The ouster of Sam Altman, OpenAI’s CEO and the face of the AI boom, is unlikely to have a long-term impact on the company’s existing business partnerships with Indian IT services companies and the pace of generative AI innovations, said industry experts.
Over the past year, even as demand continued to slow down in a tough business environment, IT companies banked on customers’ generative AI curiosity to win deals, leading to billions of dollars being invested to develop industry-specific use cases of the technology and upskilling employees.
Altman’s abrupt firing on November 17, shook the technology world as it comes at a time when competition from big tech rivals Google, IBM and NVIDIA is intensifying.
In the short run, said Peter Bendor-Samuel, founder of management consulting firm Everest Group, Altman’s exit is unlikely to affect OpenAI’s partnerships and commercial agreements. But in the long run, it may affect the company’s ability to raise capital, which could make it a less attractive partner, he told Moneycontrol.
OpenAI, which started as a ‘non-profit’ organisation, later transitioned to a hybrid ‘capped-profit’ company, letting it raise funds externally, while ensuring that the original non-profit operation would still benefit. It has so far raised $10 billion from Microsoft at a valuation of almost $30 billion, as it invests in building computing capacity.
This structure, however, led to a lot of confusion reports suggest. OpenAI is structured in a way that the non-profit owns and controls a subsidiary that received funds from Microsoft, causing Altman to not have a say in the AI unicorn’s boardroom workings.
According to the company’s charter, its principal beneficiary is “humanity”, not investors.
Phil Fersht, CEO, HFS Research, a global business research consultancy, expects confusion and some chaos in the short term. The whole episode, he said, smells like a “coup d'état, with Altman becoming too powerful and not pandering to the OpenAI board”.
“However, the AI revolution has so much momentum, with many enterprise clients seeking so much support and advice from leading services firms when it comes to AI, that services firms will work even harder with Altman’s successor to ensure continuity and progressive value as these technologies evolve and mature,” he told Moneycontrol.
IT services companies such as Accenture, Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro and Tech Mahindra have in recent times been in overdrive to build their AI capabilities and offerings.
Billions at stake
While not pertaining to OpenAI’s ChatGPT alone, generative AI’s current boom has seen billions being invested by IT companies to develop the tech with ChatGPT and other partners like Google. IT companies have already charted their next few years of business growth around AI’s rapid evolution.
As of Q2FY24, TCS already has more than 250 generative AI opportunities in the pipeline and it has completed training over 100,000 employees in this field.
Infosys had over 50 active generative AI projects in the pipeline. In fact, it announced three large deals in Q2: a $2-billion contract with an existing customer to provide AI and automation-led development and maintenance services over five years; a $1.5-billion deal with Liberty Global over five years; and an MoU that was signed for $1.5 billion, where the spend is over 15 years.
HCLTech, too, had earlier said that it has over 140 external and internal generative AI projects at various stages of maturity—from PoCs to implementation. The company will be training around 20,000 associates in generative AI skills and has set up three global labs.
Meanwhile, Wipro is investing $1 billion to strengthen its AI capabilities over the next three years. It will train 250,000 associates in required skills. Accenture is investing $3 billion to enhance data and AI capabilities in the next three years.
Internally, too, these companies have started seeing an increase of up to 30 percent in productivity by using generative AI for coding and several other functions.
But now, as OpenAI’s future remains uncertain, it’s going to be up to the partners or the IT services companies to “determine the level of risk / reward they want to be in with OpenAI or go with Sam’s new company,” said Ray Wang, CEO of Constellation Research, a technology advisory firm.
Queries sent to TCS, Infosys, HCLTech, Wipro, Tech Mahindra, Capgemini and LTIMindtree didn’t elicit any responses at the time of publishing. Any comments from the companies will be updated in this article later.
Beyond OpenAI
Also, analysts unanimously believed that while ChatGPT got the ball rolling for generative AI in November 2022, giving investor Microsoft a head start, the quick catchup by Google and other rivals have made the technology and its future prospects too big to fail or to be controlled by one company.
As Bendor-Samuel put it, “The cat is out of the bag, and the Gen AI race is on, without regard to what happens at open AI. There is so much investment in this area that even if Open AI stumbles the overall pace of innovation will continue unabated.”
Fersht added, “If OpenAI derails as a result of this, it will hinder innovation in the short term, but nothing is slowing the pace of innovation in AI, and we’ll see other entities emerging at the forefront of this rapidly evolving industry,” he added.
Security and governance concerns
Moreover, the biggest takeaway for enterprise customers right now from Altman’s exit will be to focus on improving and fixing security and governance loopholes amidst fast-paced innovation. This was one of the primary concerns of OpenAI’s board amid Altman’s aggressive push on releasing new features and innovations, as security may have taken a backseat.
“The balance between too much governance and not enough innovation was the challenge the board faced,” said Wang. “The big worries were ownership of training data, impact of untested models, unwanted bias detection. Google has been the most careful and the most innovative. Microsoft has been very careful and the most adaptive. OpenAI was the least careful and the fastest innovator.”
Sanchit Vir Gogia, founder and CEO of market intelligence firm Greyhound Research concurred, adding that the company had faced flak for issues around ethical use of data to train the model and, more importantly, the intellectual property and compliance issues that customers can face.
"This is because Microsoft, as a key investor, is already significantly using the technology in their products, and this commercialisation is not the agenda with which the company was founded,” he told Moneycontrol.
Fersht added that concerns surrounding trust, security and compliance are massive for enterprises when it comes to AI and are only just starting to exacerbate.
Manish Maheshwari, former Twitter India head and co-founder of Fanory.ai, a platform that leverages AI for creators, believes OpenAI's recent move to part ways with Altman signals a significant shift towards prioritising ethical AI development over immediate commercial benefits.
“At the heart of Silicon Valley's evolving ethos is a deep-seated tension between commercial success and ethical technology development…This decision, while bold, has left many in the tech industry both surprised and contemplative about the future direction of AI," he said.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
