Model routing is a fix for AI overspending. That's a problem for OpenAI and Anthropic
Companies are shifting from running everything on the most powerful AI model to matching each task to the right one, a practice called model routing.
TL;DR
- Companies are adopting "model routing" to control rising AI expenses.
- Model routing assigns tasks to the appropriate AI model based on complexity, using cheaper alternatives for simpler jobs.
- Currently, most enterprise AI usage runs on expensive frontier models, even for basic tasks.
- High AI costs, such as $10,000 per employee annually, are prompting this spending discipline.
- AI companies are offering guarantees to demonstrate return on investment, focusing on actual value delivered rather than token usage.
- This shift could impact the business models and valuations of leading AI companies like OpenAI and Anthropic.
- Pricing power is moving from AI vendors to AI buyers.