Microsoft 365 Copilot Licensing Guide

Key Takeaways

• Two editions now exist: Microsoft 365 Copilot ($30/user/month) for enterprise, and Microsoft 365 Copilot Business ($21/user/month) for SMBs with ≤300 users.

• No minimum purchase: The 300-seat minimum was removed in January 2024. You can start with one licence.

• Discounts are scarce: Promotional pricing occasionally appears, but sustained discounts remain difficult to negotiate.

• Role-based Copilots are now bundled: As of October 2025, Sales, Service, and Finance solutions are included in M365 Copilot at no extra cost.

• Agents introduce variable costs: Autonomous agents use Copilot Credits on a pay-as-you-go basis (25 credits per trigger). This can scale unpredictably and blow budgets.

• Budget impact is significant: Depending on your base plan, adding Copilot increases per-user costs by 53% (E5) to 500% (Business Basic).

• ROI requires investment: Expect modest Year 1 returns. Factor in data readiness, training, governance, and PAYG monitoring—not just licence fees.

1. What is Microsoft 365 Copilot?

It’s a generative AI assistant like ChatGPT, but it works inside your Microsoft 365 apps. Used wisely, it can save you a lot of time and get you past writer’s block. As of November 2025, users can also choose to use Anthropic’s Claude models alongside GPT.

It works inside Word, Excel, PowerPoint, Outlook, Teams, OneNote, and Loop. You can ask it to draft, summarise, analyse, or brainstorm right where you’re already working.

Copilot Chat is a standalone chat experience. A basic version is included with your M365 subscription and is grounded in web data. The paid Microsoft 365 Copilot licence adds access to your emails, meetings, chats, and documents via Microsoft Graph, unlocks the full in-app experience, and includes agents.

As of late 2025, agents take it further. These are autonomous assistants that can act on your behalf: processing orders, chasing approvals, or monitoring dashboards.

Source: Microsoft Learn: Which Copilot

How to license Microsoft 365 Copilot

• Ensure you have an eligible Microsoft 365 or Office 365 base plan (see Chapter 3 for the full list).

• Purchase Copilot subscription licences.

• Assign both the eligible base plan and a Copilot licence to each user.

2. How much is Microsoft 365 Copilot?

2.1 Microsoft 365 Copilot (Enterprise/Standard)

Source: M365 Copilot Pricing

2.2 Microsoft 365 Copilot Business (SMB)

Bundles are only available for Business packages:

Without Teams variants:

*Promotional pricing valid 1 December 2025 - 31 March 2026.

Source: Partner Center December 2025

2.3 Copilot Business vs M365 Copilot: What's the Difference?

At launch, there is no feature difference. Both products provide identical Copilot capabilities. The distinction lies in eligibility and price.

Can you switch?

If you're currently paying $30 for M365 Copilot and you're on a Business plan with fewer than 300 users, you cannot switch mid-term. You must complete your current annual commitment before purchasing Copilot Business at renewal.

What about compliance?

Copilot respects the compliance features of your underlying M365 plan. If you're on Business Premium, you get Business Premium's security and compliance features applied to Copilot. If you're on E5, you get E5's Purview capabilities. The Copilot licence itself doesn't change the compliance posture; your base plan does.

Should SMBs on Enterprise plans consider switching?

The decision rarely hinges on Copilot savings alone. If you're on E3/E5, you're paying for features beyond Copilot: advanced compliance (eDiscovery Premium, Insider Risk Management, Information Barriers), advanced security (Defender for Office 365 Plan 2 in E5), and analytics (Power BI Pro in E5). Moving to Business Premium to save $9/user/month on Copilot only makes sense if you genuinely don't need those enterprise features.

Source: Microsoft 365 Copilot Business: The future of work for small businesses

2.4 Copilot Chat (Free)

Source: Copilot Chat Overview

2.5 Budget Impact

The $30/user/month figure can be deceptive. What matters to CFOs is the percentage increase to your existing Microsoft 365 spend. The impact varies dramatically depending on your current plan:

Prices approximate; actual prices vary by agreement and region.

Note: Microsoft announced on 4 December 2025 that M365 suite prices will increase from 1 July 2026. E3 rises from $36 to $39; E5 from $57 to $60; Business Basic from $6 to $7; Business Standard from $12.50 to $14. These changes will affect the percentages above. (Source)

Organisations on Business Standard or Basic should think carefully before adding Copilot. A $12.50/user subscription becomes $42.50 with Copilot. That’s a threefold increase in what you’re paying Microsoft each month. Calling it an “add-on” doesn’t quite capture the scale of the change.

You don’t have to license everyone. Copilot isn’t compulsory for every user in your organisation. You decide who needs it. Maybe it’s your top-tier executives, sales hotshots, data wranglers, or anyone who spends more time with spreadsheets than humans.

Is rolling Copilot out to every knowledge worker justified if some will never use it? Some enterprises we work with license 20% or more of their workforce. Others go company-wide from day one. It’s hard to estimate the return without seeing the product in action, so if you’re considering that path, budget for training and adoption costs too (see Chapter 9).

One more thing: publicly traded companies sometimes deploy Copilot company-wide for the optics. A cleverly marketed $30 million per year investment in AI could raise the company’s valuation by far more. That’s not ROI in the traditional sense, but it’s a real consideration.

2.6 Negotiating a Discount

Negotiate, and don’t hesitate to negotiate aggressively. The salesperson on the other side of the table is handsomely rewarded for selling flagship products. You, on the other hand, are facing the risk of investing in the unknown. It’s a new product. You have every right to negotiate.

Watch out for step discounting. Microsoft may offer to reduce payments in Year 1, then gradually increase them in Years 2 and 3. If they don’t offer it, ask them to include it as an option. It’s only logical that there’s an adoption curve, and you won’t see the same return in Year 1 as you could achieve in Year 3 or Year 5 of your Enterprise Agreement.

Procurement usually prefers this option as it’s a quick win, but we find it less attractive to CFOs. Consider it carefully, and compare it with a flat discount for the entire term of your agreement.

Think strategically about renewal. The discounts you receive the first time won’t carry over to the next renewal. You’ve probably already learned that lesson when you migrated to M365 E5.

3. What do I need to use Microsoft 365 Copilot?

Microsoft 365 Copilot requires one of the following base subscriptions:

3.1 Business and Enterprise

3.2 Government (GCC/DoD)

• Microsoft 365 G3, G5, F1

• Office 365 G1, G3, G5, F3

• Exchange, SharePoint, OneDrive, Project, Visio plans

3.3 Education

• Microsoft 365 A1, A3, A5

• Office 365 A1, A3, A5

• Available for faculty, staff, and students aged 13+

Note: Customers without Teams can still purchase Microsoft 365 Copilot licences.

Source: M365 Copilot Licensing

4. What’s the difference between Copilot Chat and Microsoft 365 Copilot?

4.1 Feature Comparison Matrix

*See section 4.12 for what “included” actually means.

4.2 Web-Grounded AI Chat

What it is: Chat interface where Copilot answers questions using information from the public internet (via Bing search).

Limits: Not publicly documented; licensed users get priority access during high demand.

4.3 Enterprise Data Protection (EDP)

What it is: Microsoft’s commitment that: - Your prompts and responses are not used to train foundation models - Your data stays within your tenant’s compliance boundary - Chat content is subject to your organisation’s retention policies

Important: EDP applies to both. The difference is what data Copilot can access, not how it protects it.

Source: Enterprise Data Protection

4.4 File Upload

What it is: Ability to upload documents (Word, Excel, PDF, etc.) and ask Copilot to reason over them.

Note: Uploading a file is not the same as Graph access. An uploaded file is processed in isolation; Copilot cannot cross-reference it with your emails or other documents unless you have the paid licence.

Source: Copilot Chat FAQ

4.5 Copilot Pages

What it is: A persistent, editable canvas where AI-generated content can be saved, refined, and shared with colleagues in real time. Think of it as a collaborative document that starts from a Copilot response.

Requirement: SharePoint or OneDrive storage required (included with most M365 subscriptions). Limits: No limit on the number of Pages, but total storage for Pages and Notebooks is capped at 25 TB per user.

Source: Introducing Copilot Pages

4.6 Image Generation

What it is: Create AI-generated images by describing them in natural language (powered by Designer, using Microsoft's image generation models).

Source: Which Copilot Plan Is Right for You?

4.7 Work/Web Toggle

What it is: A switch in the Copilot Chat interface that determines the data source for responses.

This is the fundamental licensing distinction. The Work toggle is what you’re paying $30/user/month for.

4.8 Microsoft Graph Grounding

What it is: The ability for Copilot to search and reason over your organisation’s data stored in Microsoft 365: emails in Exchange, files in SharePoint/OneDrive, chats and meetings in Teams, and calendar events.

Capabilities unlocked: - “Summarise my unread emails” - “What did Sarah say about the project in last week’s meeting?” - “Find the latest version of the Q3 budget spreadsheet” - “What’s on my calendar tomorrow?”

Limits: Microsoft does not publish per-user query limits for Graph access via the Copilot interface.

Note: Microsoft brands Graph-powered intelligence capabilities as “Work IQ” in marketing materials. Work IQ encompasses Graph access, memory across sessions, relationship mapping, and inference. It is not a separate product or billing unit; the capabilities are included with M365 Copilot.

4.9 In-App Experiences

What it is: Copilot embedded directly within Microsoft 365 applications (Word, Excel, PowerPoint, Outlook, Teams, OneNote).

The paid licence is what enables Copilot to do things, not just answer questions.

4.10 Access to Emails, Meetings, Chats

What it is: Ability for Copilot to read and reason over your Exchange emails, Teams chats, Teams meeting transcripts and recordings, and calendar.

Specific capabilities: - Email: Summarise threads, find specific messages, draft replies - Meetings: Recap missed meetings, find what was discussed, and list action items - Chats: Search across Teams conversations, summarise channels - Calendar: Find availability, prepare for upcoming meetings

Requirements for meeting features: - Teams Premium or M365 Copilot licence - Meeting transcription must be enabled - Recordings stored in OneDrive/SharePoint

4.11 Create Agents

What it is: Building custom Copilot agents using Copilot Studio (or the “lite” agent builder in M365 Copilot).

The catch: Microsoft lets everyone create agents for free. But using them costs money unless you have M365 Copilot. This is a significant governance risk: employees can create agents that rack up PAYG charges.

4.12 Use Agents: Interactive (User-Triggered)

What it is: An employee uses an agent by asking it a question in Teams, SharePoint, or Copilot Chat.

Conditions for “included” usage:

1. User must have an M365 Copilot licence assigned

2. Interaction must occur within M365 surfaces (Teams, SharePoint, Copilot Chat)

3. Agent must be published to Microsoft 365

What is NOT included, even with an M365 Copilot licence: - Agents deployed to external channels (web, custom apps) - Agents used by unlicensed users - Autonomous agent triggers (see 4.13) - Agent flows beyond the basic interaction

Is it unlimited? Microsoft does not publish a per-user monthly cap for licensed interactive agent usage within M365. However, rate limits (per minute and per hour) are in place to protect service stability, and users may experience throttling during periods of heavy usage.

Source: Copilot Studio Billing Rates

4.13 Use Agents: Autonomous (No User Trigger)

What it is: Agents that trigger automatically based on events (new email received, new order placed, scheduled time, etc.) without a user explicitly invoking them.

Cost: 25 Copilot Credits per autonomous trigger ($0.25 per trigger)

This is a critical point. Organisations building automated workflows with agents will incur PAYG charges on top of M365 Copilot licensing. There is no way to avoid this.

Example impact: - Agent triggers on every new order - 1,000 orders/day × 25 credits = 25,000 credits/day = $250/day = ~$91,000/year

Source: Copilot Studio Licensing

4.14 Copilot Analytics / Dashboard

What it is: Reporting tools for admins to measure Copilot adoption, usage patterns, and business impact.

Includes: - Active users by app - Prompt categories (Ask and find, Catch up, Draft, etc.) - Usage over time - Per-user and per-department breakdowns

4.15 Priority Model Access

What it is: Licensed users get first access to new AI models and capabilities.

GPT-5 context: As of late 2025, Copilot uses GPT-5’s real-time router to select the optimal model for each prompt. Licensed users get priority access.

4.16 In-App Copilot Chat Rollout (Q3 2025)

As of August–October 2025, Copilot Chat is available in Word, Excel, PowerPoint, OneNote, and Outlook, even without a paid Copilot licence. However:

• Responses are grounded in web and open document only

• Cannot access emails, meetings, other files, or Microsoft Graph

• Cannot perform in-document actions (rewrite, insert, etc.)

• Full in-app automation requires a paid licence

Impact: Previously, seeing Copilot in Office apps meant you had a licence. Now, everyone sees Copilot, but most can use it only in limited ways. This creates confusion and upgrade pressure.

Source: Copilot Chat Features

5. What about Sales, Service, and Finance?

As of October 2025, Sales, Service, and Finance solutions are included in Microsoft 365 Copilot at no additional cost. Previously, each cost $50/user/month ($30 for M365 Copilot + $20 for the role-based add-on).

"Bundled" means free, but there's a catch. The Sales, Service, and Finance agents now come at no extra charge with M365 Copilot. But you still need to license the underlying CRM or ERP system. No Dynamics 365 Sales licence, no Sales capabilities.

5.1 Sales in Microsoft 365 Copilot

A note on naming: This product has been renamed six times since 2022. If you encounter references to "Viva Sales", "Microsoft Sales Copilot", "Copilot for Sales", or "Microsoft 365 Copilot for Sales" in older documentation or contracts, they all refer to what is now called "Sales in Microsoft 365 Copilot".

What it does:

Sales in Microsoft 365 Copilot brings CRM data into Outlook and Teams, enabling sellers to work with customer records without switching applications.

Specific capabilities:

• Outlook: View CRM contact/account/opportunity data in a sidebar; get AI-generated email suggestions grounded in CRM context; save emails and meetings to CRM; receive recommended CRM updates

• Teams: Access meeting recordings with AI-extracted insights, action items, and next steps; create deal rooms (collaboration spaces) linked to CRM opportunities; share CRM records in chats

• Copilot Chat: Ask questions about pipeline, opportunities, and customer history using natural language

CRM requirements (must have one): - Microsoft Dynamics 365 Sales (Enterprise or Premium) - Salesforce Sales Cloud

Without a supported CRM, Sales capabilities do not function.

5.1.1 Sales Agents in Microsoft 365 Copilot

Beyond the bundled Sales solution, Microsoft offers three autonomous or semi-autonomous Sales agents accessible via M365 Copilot and Copilot Chat:

Sales Agent vs Sales Development Agent: These are different products despite similar names. Sales Agent (announced March 2025) is a general-purpose lead qualification tool in public preview. Sales Development Agent (announced November 2025 at Ignite) is a more advanced, fully autonomous agent available through the Frontier Program.

CRM connectivity: All three agents connect to both Dynamics 365 and Salesforce.

Billing: These agents consume Copilot Credits on a pay-as-you-go basis. They are not included in the M365 Copilot licence. Autonomous triggers cost 25 credits each ($0.25).

Note: Dynamics 365 Sales has its own set of agents (Sales Qualification Agent, Sales Close Agent, Sales Research Agent) that are separate from the M365 Copilot platform agents listed above. Those require D365 Sales licences and are not covered in this guide.

Sources: New sales agents accessible in Microsoft 365 Copilot | Microsoft Ignite 2025: Powering Frontier Firms

5.1.2 Dynamics 365 Sales Licensing Complexity

This is where it gets confusing. There are three tiers of capability:

What “limited functionality” means for D365 Sales Enterprise/Premium without M365 Copilot:

Watch out: Dynamics 365 Sales Enterprise customers see Copilot features in their apps but cannot use the full set. Microsoft explicitly states: “We do not anticipate any net new features to be included for Dynamics 365 Sales customers” in the limited tier. All future development goes to the paid Sales in M365 Copilot experience.

D365 Sales Premium shortcut: If you have D365 Sales Premium, purchasing M365 Copilot ($30/user/month) automatically unlocks the full Sales in M365 Copilot capabilities. No separate Sales add-on required.

Credit bonus: Dynamics 365 Premium SKUs include 1,000 Copilot Credits per user per month, pooled at tenant level. This offsets some PAYG costs for autonomous D365 agents.

Source: Sales in M365 Copilot features for D365 Users

5.1.3 Salesforce Users

Salesforce Sales Cloud customers require: - M365 Copilot licence ($30/user/month) - Salesforce admin permissions (“Manage Data Integrations” or “Modify All Data”) - Configuration of the Sales app in Teams admin center

No Dynamics 365 licence required. The Sales solution connects directly to Salesforce.

5.2 Service in Microsoft 365 Copilot

What it does:

Service in Microsoft 365 Copilot brings contact centre capabilities into Outlook and Teams, helping service representatives resolve customer issues faster.

Specific capabilities:

- Outlook: View customer case history and account data; get AI-suggested email responses grounded in knowledge base and case context; summarise email threads - Teams: Access case information during calls; get suggested conversation scripts; save interaction summaries back to CRM - Knowledge base integration: Copilot searches internal documentation and provides agents with relevant answers - Case summarisation: AI-generated summaries of customer interactions across channels

CRM/contact centre requirements (must have one): Microsoft Dynamics 365 Customer Service | Salesforce Service Cloud | ServiceNow | Genesys Cloud | Zendesk

Without a supported CRM or contact centre platform, Service capabilities do not function.

Deployment options: - Outlook and Teams apps (standard) - Embedded in CRM desktop (requires additional configuration) - Custom channels via Copilot Studio

Source: Welcome to Service in Microsoft 365 Copilot

5.3 Finance in Microsoft 365 Copilot

What it does:

Finance in Microsoft 365 Copilot connects ERP systems to Excel and Outlook, automating financial reconciliation, variance analysis, and collections workflows.

Generally available as of October 2025.

Specific capabilities:

ERP requirements (must have one): Microsoft Dynamics 365 Finance | Microsoft Dynamics 365 Business Central | SAP | Other ERPs via Copilot Studio connectors

Without a supported ERP connection, Finance capabilities do not function.

Language limitation: Finance agent–created content (email summaries, suggested responses, analysis summaries) is currently provided only in US English (en-US).

Source: Finance in M365 Copilot overview

5.4 What You Actually Pay

The key insight: The October 2025 bundling saves $20/user/month for organisations that were previously paying for both M365 Copilot and a role-based add-on. It does not create new free capabilities for organisations without CRM/ERP infrastructure.

5.5 Points to Watch

1. “Bundled” ≠ “Free”: You need CRM/ERP systems. The solutions are connectors, not standalone products.

2. D365 Sales Enterprise is misleading: Microsoft includes just enough to demonstrate value, then gates all meaningful features behind M365 Copilot. Limited functionality receives no future investment.

3. Sales agents are separate from the Sales solution: The bundled "Sales in Microsoft 365 Copilot" brings CRM data into Outlook/Teams. The Sales agents (Sales Agent, Sales Chat, Sales Development Agent) are autonomous tools that cost extra via PAYG.

6. What are Copilot agents and Copilot Studio?

6.1 Billable Event Types Explained

Understanding what triggers credit consumption is essential for cost forecasting. The following definitions are from Microsoft’s official documentation.

Classic answer (1 credit)

Predefined responses manually authored by agent makers. They are static and do not change unless manually updated. They are typically used where precise and controlled responses are the only ones desired.

Example: User asks “What are your opening hours?” and the agent returns a pre-configured answer.

Generative answer (2 credits)

Dynamically generated using AI models, such as Generative Pretrained Transformers (GPTs). They can adapt and change based on the context and the knowledge sources they are connected to. They are useful for handling a wide range of topics and providing more flexible and natural interactions.

Example: User asks “How do I configure SSO for our Azure AD tenant?” and the agent searches internal documentation, then generates an answer based on retrieved content.

Agent action (5 credits)

Steps such as triggers, deep reasoning, and topic transitions that appear on the activity map in Copilot Studio when testing an agent. When the agent invokes the Knowledge Search/Retrieval tool or the AI Tools prompt, the invocation itself is billed at the Agent Action rate.

Examples: Confirm product availability in inventory system, update a CRM record, send an email, approve a request, look up shipping status.

Tenant Graph grounding (10 credits)

Higher quality grounding for agents using retrieval-augmented generation (RAG) over the tenant-wide Microsoft Graph, including external data synced into Microsoft Graph through connectors. This capability results in more relevant and improved responses and ensures that the grounding information is up to date.

This is optional per agent and can be enabled or disabled. When enabled, it adds 10 credits to each response that uses it.

Example: User asks “What did Sarah say about the Q3 budget in our meeting last week?” The agent searches Teams meeting transcripts via Graph, retrieves the relevant discussion, and generates a response.

Autonomous trigger (25 credits)

Events or conditions that automatically initiate an agent to take action, without requiring a user to manually invoke it.

Example: Agent triggers whenever a new order is received, retrieves product details, confirms availability, approves the order, and emails the customer (all without human interaction).

Agent flows (13 credits per 100 actions)

Power Automate flows embedded within agents that perform multi-step automations. Billed per 100 flow actions executed.

Source: Billing rates and management

6.2 What’s Included with M365 Copilot Licence

For users with a Microsoft 365 Copilot licence, the following are included at no additional Copilot Credit cost when used in Microsoft 365 apps (Teams, SharePoint, Copilot Chat): - Classic answers - Generative answers - Tenant Graph grounding - Agent actions

6.3 What Requires Additional Payment

6.4 Copilot Credits Pricing

6.5 Pre-Purchase Plan (P3) Details

Introduced 1 November 2025. One-year, pay-upfront commitment for organisations with high-volume or variable usage.

How it works: - Purchase Copilot Credit Commit Units (CCCU) upfront for one year - 1 CCCU = $1 = 100 credits - Usage automatically deducts from pool across Copilot Studio, Dynamics 365 agents, and Copilot Chat

Discount tiers:

Microsoft publishes 9 tiers with progressive discounts. The full table is available in the Copilot Studio Licensing Guide and in the Azure portal when purchasing.

Pricing from Microsoft Copilot Studio Licensing Guide, November 2025.

Minimum commitment: 300,000 credits (3,000 CCCUs / ~$2,850)

Key characteristics: - Annual expiry: unused credits are lost at end of term (better than monthly expiry of capacity packs) - MACC-eligible: counts toward Microsoft Azure Consumption Commitment - Auto-renews by default - No cancellations or exchanges: all purchases final - Overage options: if credits exhausted, purchase additional P3 or revert to PAYG

Purchase: Azure portal → Reservations → Copilot Credit Pre-Purchase Plan

Scope options: Resource group, subscription, management group, or shared

Source: Copilot Credit P3 Alternative: Organisations also using Microsoft Foundry (Azure AI services) should consider the broader Microsoft Agent Pre-Purchase Plan, which covers both Copilot Credits and Foundry services through Agent Credit Units (ACUs).

6.6 Credit Consumption Rates

Consumption stacks. A single user interaction can trigger multiple billable events. For example: - User asks a question grounded in tenant Graph → 2 (generative) + 10 (Graph) = 12 credits - Agent searches knowledge, then calls two APIs → 2 (generative) + 5 + 5 (actions) = 12 credits - Autonomous agent triggers, retrieves product info, calls four actions → 25 (trigger) + 2 (generative) + 20 (4×5 actions) = 47 credits

Example calculation (from Rich Gibbons): - 100 users, 4 generative answers + 1 classic answer per day - Daily: 100 × (4×2 + 1×1) = 900 credits = $9/day - Annual: ~$3,285

For 1,000 users: ~$32,850/year, approaching the cost of M365 Copilot licences.

Sources: Copilot Studio Billing Rates | Cloudy with a chance of licensing: PAYG

6.7 Managing PAYG Costs

Admins can control agent-related spending via Microsoft 365 admin center (Copilot section):

Billing controls: - Set spending budgets for PAYG services - Configure billing policies for pay-as-you-go - View usage reports and credit consumption - Access Copilot Dashboard for usage analytics

Agent governance (cost-relevant): - Approve/block agents before deployment (prevents unexpected PAYG charges) - Control who can create and share agents - Monitor agent inventory across tenant

These controls help prevent the common scenario where employees create agents that rack up PAYG charges without IT awareness.

7. What can Copilot do in each Microsoft 365 app?

As of Q3 2025, Copilot appears in Microsoft 365 apps for all users, but capabilities differ significantly between Copilot Chat (free) and Microsoft 365 Copilot (paid). This chapter clarifies what each tier provides.

7.1 Understanding the Frontier Program

Throughout this guide, “Frontier” refers to Microsoft’s early access program for AI innovations. Features labelled “Frontier” are in preview: functional but still evolving based on user feedback.

What Frontier is: - Microsoft’s public preview programme for Copilot and AI features (similar to Microsoft 365 Insiders, but for AI specifically) - Hands-on access to experimental agents and features before general availability - Governed by preview terms in your enterprise product terms or Microsoft Services Agreement

Eligibility: - Enterprise: M365 Copilot licence required; subject to admin settings - Consumer: M365 Personal, Family, or Premium subscription

Current limitations: - Initially English-only - Some features US-only at launch - Web apps first; desktop apps follow - Features may change or be discontinued

How to access: - Frontier agents appear in the Agent Store (labelled with “Frontier”) - Frontier app features appear in Preview/Insiders channels - Admins control access via Microsoft 365 admin centre

Examples of Frontier features (as of November 2025): - Agent Mode in Excel and PowerPoint - Researcher and Analyst agents (built on OpenAI o3 reasoning models) - App Builder and Workflows agents - Sales Development Agent - Sora 2 video creation - Multi-tab reasoning in Edge

Source: What is Frontier?, Frontier Program

7.2 Feature Comparison by App

Key distinction: Copilot Chat in apps can only answer questions about the currently open document using web context. M365 Copilot can take actions (draft, rewrite, create, analyse) and access organisational data via Microsoft Graph.

Note: Items marked “(Frontier)” are in preview. See section 7.1 for eligibility and limitations.

7.3 What “Chat About Open Document” Means

When Copilot Chat (free) is available in an app, it can: - Answer questions about the content currently visible - Use web search to provide context - Reason over the open file only

It cannot: - Access other files, emails, or meetings - Search Microsoft Graph - Perform in-document actions (insert, rewrite, format) - Remember context across documents

This is why two users might see Copilot in Word, but only the licensed user can click “Draft” or “Rewrite.”

7.4 Agent Mode

Agent Mode allows Copilot to take multi-step actions autonomously within apps. Requires M365 Copilot licence.

What Agent Mode does: Rather than responding to single prompts, Copilot can execute a sequence of actions: research a topic, draft content, format it, insert citations, and refine based on feedback, all from a single instruction.

Source: M365 Blog Ignite 2025

7.5 SharePoint Agents

SharePoint agents enable site-specific Q&A grounded in the documents and pages within a SharePoint site.

Creating agents: Anyone with Copilot Chat can create SharePoint agents. Using agents requires either an M365 Copilot licence or PAYG credits.

8. How should I license my organisation?

Deployment Strategy: Start Small, Expand Gradually

You don’t have to buy Copilot for every user on day one. In fact, you probably shouldn’t.

Phase 1: Proof of Concept (5–50 users) - Target early adopters who are already comfortable with AI tools - Include a mix of roles: executives, salespeople, analysts, heavy Outlook/Teams users - Set clear success metrics before you start - Duration: 2–3 months

Phase 2: Targeted Rollout - Expand to roles with highest potential ROI - Prioritise users who spend significant time on content creation, data analysis, or meeting-heavy schedules - Learn from Phase 1: what prompts work, what training is needed, what governance gaps appeared

Phase 3: Broader Deployment - Only after you’ve proven value and built internal expertise - Consider whether 100% coverage is actually justified - Some roles may never benefit enough to justify $30/month

Why it's important: Copilot adoption has a learning curve. Year 1 ROI will not match Year 3. Users need training, prompts need refinement, and your data needs to be in good shape (see Chapter 9). A rushed company-wide deployment often results in expensive shelfware.

9. What’s the real cost of Copilot?

9.1 Key Points to Watch

• Copilot Chat ≠ Microsoft 365 Copilot: The free version cannot access your organisational data (emails, meetings, files) unless you upload them manually.

• Autonomous agents always cost credits: Even with M365 Copilot licence, agents that trigger autonomously (without user interaction) consume Copilot Credits.

• Agent creation is free, usage may not be: Anyone with Copilot Chat can create agents grounded in SharePoint, but using them requires payment (PAYG or licence).

• Tenant Graph grounding is expensive: 10 credits per use adds up quickly for agents accessing organisational data.

• Priority vs standard access: M365 Copilot licensed users get priority access to new models (GPT-5) and features; unlicensed users may experience variable quality.

• O365 eligibility: Office 365 E3/E5 customers can now purchase Copilot without migrating to M365 (this changed in 2025).

• Teams not required: Customers without Teams can still purchase M365 Copilot.

9.2 The ROI Trap

The simple ROI calculation is tempting: if an employee earning $60,000/year costs roughly $30/hour, and Copilot saves them one hour per month, you’ve broken even on the $30 licence. Save more than an hour, and you’re in profit.

This calculation is dangerously incomplete.

9.3 The True Cost of Copilot

The $30/user/month licence fee is just the beginning. A realistic budget must account for:

Direct costs: - Base licence: $30/user/month (or $21 for Business) - Autonomous agent triggers: 25 credits ($0.25) per trigger, uncapped - Agents for unlicensed users: PAYG consumption (unpredictable) - Tenant Graph grounding for agents: 10 credits per query (adds up fast)

Infrastructure and readiness: - Data organisation: Copilot sees everything the user can see. If your SharePoint permissions are a mess, Copilot will surface that mess. Many organisations discover they need a permissions audit and cleanup before safe deployment. - Security review: Oversharing becomes more dangerous when AI can instantly find and summarise sensitive documents. Budget for security assessment and remediation. - Governance setup: Agent controls, DLP policies, spending limits, approval workflows. Someone has to configure and maintain these.

People costs: - Training: Users need to learn effective prompting. “Ask it like you’d ask a smart colleague” isn’t enough. Budget for formal training programmes. - Change management: Resistance is normal. Adoption requires champions, communication, and patience. - Support: Help desk will field new types of questions. IT will manage new admin consoles.

9.4 The Unpredictable Element: PAYG

Autonomous agents are the wildcard. Unlike per-user licensing, PAYG costs scale with activity, not headcount.

The order-processing example in Section 4.13 shows how 1,000 daily triggers can add ~$90,000/year in PAYG charges. That's one agent. Now imagine five agents across sales, HR, finance, and operations, each triggering on different business events. PAYG costs can quietly exceed your entire per-user Copilot spend.

Mitigation: Use the spending budgets and billing controls in the admin center (section 6.7). Set alerts. Review usage monthly. Don’t let agents run unchecked.

9.5 Realistic ROI Expectations

Year 1: Expect modest returns - Learning curve for users - Adoption is uneven - Data and permissions issues surface - Governance processes still maturing

Year 2–3: Returns should improve - Users develop effective habits - Organisation learns which use cases deliver value - Agents become more sophisticated - Technical debt (permissions, data quality) addressed

Octopus Energy reported that customer satisfaction rose from 65% to 80% after deploying AI in their customer service operation.

Ongoing: Measure, don’t assume - Track actual time saved, not hypothetical time saved - Survey users on perceived value - Compare Copilot-assisted output quality to baseline - Be willing to reduce deployment if ROI doesn’t materialise

9.6 Building the Business Case

When presenting to finance, include:

What not to promise:

• Headcount reduction (rarely achievable in practice)

• Immediate productivity gains (adoption takes time)

• Universal applicability (some roles won’t benefit)

9.7 The Strategic View

Some organisations are deploying Copilot company-wide regardless of granular ROI calculations. The reasoning: AI competency is a strategic capability, and the cost of falling behind competitors exceeds the cost of the licences.

This is a valid argument, but it’s a strategic argument, not a financial one. Don’t dress it up as ROI when it’s really about competitive positioning. CFOs can tell the difference.

If your organisation takes the strategic route: - Still invest in training and adoption - Still implement governance controls - Still measure outcomes (even if they’re not the primary justification) - Accept that some users will underutilise it

10. What other Microsoft Copilot products are there?

11. Timeline of events

12. Frequently Asked Questions

How much does Microsoft 365 Copilot cost?

$30 per user per month for most organisations. SMBs with 300 or fewer users can get Microsoft 365 Copilot Business for $21 per user per month. Both require an annual commitment. Monthly billing adds 5%. Discounts are hard to negotiate, but not impossible.

What’s the difference between Copilot Chat (free) and Microsoft 365 Copilot?

Copilot Chat is free with your M365 subscription. It’s a web-grounded AI chat with enterprise data protection, but it can’t access your emails, documents, or calendar. Microsoft 365 Copilot ($30 or $21) unlocks full integration with your organisational data, works inside Word, Excel, PowerPoint, Outlook, and Teams, and includes agents.

What’s the difference between Copilot Pro and Microsoft 365 Copilot?

Copilot Pro ($20/month) is for individuals. It works with Microsoft 365 Personal or Family subscriptions and gives you Copilot in the desktop apps. Microsoft 365 Copilot ($30 or $21/month) is for organisations. It connects to your company’s data via Microsoft Graph and includes business features like agents, Copilot in Teams meetings, and admin controls.

Is Copilot included in E5?

No. Microsoft 365 Copilot is a paid add-on regardless of your base plan. E5 customers pay the same $30 per user as everyone else. The only thing E5 gets you is Security Copilot capacity (400 SCUs per 1,000 users), which is a different product.

What are Copilot agents and how much do they cost?

Agents are AI assistants that can act on your behalf: processing orders, answering queries, monitoring dashboards. Creating and running simple agents is included with your Microsoft 365 Copilot licence. But when agents trigger autonomous actions, you pay 25 Copilot Credits per trigger ($0.25). This is pay-as-you-go and can scale unpredictably. Budget carefully.

What are the Sales agents and how do they differ from Sales in Microsoft 365 Copilot?

Sales in Microsoft 365 Copilot is the bundled solution that brings CRM data into Outlook and Teams; it's included with your M365 Copilot licence. The Sales agents (Sales Agent, Sales Chat, Sales Development Agent) are separate autonomous tools that qualify leads, prepare for meetings, and engage prospects. These agents cost extra via PAYG Copilot Credits and are not included in the M365 Copilot licence.

Is Microsoft 365 Copilot worth the money?

It depends on who’s using it and how. If Copilot saves someone an hour a month and their time costs $30/hour, you’ve broken even. Heavy users in sales, legal, or finance often see much higher returns. But Year 1 ROI is typically modest. Factor in training, data readiness, and governance costs. Don’t expect magic on day one.

Need help?

Microsoft licensing is complex, and AI adds new variables: consumption billing, credit pools, and rapidly changing product bundles. We don't sell Microsoft licences or cloud services, so our advice is impartial. If you're negotiating a Microsoft deal that includes Copilot, or need help forecasting AI costs, get in touch.