Just a decade ago, the world's biggest high-tech beast was a relatively small minnow. Microsoft had become notorious for disappointing product launches, stagnant innovation, and losing top talent. The first true software giants were becoming giant technology dinosaurs.
Fast forward to 2024 and Microsoft will be the most valuable business on the planet. Under the leadership of CEO Satya Nadella, the stock price soared more than 1,000% in his 10 years. In January, the company's market capitalization reached $3 trillion, more than the entire GDP of France.
At the heart of the comeback is artificial intelligence. Microsoft has built AI across its Azure cloud computing platform, Office productivity suite, and Bing search engine. The Redmond giant has become a world leader in AI after missing the mobile and social media boom.
The person behind the turnaround is Sofia Verastegui, one of the star speakers at this June's TNW conference. Velastegui joined Microsoft in 2017 as general manager of AI products and search. Six months later, Business Insider named her one of the most powerful female engineers in the technology industry.
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At the time, Nadella's plans were just beginning to take shape.
“Microsoft was a software company, not an AI company. But if you talk about Microsoft now, many people will say it's an AI company. ” Verastegui, currently chief product officer at auto giant Aptiv, told TNW.
“How did they do that? What did they do? They invested in AI, they brought it into their features and products, whether it was software development or Office. .”
Verastegui played an increasing role in that injection. After being promoted to her chief AI officer in the Business Applications division, she became part of the core team that considered Microsoft's vaunted new investment, her OpenAI.
intergenerational relationships
Microsoft has a long history in AI. The company's research division has been exploring this area since Bill Gates launched the center in 1991, but the experiments have not resulted in any popular products. From the reviled Clippy to the quivering Cortana, Microsoft's AI apps have rarely captivated consumers.
Nadella quickly sought to change that. His first big move after being named CEO in 2014 was the full implementation of chatbots. This change was not an immediate victory. An early bot called Tay Hitler loving sex pest.
Despite the controversy, the plan went ahead.
“As an industry, we are on the cusp of a new frontier that combines the power of human natural language with advanced machine intelligence,” Nadella said after Tay's meltdown.
As a company, Microsoft explored its frontiers beyond its walls. The search led the company to his OpenAI.
Founded in 2015, OpenAI had a bold mission: to build artificial intelligence that would “benefit all of humanity.” But that ambition was consuming enormous resources.
In 2017, the hot startup spent an estimated $7.9 million on cloud computing. This represents one-fourth of the functional expenses. This led the young candidate to partner with the aging tech giant Microsoft.
The software giant announced a partnership with OpenAI the following year. Under the terms of the agreement, OpenAI: use Microsoft's Azure cloud platform for research and development.
By 2019, Microsoft became AI Lab's “exclusive” cloud computing provider.Following new $1 billion investment in startup, Redmond giant has become a preferred partner for commercialization of OpenAI.
Commercialization of OpenAI
Microsoft quickly integrated OpenAI Large Language Models (LLM) into its Azure cloud services. Customers use the software for a variety of app features, from chatbots and content generation to translation and personalized marketing.
The service grew rapidly. In the second quarter of this year, Microsoft reported that Azure OpenAI users increased by 50% over the past 12 months. More than 53,000 customers currently use the service, Nadella said. “More than half” of the Fortune 500.
Azure's plans reflect a broader move by Microsoft. According to Velastegui, his AI strategy for the company was focused on delivering a powerful product.a Recent McKinsey report We've found this approach to be common among successful AI adopters.
“They're not just focused on efficiency and operations, they're developing new products and features and selling them as part of their business or offering them as a service.” Velastegui says Mr.
Azure is now the world's fastest growing cloud computing platform, dramatically closing the gap with long-term leader Amazon Web Services. OpenAI played a key role in the resurgence.
The GPT giant gives Microsoft “a huge competitive advantage over Google and Amazon,” said Barclays equity analyst Raimo Renshaw.
“Historically, if you were a cool startup doing something great, Microsoft wasn't your first choice,” Renshaw said. Said The Associated Press reported in February. “In other words, the fact is that [Nadella] Committing OpenAI to Azure was an amazing feat. ”
Azure is just the first collaboration between the two. OpenAI's models quickly spread across Microsoft's product portfolio.
Microsoft enters the LLM era
OpenAI had a breakthrough moment 2020. That June, The startup announced GPT-3, a powerful new LLM that sparked today's AI explosion. This architecture laid the foundation for his ChatGPT.
The New York Times described GPT-3's ability to generate prose, poetry, and ciphers as “amazing,” “creepy,” “humble,” and “more than a little horrifying.” Wired said the model is “causing chills across Silicon Valley.”
Microsoft was clearly impressed. In September, the software giant signed a new agreement with OpenAI that provides an exclusive license to GPT-3.
Mr. Velastegui led Microsoft's exploration of potential use cases for this model, from search and business applications to low-code development platforms.
Applications quickly expanded across the company's products. When the World Economic Forum opened in Davos last year, Nadella said Microsoft planned to introduce “tools like ChatGPT into all of our products.” But integration required strong guardrails.
“ChatGPT is interesting, but the source doesn't work…I get into this black box and I can't understand why it works the way it does,” Velastgui says.
What do we offer? she Although Microsoft calls it “authoritative information,” Microsoft has added a reference to the LLM output. Annotations are links to sources.
AI risks and benefits
Additional safety measures were taken to reduce the risk of harmful output.safety Filters, abuse monitoring, hallucination detection, and hostile attack simulation enhance your defenses.
“The reason Microsoft didn't leverage ChatGPT out of the box is because ChatGPT is trained on everything about the Internet: the good, the bad, the ugly, and the very ugly,” says Velastegui.
However, not all restrictions were successful. Microsoft engineers have warned that design tools powered by OpenAI are producing violent and sexual images. The engineer told the FTC that the output also includes “political bias, underage drinking and drug use, corporate trademark and copyright abuse, conspiracy theories, and religion, to name a few.” He said that he was
Tools that utilize ChatGPT are also producing disturbing output. Microsoft said this activity was limited to a small number of prompts that were used to circumvent security measures. The company also promised to look into the concerns. Meanwhile, the rollout of AI continues.
Bringing OpenAI to Microsoft
Microsoft has built OpenAI into a variety of apps. One is Copilot. It is a coding tool that has an increasing proportion of programming tasks.
The other is the improved Bing search engine.microsoft The company announced an AI-powered update in February 2023. A month later, OpenAI reportedly received $10 billion in new investment.
Nadella Bing's resurrection was heralded as a “day of new exploration.'' By adding OpenAI's models to its system, Microsoft hoped to create a conversational rival to the market-conquering Google.
It's still a distant goal, but early results showed promise. Within his six weeks since launch, Bing's page visits increased by 15.8%, while Google's page visits decreased by 1%. according to Analytical company Similarweb.
OpenAI has also entered Microsoft 365 Office apps. Word, Excel, PowerPoint, and Outlook now include an AI assistant called Copilot that generates new content and analysis in response to prompts.
The move highlighted Microsoft's competitive advantage. ““Can Google immediately work with OpenAI and bring it into its own products? The answer is no,” Verastegui says.
She added that Microsoft's rivals can still integrate OpenAI. Ready-made products. But it blunts the software advantage.
“That means our competitors can do the same,” Verastegui added. “If it's easy for you, it's easy for them.”
Microsoft's exclusive access quickly paid off. By the end of 2023, the company's stock will be 57% jump Compared to the previous year. Analysts attribute the rise to Microsoft's lead in generative AI.
Future relationship
Not everything added to OpenAI was a hit. Copilot's early customers criticized cost of service. Meanwhile, users of other Microsoft products are dissatisfied with the functionality of their coding tools. spread inexorably.
In the future, the relationship with OpenAI may loosen. Microsoft is also integrating services from rival companies, including Paris-based Mistral AI, which attracted a 15 million euro cash injection from the Windows maker last month.
Alongside external additions, Microsoft is also investing in homegrown foundation models. The company plans to eventually turn Azure into a “model garden.”
In the evolving world of AI, the future of Microsoft's relationship with OpenAI is uncertain. However, their marriage so far has been very successful. It also provides useful lessons on AI strategies. Verastagi says he has one thing that deserves special attention:
“Don’t solve these micro problems, problems, and goals,” she says. “Solve problems that make a difference in business.”
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