Microsoft's lagging internal AI efforts sparked OpenAI investment, internal email reveals

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Key notes

  • The Microsoft-OpenAI partnership is still evolving and has tremendous potential for further innovation.
  • We can expect to see even more sophisticated AI applications emerge, reshaping several industries and the way we work and interact with technology.
Microsoft OpenAI Service OpenAI Whisper

Microsoft was scrambling to catch up to Google’s dominance in AI, according to an internal email, which led to its major investment in OpenAI. This email exchange sheds light on Microsoft CEO and CTO’s sense of urgency and their awareness that Microsoft was falling behind in AI development.

“Very, very worried.”

In a 2019 email to CEO Satya Nadella and co-founder Bill Gates, Microsoft CTO Kevin Scott expressed deep concern about the growing gap between Google’s AI capabilities and their own. The email, released as part of the Justice Department’s antitrust case, shows that Microsoft executives were worried about the impact of Google’s AI-powered search improvements on their own products.

Playing catch-up.

“We are several years behind the competition in terms of the scale of machine learning,” Scott admitted, with portions of his email redacted for confidentiality. He also confessed to previously underestimating competitors’ AI efforts. Nadella, echoing Scott’s fears, forwarded the email to CFO Amy Hood, adding, “This explains why I want us to do this.”

Turns out, just replicating BERT-large wasn’t easy to do for us. Even though we had the template
for the model, it took us ~6 months to get the model trained because our infrastructure wasn’t up to
the task. Google had BERT for at least six months prior to that, so in the time that it took us to hack
together the capability to train a 340M parameter model, they had a year to figure out how to get it
into production and to move on to larger scale, more interesting models. We are already seeing the
results of that work in our competitive analysis of their products. One of the Q&A competitive metrics
that we watch just jumped by 10 percentage points on Google Search because of BERT-like models.
Their auto-complete in Gmail, which is especially useful in the mobile app, is getting scarily level good. -Kevin Scott, CTO at Microsoft.

Billions poured into OpenAI

Microsoft and OpenAI first formed their partnership in 2019, with Microsoft investing $1 billion in the AI research company. The deal was founded on a shared vision of developing ethical and trustworthy AI. The partnership has deepened over the years, with Microsoft pouring significantly more capital into OpenAI. The total investment is estimated to be over $13 billion.

The stakes are high.

The OpenAI deal and subsequent partnerships done by Microsoft indicates their aggressive pivot toward AI. The company sees the technology as critical to competing with Google and maintaining its foothold in the tech industry.