OpenAI mess exposes the dangers of vendor lock-in for startups

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If you looked at OpenAI prior to Friday afternoon, it had everything an enterprise buyer (and, for that matter, an investor) could possibly want in a startup: an absolutely killer product in ChatGPT, a rock star CEO and huge potential future revenue.

It looked as stable as any startup could possibly be — until it wasn’t. While the situation remains fluid, it appears that CEO Sam Altman is prepared to drive his tour bus to Microsoft, taking co-founder Greg Brockman and most of his employees with him.

When the shit hit the fan Friday, suddenly all the dangers that vendor lock-in represents were on display, and when the soap opera spilled into the weekend, startups who had invested heavily in OpenAI tech had to wonder how this was going to play out.

Vendor lock-in has been a problem for as long as there have been enterprise buyers. While there are plenty of large language models in the market from a variety of vendors, OpenAI’s GPT 3.5 and GPT 4 seemed to stand above the rest.

Many companies I’ve spoken with have stressed that even though OpenAI appeared to be the market leader (with help from Microsoft’s significant investment in the company), there was a general feeling that the current AI wave is still very early, and that it pays to be flexible when choosing a model.

The companies that chose a flexible approach over depending on a single AI model vendor must be feeling pretty good today. If there is any object lesson to be learned from all this, even as the drama continues to play out in real time, it’s that it’s never, ever a good idea to go with a single vendor.

Founders proceed cautiously

Founders who put all of their eggs in the OpenAI basket now find themselves suddenly in a very uncomfortable situation, as the uncertainty around OpenAI continues to swirl. One startup founder, who chose to speak on background so that they could be candid, says their company was just about to sign a big contract with OpenAI, and this situation has left them in limbo.

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