Open AI's tricky path to corporate sales

OpenAI is facing increased competition in selling its generative AI to businesses. Some customers are beginning to buy OpenAI’s software through Microsoft because they can bundle the purchase with other products. Others are finding open-source models cheaper for basic tasks.

What's going on here?

OpenAI’s competition in the enterprise market is increasing day-by-day.

What does this mean?

Open AI’s early customers like Salesforce and Wix now use its models less. Salesforce’s Senior VP of AI, Jayesh Govindarajan said “We’re at the very beginning of this cost-reduction exercise in AI.” Salesforce is adding its own models and other open-source models in the mix.

Wix is also trying out Google’s Vertex AI and more Open AI but through Azure. Morgan Stanley, one of OpenAI's flagship customers, also began buying some models via Microsoft Azure recently. That’s a problem for OpenAI, as Microsoft keeps much of the OpenAI-related revenue it generates.

Smaller tools like Summarize.tech are finding open-source models cheaper for basic tasks and switching from OpenAI's GPT-3.5 to Mistral 7B. However, OpenAI is also gaining some new enterprise customers like the mutual fund giant Fidelity Investments, which recently started using Azure OpenAI after being an AWS SageMaker customer.

Why you should care?

More competition means enterprises have options beyond OpenAI now. They can mix and match providers to optimize costs.

Because of their weird partnership, dealing with Microsoft is tricky for OpenAI. OpenAI also has a nascent enterprise sales team compared to Microsoft's established presence.

The bull case for Open AI stands if it proves itself as an enterprise seller and gets more wins like Fidelity under its belt.