orlando 2025
Register
Microsoft’s dependency on one provider could prompt a strategic pivot — possibly within the next year — as it seeks to maintain its competitive edge in an increasingly open and fast-evolving AI landscape.
Editor's Note: Read more happenings in the LLM world below:
- The Hidden Cracks: How AI Integration Is Testing Workplace Resilience — AI effectiveness depends on integration with business systems. But the more embedded AI becomes, the more it exposes an organization to potential problems.
- The Fake Startup That Exposed the Real Limits of Autonomous Workers — The Carnegie Mellon study confirmed what many suspected: in spite of the promises of world-dominating results, agentic AI isn’t ready to run the ship.
- Box Is Building Its AI Vision, One LLM Integration at a Time — Box has been incorporating new LLMs as fast as vendors release them. A look at how this fits into the company's vision of the AI-first enterprise.