The One Policy That Proves Microsoft is All In on AI

Mike Wolfe -

Companies make bold strategic decisions all the time.

But even the boldest of strategic decisions rarely threaten the existence of the company itself.  Microsoft, however, recently made one such move.  

Microsoft has been no stranger to bold moves under current CEO Satya Nadella.  The company bet big on the cloud with its Azure platform.  And the company is betting big on AI with its investment in OpenAI and its frenzied release of AI "copilots" for absolutely everything (well almost).

But Microsoft dwarfs all those other bets with one single word:

INDEMNIFICATION

On September 7, 2023, Microsoft first announced it would provide legal defense for its enterprise customers using Microsoft AI copilots, so long as they follow certain guidelines:

...Microsoft is announcing our new Copilot Copyright Commitment. As customers ask whether they can use Microsoft’s Copilot services and the output they generate without worrying about copyright claims, we are providing a straightforward answer: yes, you can, and if you are challenged on copyright grounds, we will assume responsibility for the potential legal risks involved.

A few months later, Microsoft extended that protection to include the Azure OpenAI Service:

Microsoft has set the standard with services and tools like Azure AI Content Safety, the Responsible AI Dashboard, model monitoring, and our industry-leading commitment to defend and indemnify commercial customers from lawsuits for copyright infringement.

Today, we are announcing the expansion of the Copilot Copyright Commitment, now called Customer Copyright Commitment (CCC), to customers using Azure OpenAI Service. As more customers build with generative AI inside their organizations, they are inspired by the potential of this technology and are eager to commercialize it externally.

By extending the CCC to Azure OpenAI Service, Microsoft is broadening our commitment to defend our commercial customers and pay for any adverse judgments if they are sued for copyright infringement for using the outputs generated by Azure OpenAI Service. This benefit will be available starting December 1, 2023.

Opportunity Costs vs. Actual Costs

Opportunity cost is the main downside to most strategic bets.

By focusing on the cloud and AI, Microsoft had to move resources away from earlier cash cows including the Windows operating system and the Office suite.  That bet appears to have been a good one.  Even if it weren't, though, the most likely outcome would have been a less profitable and less valuable company.  But still a company.  

As the old saying goes, "You never go broke making a profit."

To which Mr. Opportunity Cost responds, "Sure, but if not for me you could be making an even BIGGER profit!"

At the end of the day, though, most companies as big as Microsoft don't collapse based on opportunity costs alone (put your hand down, BlackBerry, no one was talking to you).

Sinking the Ships

In 1519, Spanish conquistador Hernán Cortés ordered his men to sink the boats they sailed in on so that they would have no means of retreat.

In 2023, Satya Nadella made a similarly audacious move with the Copilot Copyright Commitment (CCC).

In both cases, the leaders' decisions made clear to their subordinates that failure was not an option.  For Cortés's soldiers, they had no choice but to fight to the death.  For Nadella's developers (and legal team), if Microsoft loses the AI copyright fight in court, they could be stuck holding a bill that not even Microsoft has the funds to cover.

More than Just a Suicide Pact

Nadella's bet has additional strategic value.

For large enterprises, the potential liability exposure of AI was likely a key roadblock to adoption.  By assuming that risk, Microsoft makes it much easier for its enterprise customers to get to "Yes" when evaluating AI.

While the Copyright Commitment makes life hard on Microsoft's legal team, the Copilot enterprise sales team is jumping for joy.

Satya Nadella: The Man in the Arena

Whether this latest bet pays off, only time will tell.  But if Microsoft ultimately fails, it certainly won't be through lack of commitment.

As Teddy Roosevelt famously said,

"It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat."