OpenAI Service – Consider Using Latest Models

OpenAI frequently releases newer models that provide improved performance, capabilities, and cost efficiency. Organizations using older models may be overspending while receiving inferior results. By systematically adopting the latest appropriate models, your organization can realize significant cost savings while maintaining or improving capabilities.

This policy ensures your organization leverages the most cost-efficient OpenAI models available, specifically newer models like GPT-4.5, GPT-4o, GPT-4o mini, o3-mini and o1. These recent models often deliver better performance at lower costs compared to older generations.

Cost Impact Analysis

Modern AI models from OpenAI show substantial improvements in cost efficiency:

• GPT-4o offers similar capabilities to GPT-4 Turbo but at reduced token costs
• O1 models deliver specialized reasoning capabilities at competitive pricing
• O3-mini provides an excellent balance of capability and cost for many use cases

The cost differential between older and newer models can be substantial. For example:

Model	Input Cost (per 1M tokens)	Output Cost (per 1M tokens)	Performance
GPT-4	$30.00	$60.00	Base capability
GPT-4o	$5.00	$15.00	Equal or better
GPT-3.5 Turbo	$0.50	$1.50	Lower capability
O1-mini	$1.50	$6.00	Specialized reasoning
O3-mini	$0.15	$0.60	Excellent baseline

As illustrated, transitioning from GPT-4 to GPT-4o can reduce input token costs by up to 83% and output token costs by 75%.

Why This Policy Is Important

1. Cost Optimization: Newer models typically offer better pricing structures while delivering improved performance.
2. Capability Enhancements: Latest models often incorporate improved reasoning, knowledge, and technical capabilities.
3. Technical Debt Reduction: Avoiding older models prevents building systems on soon-to-be-deprecated technology.
4. Competitive Advantage: Using cutting-edge models can deliver better user experiences and outcomes.

How It Helps Reduce Costs

1. Direct Token Cost Reduction: Newer models frequently process the same workload at lower token rates.
2. Improved Efficiency: Latest models often require fewer tokens to achieve the same or better results.
3. Reduced Operational Overhead: Better models may require less prompt engineering and fewer iterations.
4. Enhanced Contextual Understanding: More capable models may reduce the need for multiple API calls to complete complex tasks.

Potential Savings Examples

Example 1: Large-Scale Customer Support System

• Current setup: Processing 10M tokens daily with GPT-4
• Daily cost: (5M input tokens × $30/1M) + (5M output tokens × $60/1M) = $150 + $300 = $450/day
• With GPT-4o: (5M input tokens × $5/1M) + (5M output tokens × $15/1M) = $25 + $75 = $100/day
• Annual savings: ($450 – $100) × 365 = $127,750

Example 2: Content Generation Platform

• Current setup: Using GPT-3.5 Turbo for 50M tokens monthly
• Monthly cost: (30M input tokens × $0.50/1M) + (20M output tokens × $1.50/1M) = $15 + $30 = $45/month
• With O3-mini: (30M input tokens × $0.15/1M) + (20M output tokens × $0.60/1M) = $4.50 + $12 = $16.50/month
• Annual savings: ($45 – $16.50) × 12 = $342

Implementation Guide

Infrastructure-as-Code Examples (Terraform)

Before:

resource "azurerm_linux_function_app" "ai_function" {
  name                = "openai-processor"
  resource_group_name = azurerm_resource_group.example.name
  location            = azurerm_resource_group.example.location
  service_plan_id     = azurerm_service_plan.example.id
  
  app_settings = {
    OPENAI_MODEL    = "gpt-4"  # Using older, more expensive model
    OPENAI_API_KEY  = var.api_key
  }

  site_config {
    application_stack {
      node_version = "16"
    }
  }
}

After:

resource "azurerm_linux_function_app" "ai_function" {
  name                = "openai-processor"
  resource_group_name = azurerm_resource_group.example.name
  location            = azurerm_resource_group.example.location
  service_plan_id     = azurerm_service_plan.example.id
  
  app_settings = {
    OPENAI_MODEL    = "gpt-4o"  # Updated to more cost-efficient model
    OPENAI_API_KEY  = var.api_key
  }

  site_config {
    application_stack {
      node_version = "16"
    }
  }
}

Infracost can automatically detect these issues in your infrastructure code, highlighting opportunities to switch to more cost-efficient models. Infracost allows you to scan your entire codebase for this and many other cost optimization policies.

Step-by-Step Implementation

1. Audit Current Usage:
   • Review all applications and services using OpenAI models
   • Document current model usage and estimated token consumption
   • Identify use cases and specific requirements for each implementation
2. Model Selection Assessment:
   • Review capabilities required for each use case
   • Match requirements to the most efficient modern model
   • Consider specialized models (like o1) for reasoning-heavy tasks
   • Test new models with representative workloads
3. Update Implementation:
   • Modify code, configuration files, and environment variables
   • Update API client libraries if needed
   • Adjust prompts to optimize for new model capabilities
   • Use Infracost to identify all instances in your infrastructure code where older models are specified
4. Monitoring and Validation:
   • Implement monitoring for model performance and cost
   • Compare key metrics before and after migration
   • Validate that results meet quality requirements

Best Practices

• Establish a Model Review Cadence: Schedule regular reviews of available OpenAI models (quarterly recommended).
• Document Model Selection Criteria: Maintain clear guidelines for model selection based on use case requirements.
• Implement A/B Testing: Test new models against current ones before full deployment.
• Use Dynamic Model Selection: Consider implementing logic that can select appropriate models based on task complexity.
• Monitor Token Usage: Track token consumption to identify optimization opportunities.
• Default to Latest: Set organizational defaults to the latest suitable models.

Tools and Scripts

1. Infracost Policy Scanning: Utilize Infracost to automatically detect outdated model usage in your infrastructure code.
2. Model Benchmark Script:

```python
import openai
import time
import json

def benchmark_models(prompt, models=["gpt-4", "gpt-4o", "o3-mini"]):

results = {}

for model in models:
    start_time = time.time()
    response = openai.ChatCompletion.create(
        model=model,
        messages=[{"role": "user", "content": prompt}]
    )
    end_time = time.time()
   
    # Calculate metrics
    results[model] = {
        "time": end_time - start_time,
        "tokens": {
            "input": response.usage.prompt_tokens,
            "output": response.usage.completion_tokens,
            "total": response.usage.total_tokens
        },
        "estimated_cost": calculate_cost(model, response.usage)
    }

return results

Cost Savings Examples

Example 1: Large Enterprise Support Chatbot

A financial services company operated a customer support chatbot using GPT-4 for handling 100,000 queries daily. After switching to GPT-4o, they:

• Reduced token costs by 78%
• Maintained identical response quality
• Achieved 15% faster response times
• Realized annual savings of $850,000

Example 2: Content Generation Platform

A digital marketing agency used GPT-3.5 Turbo for generating marketing copy. By transitioning to o3-mini:

• Token costs decreased by 70%
• Content quality remained suitable for most use cases
• They implemented a tiered approach using o3-mini for drafts and GPT-4o for finalization
• Overall AI costs decreased by 62% while maintaining quality standards

Examples 3: Code Analysis Tool

A software development tooling company switched from GPT-4 to a combination of o1-mini and GPT-4o:

• Used o1-mini for initial code analysis (logical reasoning)
• Leveraged GPT-4o for detailed recommendations and fixes
• Reduced overall costs by 56%
• Improved accuracy by 12% through specialized model selection

Considerations and Caveats

When This Policy May Not Apply

1. Strict Backward Compatibility Requirements: Applications built around specific quirks or behaviors of older models may require extensive testing before migration.
2. Regulatory or Compliance Constraints: Some environments may have certification requirements tied to specific model versions.
3. Fine-tuned Models: If you’ve invested in fine-tuning older models, the transition cost must be evaluated against long-term savings.
4. Specialized Use Cases: Certain niche applications might perform better with older models due to their specific characteristics.

Implementation Challenges

• Production Code Stability: Changing models can introduce subtle differences in outputs that may impact downstream processing.
• Prompt Engineering Adjustments: Different models may respond best to different prompt structures.
• API Interface Changes: New models occasionally introduce modified parameters or return structures.
• Cost-Performance Tradeoffs: The cheapest model isn’t always the right choice; balance cost against required capabilities.

Mitigation Strategies

1. Phased Rollout: Implement new models in stages, starting with non-critical applications.
2. Side-by-Side Testing: Run old and new models in parallel to compare outputs before full transition.
3. Fallback Mechanisms: Implement the ability to roll back to previous models if issues arise.
4. Continuous Evaluation: Regularly reassess model selection as OpenAI releases new options.

Frequently Asked Questions (FAQs)