In Microsoft news, the tech giant announced this week that it will be laying off 3% of its workforce. On Tuesday, the company confirmed it would cut around 6,000 roles across the organisation. In a statement, Microsoft said it “continues to implement organisational changes to best position the company for success.”
Bloomberg first reported that the layoffs have disproportionately affected engineers and product managers, who made up 30% of the total reductions in Washington. While the company stated that the move was intended to remove layers of management, time will tell what this actually means for Microsoft’s strategy and AI approach moving forward.
In addition to Microsoft’s layoffs, the tech giant and OpenAI are currently renegotiating their partnership, as OpenAI’s decision to restructure its for-profit business as a public benefit corporation has important implications for Microsoft
Microsoft is OpenAI’s biggest investor and has invested over $13 billion in the company since 2019, primarily through a capped-profit structure. In return, it has been entitled to a share of OpenAI’s profits, reportedly capped at around 100x return. It was OpenAI’s exclusive cloud provider until earlier this year, and now has first choice over whether to host OpenAI’s AI workloads in the cloud. It has embedded OpenAI’s models into its products and gets early access to OpenAI’s models. To date, the partnership has given Microsoft a strategic and commercial edge in AI and in return OpenAI has got funding, scale and global reach - though arguably the latter two were already a given due to the overwhelming interest in artificial intelligence - and still retains autonomy.
The restructuring of OpenAI’s for-profit business as a public benefit corporation, with the non-profit as its largest shareholder, can be seen as an attempt to keep everyone happy. It still allows OpenAI to offer investors equity in the business and an IPO will become possible in the future, while not abandoning its foundational mission to “ensure that artificial general intelligence (AGI) benefits all of humanity”. As OpenAI’s biggest investor, Microsoft must approve any reorganisation and be happy with the amount of equity it holds in the reshaped business. The FT reports that MS and OpenAI are revising the terms of a wider contract, drafted at the time of Microsoft’s first investment. According to the FT: “The contract currently runs to 2030 and covers what access Microsoft has to OpenAI’s intellectual property such as models and products, as well as a revenue share from product sales.”
But how do you redraw and renegotiate a $13 billion deal? The FT also reports that relations between the two companies have cooled and quotes an unnamed senior exec at MS as saying:
“The friction comes partly due to style. OpenAI says to Microsoft ‘Give us money and compute and stay out of the way: be happy to be on the ride with us.’ So naturally, this leads to tensions. To be honest, that is a bad partner attitude, it shows arrogance.” Watch this space.
