Microsoft replaces OpenAI models, scraps SMS logins for AI era
Microsoft is stripping OpenAI technology from its core apps to cut compute costs and killing SMS logins to combat AI-driven phishing, signalling a fundamental shift in how Europe's businesses will secure and run their software.
Microsoft is pulling OpenAI’s technology out of its flagship applications to slash computing costs. At the same time, it is phasing out text-message logins to counter a surge in AI-powered phishing. The twin moves mark a strategic shift for the software giant as it wrestles with the new technology's dual nature.
The company is replacing OpenAI’s image-generating models in PowerPoint and Bing with its own in-house technology, known as MAI. “It’s faster, it’s cheaper, it’s higher quality, it drives better retention,” said Mustafa Suleyman, Microsoft’s AI chief. The primary motivation is financial, as running MAI models in PowerPoint is roughly 85% cheaper than using OpenAI, despite the partnership granting Microsoft free access to those external models.
Microsoft has already begun swapping out OpenAI and Anthropic text models in its office suite, claiming its own tools now match GPT-5.6 on standard Excel tasks. MAI models currently run in more than half of all Microsoft products. The technology is already reaching European corporate customers, with Britain’s EasyJet and T-Mobile deploying Microsoft’s voice models in their call centres.
The end of the text-message login
On the defensive side, Microsoft will make passkeys the default sign-in method for its Entra ID business identity service starting 1 September. By 1 February 2027, the company will stop sending SMS and voice-call codes entirely. Windows Hello and FIDO2 security keys will remain in use.
The shift is a direct response to the threat posed by generative AI. “The AI era demands stronger, phishing-resistant authentication,” Microsoft said. The company’s data reveals the scale of the problem: AI-assisted phishing emails achieve a 54% click-through rate, compared to just 12% for traditional scams.
Because passkeys require possession of the user's physical device, they neutralize the risk of a stolen code. For investors and corporate IT buyers, the significance is clear. AI is simultaneously becoming cheaper for Microsoft to operate and more dangerous for its customers to defend against.
Suleyman was hired specifically to loosen the grip of a partnership into which Microsoft has poured more than $100 billion. Every application shifted in-house chips away at OpenAI's status. The AI startup is gradually being transformed from a strategic partner into just another vendor.
