OpenAI $6.6B Funding, U.S. AI Fed Guidelines, and United Airlines' Data-Driven Recovery Strategies

[00:00:01] It's Thursday, October 3rd, 2024, and I'm Dave Sobel. Three things to know today. OpenAI raises $6.6 billion, securing a $4 billion credit line, as KPMG surveys show scaling AI remains a challenge.

[00:00:16] The White House sets AI acquisition guidelines focusing on risk management and vendor flexibility for U.S. agencies, and

[00:00:23] United Airlines used real-time data and cloud technology to outperform their competitors in their CrowdStrike Disruption Recovery. This is the Business of Tech.

[00:00:36] Well, the headline has to be that OpenAI has raised $6.6 billion in funding, valuing the company at $157 billion, with significant investments from Microsoft and NVIDIA.

[00:00:49] The funding will support AI research and infrastructure, despite their recent leadership changes.

[00:00:55] OpenAI has requested investors, including Thrive Capital and Tiger Global, to avoid funding five AI startups perceived as competitors, including Anthropik, XAI, and Safe Superintelligence, co-founded by OpenAI's Ilya Sutskovar.

[00:01:13] The request is not legally binding, though it may impact future fundraising efforts for both OpenAI and their listed competitors.

[00:01:23] OpenAI has also secured a $4 billion revolving credit line, increasing its total liquidity to over $10 billion.

[00:01:31] The credit line, which can be tapped over three years, will support research, infrastructure, and talent acquisition investments.

[00:01:38] OpenAI reported significant revenue growth, but anticipates a $5 billion loss this year due to high costs associated with GPU purchases.

[00:01:48] The company is undergoing leadership changes and considering restructuring to a for-profit model while maintaining its non-profit segment.

[00:01:56] The company also faces high operational costs and aims to generate over $11 billion in revenue next year, although profitability remains to be determined.

[00:02:06] In data released by Superside, ChatGPT remains the most searched AI tool in the U.S., with nearly 25 million monthly searches.

[00:02:16] It's followed by Google's Gemini with 1.5 million searches, which is a significant cap.

[00:02:23] Third place, Microsoft Copilot has 368,000 searches per month, with Perplexity and Brave Search rounding out the top five.

[00:02:32] A KPMG survey reveals that while nearly 75% of organizations gain value from AI, only one-third successfully scale it into production.

[00:02:42] Concerns about AI's complexity and its impact on jobs are prevalent among tech executives.

[00:02:48] KPMG emphasizes strong governance and ethical AI policies to manage emerging risks, particularly with generative AI.

[00:02:56] Despite challenges, 87% of respondents report increased profits from tech investments.

[00:03:02] Why do we care?

[00:03:04] Well, that's an astronomical price.

[00:03:06] But let me note how it does appear OpenAI is the market leader without any question.

[00:03:12] They are dominating the market.

[00:03:13] But this won't be a large collection of players.

[00:03:16] The fact that OpenAI raised a credit line in addition to this funding shows the intense capital requirements of leading in AI development,

[00:03:24] proving that any player in this space needs significant resources.

[00:03:28] Scaling AI to meet enterprise demand isn't cheap, and profitability remains uncertain.

[00:03:34] The KPMG survey is a sobering reminder that while AI adoption is widespread and moving,

[00:03:40] scaling it into production remains a significant hurdle.

[00:03:43] With only one-third of organizations successfully scaling AI,

[00:03:47] IT service providers need to focus on more than just selling AI-empowered tools,

[00:03:51] but on offering holistic, scalable solutions.

[00:03:53] And that will take time, which is the good news here.

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[00:04:51] The White House has issued new guidance for U.S. agencies on acquiring artificial intelligence tools,

[00:04:57] emphasizing risk management, competition, and information sharing.

[00:05:00] The memorandum outlines steps for responsible AI acquisition,

[00:05:05] requiring agencies to promote competition, prevent vendor lock-in, and share best practices.

[00:05:10] Agencies must comply with deadlines for identifying and managing AI-related contracts,

[00:05:16] with specific requirements for contracts impacting rights and safety.

[00:05:21] The guidance aims to help agencies effectively integrate AI while managing associated risks.

[00:05:26] Key points from the White House memo on AI acquisition.

[00:05:30] AI will be treated as IT acquisition.

[00:05:33] Agencies must promote competition and prevent vendor lock-in.

[00:05:37] Information sharing and best practices are required among agencies.

[00:05:41] A working group led by the federal CIO will inform future acquisition strategies.

[00:05:46] AI is defined as tools designed for AI purposes or integrated into other systems,

[00:05:52] and common commercial products with AI are excluded.

[00:05:56] And agencies should ask vendors to report AI uses and notify stakeholders of AI integration.

[00:06:02] Why do we care?

[00:06:04] Well, the U.S. government is using the power of the purse to set some basic guidelines.

[00:06:09] The requirements here precisely outline what service providers should be focused on with customers.

[00:06:14] Avoid lock-in, prioritize AI tools that integrate smoothly into various platforms,

[00:06:19] and can work across multiple environments.

[00:06:22] Proactively deploy risk management and ethical frameworks with customers,

[00:06:26] and prepare for more rigorous reporting and monitoring of AI's tool usage.

[00:06:32] And we care because why reinvent the wheel?

[00:06:35] It's here for reuse.

[00:06:39] I noted in an article in CIO Dive about United Airlines' ability to recover quickly from the CrowdStrike incident.

[00:06:46] United Airlines utilized real-time data to effectively recover from that CrowdStrike software outage

[00:06:52] that disrupted operations in July of this year.

[00:06:55] The airline's focus on enhancing customer experience and operational efficiency allowed it to minimize flight cancellations compared to its competitors.

[00:07:04] Key strategies included investing in recovery capabilities, leveraging cloud technology,

[00:07:09] and enabling employees to access real-time data.

[00:07:12] The results?

[00:07:13] United had to ground nearly 700 flights on Friday, July 19th,

[00:07:17] and more than 700 over the following two days, according to FlightAware.

[00:07:21] However, Delta grounded more than 1,000 flights on Monday, July 22nd,

[00:07:27] and hundreds more the next day, while United's daily cancellations fell below 100.

[00:07:33] Why do we care?

[00:07:35] United's recovery underscores the critical role of real-time data in operational resilience.

[00:07:40] By enabling real-time data access for employees,

[00:07:43] the airline could make faster, more informed decisions,

[00:07:46] reducing the impact of disruptions on its operations.

[00:07:49] United's investment in cloud technology appears to have been critical to its quicker recovery,

[00:07:55] but platforms offer the scalability and flexibility necessary to handle disruptions like a software outage.

[00:08:01] United's investment in recovery capabilities is another key takeaway.

[00:08:06] Organizations prioritizing incident recovery and investing in systems to enable rapid recovery from outages

[00:08:12] gain a significant advantage over their competitors.

[00:08:15] So, IT providers should position their services not just as tools for growth,

[00:08:20] but as essential components of resilience strategies capable of reducing downtime and mitigating disruptions.

[00:08:27] Most importantly, they should be able to demonstrate this during and after the incident.

[00:08:33] The United Airlines recovery provides a powerful industry-specific example

[00:08:37] that IT providers can leverage when discussing the importance of incident response,

[00:08:42] cloud infrastructure, and real-time data.

[00:08:44] This case study could resonate particularly well in discussions with other high-stakes industries

[00:08:49] like healthcare, finance, and logistics, where downtime can't be critical.

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[00:09:38] Thanks for listening.

[00:09:39] Today is National Techies Day.

[00:09:41] Really, have your gadget moment today.

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[00:09:52] SMBTechFest.com slash go slash sobel.

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