All may not be well between Microsoft and one of its biggest partners — OpenAI. According to a report in Financial Times, the reason for apparent disagreement is OpenAI’s recent $50 billion partnership with ecommerce giant Amazon. What has reportedly not gone well with Microsoft is that among the several agreements signed between the two companies — Amazon and OpenAI — last month, there is one that makes Amazon Web Services (AWS) the exclusive third-party cloud provider for Frontier, which is OpenAI’s enterprise platform for building and running AI agents. When Microsoft first invested in OpenAI, the two companies locked in one rule above everything else: All access to OpenAI’s models must go through Microsoft’s Azure cloud. No exceptions. That deal made Azure the backbone of the AI revolution. This means that every company using ChatGPT’s API has to pay Microsoft for the privilege. The arrangement has been highly lucrative for Microsoft, with OpenAI’s products reportedly helping drive Azure revenues to record highs. Also, while Microsoft had been OpenAI’s exclusive cloud provider since investing $1 billion in the startup in 2019, the company gave up that right when it signed off on its restructuring in October. However, it retained a clause covering application programming interfaces (APIs), the connections developers and businesses use to access OpenAI’s models. The clause still requires all API calls to be routed through Azure. So, the friction between OpenAI and Microsoft centres on whether AWS can offer OpenAI’s new commercial product Frontier without violating the longstanding agreement that requires all access to OpenAI’s models to be routed through Microsoft’s Azure cloud platform, the FT report said, citing sources. All the three companies have released parallel statements describing OpenAI’s Frontier product, and on its part Microsoft asserts that nothing has changed from the October agreement and it remains the exclusive cloud provider for OpenAI APIs.
What Microsoft is telling Sam Altman and company
Microsoft executives dispute OpenAI and Amazon’s partnership. Their view is that the approach they are taking is just not feasible and would violate the spirit, if not the letter, of OpenAI-Microsoft agreement. According to the FT report, a person familiar with Microsoft’s position said, “We know our contract.” He added, “We will sue them if they breach it. If Amazon and OpenAI want to take a bet on the creativity of their contractual lawyers, I would back us, not them.” Microsoft said: “We are confident that OpenAI understands and respects the importance of living up to [its] legal obligation.”The report also claims that behind the scenes, the companies’ lawyers clashed for weeks over the scope of Amazon’s agreement and how it could be described..
What Amazon and OpenAI is ‘telling’ Microsoft
ChatGPT-maker OpenAI is reportedly of the opinion that its partnership with Amazon is compatible with its deal with Microsoft. As per the report, Amazon and OpenAI are building a system that works around the contract between OpenAI and Microsoft. OpenAI CEO Sam Altman is also if of the view, as per the report, that Microsoft is unlikely to pursue legal action and invite further scrutiny as the software giant is already facing regulatory probes in the the US, UK and EU into its alleged anti-competitive licensing practices with Azure.OpenAI refutes that its Amazon deal allows backdoor access to its stateless models. The start-up claims that it has the right to make new products with third parties so long as they do not cross the “red line” of being primarily offered as an API.To avoid making Microsoft angry, Amazon has reportedly given employees strict guidance on how to describe the SRE, according to an internal memo seen by the FT and first reported by Business Insider. AWS employees may tell customers that SRE is “powered by” or “enabled by” or “integrates with” OpenAI, but are banned from saying that SRE “enables access” or “calls on” OpenAI’s ChatGPT.
