Microsoft

's deteriorating relationship with OpenAI is forcing the tech giant to make AI usage mandatory for employees, as competitive pressures from the partnership dispute drive workplace culture changes at the company.

"AI is no longer optional," Julia Liuson, president of Microsoft's Developer Division, told managers in a recent email obtained by Business Insider. She instructed them to evaluate employee performance based on internal AI tool usage, calling it "core to every role and every level."The mandate comes as Microsoft faces lagging internal adoption of its

Copilot AI services

while competition intensifies in the AI coding market. GitHub Copilot, Microsoft's flagship AI coding assistant, is losing ground to rivals like Cursor, which recent Barclays data suggests has surpassed Copilot in key developer segments.

The partnership tensions have reached a critical point where OpenAI is considering acquiring Windsurf, a competitor to Microsoft's GitHub Copilot, but Microsoft's existing deal would grant it access to Windsurf's intellectual property, creating an impasse that neither OpenAI nor Windsurf wants, sources familiar with the talks told Business Insider.Microsoft allows employees to use some external AI tools that meet security requirements, including coding assistant Replit. However, the company wants workers building AI products to better understand their own tools while driving broader internal usage.Some Microsoft teams are considering adding formal AI usage metrics to performance reviews for the next fiscal year, Business Insider learned from people familiar with the plans. The initiative reflects Microsoft's broader strategy to ensure its workforce embraces AI tools as competition heats up.Liuson emphasized that AI usage "should be part of your holistic reflections on an individual's performance and impact," treating it like other core workplace skills such as collaboration and data-driven thinking. The move signals how AI adoption has become essential to Microsoft's competitive positioning amid evolving partnerships and market pressures.