Microsoft replaces OpenAI and eliminates SMS login.

      Microsoft is reinventing its technology infrastructure for the age of AI, focusing on both proactive and reactive measures. This week, the company initiated actions on two fronts: it started replacing OpenAI's models in its most popular applications to reduce expenses and announced a timeline for discontinuing text-message logins due to a surge in AI-based phishing attacks.

      While the two announcements might seem unrelated, they are driven by a common factor.

      Transitioning from OpenAI

      According to Bloomberg, Microsoft is substituting OpenAI's image-generating models with its own technology in applications like PowerPoint and Bing. “It’s faster, it’s cheaper, it’s higher quality, it drives better retention,” stated Mustafa Suleyman, Microsoft’s AI chief.

      The key aspect here is reduced costs. Suleyman noted that the company's proprietary MAI models cost about 85% less than OpenAI's in PowerPoint.

      The 💜 of EU techThe latest updates from the EU tech scene, a piece from our insightful founder Boris, and some dubious AI-generated art. It's free and delivered weekly to your inbox. Sign up now! Although Microsoft still has access to OpenAI’s models at no cost under their partnership, it incurs considerable expenses to operate them. The financial burden of computing resources is significant. Earlier this month, it started swapping out OpenAI and Anthropic text models in its office applications, achieving performance comparable to GPT-5.6 in regular Excel tasks at a lower expense.

      The transition to images is forthcoming. MAI models are now integrated into more than half of Microsoft’s products, with testing ongoing in all of them. T-Mobile and EasyJet in the UK have already implemented its voice models in their customer service centers.

      The underlying message is one of independence. Suleyman, a co-founder of DeepMind who joined last year to lead Microsoft's AI initiatives, was tasked with reducing reliance on OpenAI. Microsoft has invested over $100 billion in this collaboration, and bringing applications in-house diminishes OpenAI's status from partner to vendor.

      Elimination of SMS login

      The second action is a proactive measure. Starting September 1, passkeys will be the default sign-in method for Entra ID, Microsoft’s enterprise identity service. From February 1, 2027, the company will cease sending SMS and voice-call authentication codes entirely, while Windows Hello and FIDO2 security keys will continue to be used.

      The basic text-message code is being phased out. The rationale is centered around AI. Microsoft explained that “the AI era demands stronger, phishing-resistant authentication.” Its data supports this, showing that AI-assisted phishing emails yield a 54% click-through rate compared to only 12% for traditional phishing attempts.

      AI has rendered scams much more convincing, necessitating the removal of the weakest login method. Passkeys offer improved security since an attacker would need the victim’s actual device, rather than just a stolen code.

      However, neither change is as straightforward as it appears. Microsoft positions its models as matching OpenAI only on “common” tasks, and much of the implementation is still in testing. Passkeys also aren't a complete solution, which is why biometric and hardware keys will remain in use.

      Nonetheless, the trend is clear. AI is both a factor that Microsoft seeks to utilize more economically and a reason to enhance its security measures. Even Google now allows users to sign in with a selfie, marking a swift decline in the use of passwords.