Copilot goes cheap as Microsoft phases out OpenAI and Anthropic models to cut costs
The business move
Microsoft is replacing the AI models behind Copilot in Office products like Excel and Outlook. Instead of relying on OpenAI and Anthropic’s external models, Microsoft is switching users over to its own proprietary MAI models. Tens of thousands of user queries per week already pass through these in-house models as part of this phased shift. Mustafa Suleyman, Microsoft’s AI chief, aims to ultimately remove costs linked to third-party AI models altogether.
Why it matters
This reflects Microsoft’s effort to cut AI expenses by internalizing model development and serving capacity. AI model usage is expensive at scale, especially with high volumes common in Copilot and Office AI features. By transitioning to its own models, Microsoft gains direct control over cost structures and performance trade-offs. However, this move could reduce the quality or responsiveness of Copilot because Microsoft may be prioritizing cheaper operation over model sophistication. It pressures AI service providers like OpenAI and Anthropic by reducing their enterprise revenue opportunities from Microsoft’s massive user base.
Who gains and who gets squeezed
Microsoft stands to gain tighter cost control and strategic independence in AI, making it less vulnerable to external vendors’ pricing and technical limits. For customers, this could lead to increased subscription pricing pressure without an obvious improvement in service quality. On the flip side, OpenAI and Anthropic lose a major client and source of recurring AI inference revenue. Builders and businesses relying on the highest-quality AI outputs will want to monitor whether Microsoft’s MAI models match or lag behind the established external models they replace.
What to watch next
Track user feedback on Copilot’s performance now that Microsoft’s MAI models are handling more requests. Any drop in accuracy, speed, or contextual understanding could influence enterprise satisfaction. Also, watch if Microsoft extends this approach to other AI-powered products or upsell tiers linked to external models. Finally, keep an eye on how OpenAI and Anthropic adjust their business strategies after losing Microsoft’s share and what new partnership models they pursue going forward.
AI Quick Briefs Editorial Desk
