What Meta and Microsoft stand to gain from their Llama 2 partnership

On July 18th, Meta open sourced its Llama 2 large language and announced Microsoft as its "preferred partner for Llama 2". This designation is rare for platform businesses like Meta – who often remain neutral with partners so they don't limit their market reach – and highlights the strategic importance of the partnership to both Meta and Microsoft.

Ultimatley, growth acceleration is what both want to achieve. Microsoft wants to accelerate Azure consumption growth and the adoption of its co-pilot interface, while Meta wants to accelerate the growth of its products using AI.

There's more to the partnership than just growth acceleration though, so let's dig into it:

Meta

Acceleration of Generative AI's impact within Meta's Products
As already noted, by partnering with Microsoft, Meta can scale through Microsoft's field teams and partner ecosystem. This should accelerate the adoption of Llama 2 within large enterprises that require more control and transparency when using large language models (LLMs).

The faster Llama 2 scales, the more likely it becomes the defacto open source large language model with the largest community contributing to its growth. As this happens, Meta will be in strong position to enhance its products with genertive AI features at an acclerated rate.

Building trust in Meta's use of AI through transparency
By increasing model transparency, Meta in turn builds trust around its own use of AI. The trustworthy use of AI is essential to improving Meta's brand image and attracting / retaining users.

Attracting top talent
Top AI researchers and developers want to work for companies that allow them to publish their work. By open sourcing Llama 2, Meta shows it understands and values this desire, which makes Meta a more attractive place to work for top talent.

Microsoft

Hedges reputational risk if the model performs poorly
Perhaps the single biggest strategic decision Microsoft made was partnering to aquire its LLM offerings.

By doing this they abstracted themselves from the reputational impact should the LLMs perform poorly. For example, it was only after OpenAI's ChatGPT model was "tested" by the general public that Microsoft invested bllions of dollars in the company and kicked off the generate AI era.

Competitors like Google, who built their LLMs in-house, didn't have this luxury and had to be more deliberate with their commercial deployment of generative AI.

This partnership with Meta extends this dynamic to open source large language models. Microsoft again provides the infrastructure and compute to train and run these models, but it doesn't directly hold the reputational risk that some compeitors do.

Offers customers best-in-class choice of proprietary and open source models
Assuming Microsoft and Meta together can rapidily establish Llama 2 as the defacto open source large language model, Microsoft will be able to offer its customers the choice of best-in-class LLMs, whether proprietary (OpenAI ChatGPT) or open source (Llama 2).

Accelerates Azure consumption growth
Llama 2 on Microsoft Azure will attract adoption/usage by large enterprise customers that require more control and transparency over the models they productionalize. It's these large customers that generate outsized consumption on Azure, so quickly capturing their generative AI workloads is essential to scaling consumption growth.

Furthers Microsoft's integrated solution value proposition
Microsoft's moves these days serve to reinforce the value of its integrated solutions – from Azure to M365 – and this partnership is no different.

Llama 2 is the "brains" of the co-pilot natural language interface paradigm Microsoft is championing. But what's important to understand is no other cloud vendor can compete with the end-2-end value proposition Microsoft offers. Not only are they offering a best-in-class experience for two of the top LLMs, but they also seemlessly integrate into the M365 suite of solutions and the new co-pilot natural language interface. This is huge value.

So even if customers don't choose Azure for their AI workloads, Microsoft is at least making it a hard decision not to. And, again, the faster Meta/Microsoft mature Llama 2, the more difficult this decision becomes.

Drive consumpton growth through Meta's use of Azure to train its GenAI models
Finally, while it's not publically known, it's likely Meta committed to training its GenAI models on Azure. If this is the case, this secures one of the largest workloads available for Azure – one that would certainly impact consumption growth in a meaningful way.

These are the top benefits I see for both. Let me know if you agree.