Editor's note: Sam Altman reached an "agreement in principle" with OpenAI to return as CEO to a revamped board. The subhead of this article was updated to reflect the change. You can read our ongoing coverage here.
As the OpenAI saga unfolds, enterprise technology leaders are getting a close-up view of what happens when key departures and threats of mass resignation disrupt a major vendor’s operations.
The weekend’s turmoil highlights the importance for CIOs and other enterprise stakeholders to have visibility into key vendors’ governance structure and business goals.
Vendors are subject to disruptions from a business perspective, whether that’s layoffs or executive departures, but oftentimes there’s not as much of a short-term impact, according to Jason Wong, distinguished VP analyst at Gartner.
“The OpenAI situation is very different because you have a mass percentage of employees signing a letter threatening to resign if action isn’t taken, so that has to be taken seriously,” Wong said.
Disruptions of that magnitude may impact the company’s roadmap, customer support and operations related to running its services and technology, Wong said.
With OpenAI’s stability in question, enterprise tech leaders have a central role in helping their businesses navigate the terrain.
Enterprises have hefty investments and roadmap plans intertwined with OpenAI. While initially hailed as early adopters, these companies are now suddenly in the throws of trying to assess viability.
For those accessing OpenAI's tools through Microsoft, CEO Satya Nadella told technology journalist Kara Swisher on a podcast Tuesday, “If tomorrow OpenAI disappeared, I don’t want any customer of ours to be worried about it quite honestly because we have all the rights to continue the innovation, not just to serve the product, but we can .. do what we were doing in our partnership ourselves."
"We have the compute, we have the data, we have everything,” Nadella said.
Yet, companies are worried and monitoring the situation closely.
“A lot of the big players are taking two tracks,” said Scott Bickley, practice lead and principal research director at Info-Tech Research Group. “First is, ‘let’s start talking to the other vendors with large language models and see what that contract style looks like’ … and they are starting that now.”
The other track is raising questions to OpenAI and Microsoft about what the future holds. But enterprises are "not going to get any answers right now … until [OpenAI] cleans up this debacle in the background,” Bickley said.
Thinking through vendor management
OpenAI presents a rare hiccup for vendor management strategies.
While a top executive departure would be grounds for some questioning by enterprise customers, the startup has an unconventional governance structure that presents even more confusion, Bickley said.
Based on the information provided as of Tuesday, it appears the nonprofit board and its capped for-profit commercial business were not aligned in its vision.
“This is a very unique corporate structure that was designed purposefully to avoid antitrust issues and to be able to meet the mission of the company… this is probably not something that you would generally have thought of in your due diligence process,” Bickley said.
Vendor management is a key part of ensuring plans are smoothly executed while allowing organizations to pivot if needed. Vendor management teams put the extra focus needed on assessing all the risks that go into the procurement process.
“Everyone’s looking at security risks, but all the other risks, unless you have a function looking at that, they’re not seeing this coming,” Bickley said.
Adding some sort of designated vendor management team is becoming more popular among IT departments, according to Info-Tech Research Group’s findings, though many still lack the resources.
To ace vendor management, CIOs need to make sure they understand the contract, capabilities, use cases, future goals and product roadmaps of the vendors they select. Or tech leaders need to appoint a few people or a team to dig into the specifics for them. Either way, visibility matters.
When new leadership comes on board at a vendor, priorities and product roadmaps can shift. That can cause a fundamental change for enterprises with contracts based on future expectations of features or solutions in development, according to Bickley. It’s a concern for enterprise customers.
“I think that’s where they should be contacting OpenAI and starting to raise those questions,” Bickley said.
Protecting investments in emerging technology
Technology leaders know there are risks with going all-in on a single vendor, but many enterprises built their generative AI strategies around a sole provider through sizeable investments and wide scale implementation plans.
Vendor lock-in is a problem that is only magnified when assessing emerging technology solutions.
“The impact of OpenAI kind of self-imploding a little bit is it makes people pause and think, ‘Are we moving too fast ourselves?’” Wong said. “Even if the hyperscalers, Google, AWS, Microsoft, offer these technologies, how stable is it for businesses to depend on for the next five years or even the next 10 years?”
While enterprises already intertwined in a longer contract with OpenAI may stay the course for now, businesses beginning the journey need to consider what happens if things go sour before signing on the dotted line.
“We have advised clients to start smaller as opposed to getting shorter contract terms because then you can begin to add on once you understand the value and risks,” Wong said. Vendors don’t typically react kindly to shorter terms, which could lead to economic impacts.
“The vendors will try to lock in higher prices so you don’t get the discounts that you would normally get from a longer contract,” Wong said.