The price war among AI giants intensifies: OpenAI starts discounting ChatGPT Enterprise Edition, Microsoft finds itself in a passive position

As competition heats up in the enterprise AI market, OpenAI has begun offering discounts of up to 20% on ChatGPT Enterprise subscriptions to corporate clients, directly impacting the sales business of its partner Microsoft and potentially exacerbating the already tense cooperative relationship between the two.

On Wednesday, media outlets cited sources familiar with the matter and an OpenAI spokesperson stating that corporate clients can enjoy discounts of 10%-20% on ChatGPT Enterprise subscriptions as long as they sign multi-year contracts and agree to purchase other OpenAI products, such as customized "deep research" AI, or Codex for automatic debugging or code rewriting. Additionally, clients can also receive discounts if they commit to spending a certain amount on OpenAI's API calls.

An OpenAI spokesperson indicated that the company has officially reduced enterprise subscription prices in the past two weeks, provided that clients are willing to invest further in its latest "premium features and models."

Why are Microsoft salespeople in a dilemma?

Microsoft and OpenAI are both partners and competitors, and OpenAI's discounts put Microsoft salespeople in a difficult position because Microsoft's Copilot chatbot is a direct competitor to ChatGPT Enterprise, with similar pricing starting at $30 per user per month. Microsoft typically does not offer such large discounts, which could lead some clients to switch to OpenAI.

In recent weeks, some clients have asked Microsoft if it can provide the same discounts as OpenAI. According to two Microsoft employees, they have lost some deals due to not being authorized to match OpenAI's pricing.

However, this discount strategy has also made the relationship between Microsoft and OpenAI more strained. The two companies are currently engaged in tense negotiations regarding the restructuring plan for OpenAI's profit-making division, and this competition undoubtedly adds another variable to their already complex cooperative relationship.

Why is OpenAI offering discounts to enterprises?

In the consumer market, OpenAI has achieved remarkable growth with its ChatGPT subscription service. However, in the enterprise market, it must contend with a group of clients that have stronger bargaining power and more complex purchasing decisions. Therefore, OpenAI's decision to offer discounts in the enterprise market may have multiple considerations behind it.

First, analysis indicates that offering discounts to enterprises suggests that OpenAI's bargaining power in the B2B market is not as strong as in the B2C market, with its main revenue still coming from individual subscriptions. It also reflects the "room for profit" brought about by declining model costs; over the past year, major model providers like OpenAI and Anthropic have reduced API model prices by more than 90%.

OpenAI's Chief Business Officer Giancarlo Lionetti stated that OpenAI has been continuously improving model efficiency and is willing to "pass on the savings" from enhanced technical efficiency to customers.

Second, OpenAI's discounts can be seen as a "return gift" to Microsoft. In 2023, Microsoft directed some of OpenAI's business to its own platform by offering discounts to clients (including those using OpenAI models). Now, OpenAI's discounts to clients can also be considered a "reciprocal gesture."Thirdly, more and more companies are now frantically using AI to reduce costs and increase efficiency, even partially replacing employees. Although the current revenue share from the enterprise market is not large, with the enterprise version generating $100 million in revenue last year, accounting for only 3%-4% of ChatGPT's total revenue, OpenAI has high hopes for it, viewing it as a new growth engine.

OpenAI's goal is to achieve $400 million in revenue and 2 million users for the ChatGPT enterprise version by 2025. By 2026, it aims to reach $1 billion in revenue and 4 million users. By 2030, revenue is expected to reach $6.2 billion, with users reaching 16 million.

The ChatGPT team version subscription generated approximately $200 million in revenue last year, with 1 million subscribers. OpenAI expects the team version to reach 4 million subscribers and $800 million in revenue by the end of this year. By 2030, revenue is projected to reach $8.5 billion, with users reaching 22 million.

This means that by 2030, the combined business of the ChatGPT team version and enterprise version will have a total of 38 million subscribers and generate $14.7 billion in revenue, accounting for one-quarter of the overall ChatGPT revenue.

How do enterprise customers view OpenAI vs Microsoft?

As competition in the enterprise AI market heats up, OpenAI is offering discounts of up to 20% to large customers, putting pressure on Microsoft's sales. Multiple cases show that customers are choosing to bypass Microsoft and directly purchase models from OpenAI due to lower prices and more direct engineering support offered by OpenAI.

Media reports indicate that a software company that previously purchased OpenAI models through Microsoft is negotiating a new agreement to spend $8 million over the next three years to buy these models. However, this company informed Microsoft that OpenAI offered a 20% discount on the same models, reducing the three-year cost by about $1 million. Microsoft's sales personnel inquired with the company's finance department about matching this discount but did not receive approval. Therefore, the company decided to purchase the models through OpenAI.

The media also reported that another private equity firm is considering purchasing 3,000 Microsoft 365 Copilot seats, originally priced over $1 million per year, but OpenAI offered a 20% discount on an equivalent number of ChatGPT Enterprise seats, bringing the quote down to about $800,000. Since Microsoft was also unable to match this discount, the company is still weighing which supplier to choose.

A Microsoft spokesperson stated that its pricing is "competitive," sometimes even exceeding OpenAI's discounts, and that Azure has advantages in security and compliance. However, insiders revealed that Microsoft typically offers only 5%-10% discounts, even to large customers, which is far less than OpenAI's recent concessions.

OpenAI's Chief Business Officer stated that large enterprises choose OpenAI not only for the price but also because they can "see the future development roadmap of the product" and have priority access to new features, such as Codex.

Customers like Notion and Salesforce choose OpenAI over Microsoft partly because they can receive support from OpenAI engineers. In contrast, companies like Intuit and Fidelity continue to stay within the Microsoft ecosystem due to existing Microsoft cloud contractsMicrosoft typically offers discounts to its largest customers, especially when these customers make bulk purchases of software and cloud services and commit to spending at least several million dollars annually. This type of deal is known as a consumption agreement. According to Microsoft employees and executives from large corporate clients, even so, Microsoft usually only provides discounts of 5% to 10%