Microsoft 365 Copilot: Licensing, Pricing, ROI

Key points and trending facts

• Copilot for Microsoft 365 is available to everyone on eligible plans:

  • Microsoft 365 E3, E5, A3, and A5

  • Microsoft 365 Business Standard and Premium

  • Office 365 E3 and E5. A3 and A5

  • Microsoft 365 F1, and F3

  • Office 355 E1

  • Microsoft 365 Business Basic

• You can start with one license. The 300-seat minimum was removed on January 16, 2024.

• The price is $30 per user per month, regardless of your industry, size, and Enterprise Agreement discount level, but watch out for promotions.

• Enterprise Agreement clients are struggling to negotiate any discounts. However, it's not entirely impossible.

• ROI can be significant if Copilot is properly implemented, but CFOs should brace for a shocking cost increase.

• There's still room for negotiation with reasonable arguments.

What is Microsoft 365 Copilot?

It's a "generative AI" like ChatGPT that integrates itself into your Microsoft 365 apps. It is your virtual assistant that, if used wisely, can save you an astonishing amount of time and free you from "writer's block" and other frustrations.

It seamlessly integrates with Microsoft 365 applications: Word, Excel, PowerPoint, Outlook, and Teams.

In addition, there is a new "hero experience". Microsoft 365 Chat is more than just a Q&A feature for Microsoft Copilot for Microsoft 365. It scans all your data—emails, meetings, chats, documents, and even the web—to help you solve your most challenging work issues.

Note: it's not the same as GitHub Copilot.

The mechanics behind the M365 Copilot's "magic"

At the heart of M365 Copilot lies a sophisticated blend of AI Large Language Models (LMM), primarily built upon OpenAI's GPT (Generative Pre-trained Transformer) and Microsoft's proprietary technologies. 

This combination enables Copilot to understand, predict, and generate human-like text based on the user's input and intent.

The AI's Learning Process

1. Training on Diverse Data: M365 Copilot's training encompasses various text sources, from everyday language to specialised jargon. 

2. Real-Time Learning: Copilot evolves through ongoing user interaction, refining its understanding and enhancing response accuracy with each task and feedback received.

3. Enterprise Data Utilisation: Importantly, your instance of Copilot also trains on your enterprise's specific data, ensuring its assistance is tailored to your organisation's unique context. This training is securely contained within your organisation, ensuring that sensitive information and learned knowledge do not leak externally.

The AI's Understanding of Context

M365 Copilot's strength lies in its contextual understanding. It recognises not just words but also the nuances of language and task-specific complexities, adapting to various needs, whether for legal documents, financial reports, or project plans.

How to license M365 Copilot

1. Ensure first that you have one of the "eligible" Microsoft 365 or Office 365 subscription licenses:

   • Microsoft 365 E3, E5, A3, or A5

   • Microsoft 365 Business Standard or Premium

   • Office 365 E3 and E5. A3 or A5

   • Microsoft 365 F1, and F3

   • Office 355 E1

   • Microsoft 365 Business Basic

2. Purchase CoPilot subscription licences.

3. Assign an eligible Microsoft 365 plan license + a Copilot license to each user for whom you bought it.

How much is Microsoft 365 Copilot?

The price of Copilot for Microsoft 365 is $30 per user per month (£25).

But is it that simple? How will it affect your bottom line? Are the benefits worth the price? And what clever tactics can you use to maximise return and keep the cost under control?

Total Cost Impact

You must have eligible licenses first

Fact #1. Microsoft Copilot for Microsoft 365 is an add-on license. It works "on top" of the following packages:

• Microsoft 365 E5,

• Microsoft 365 E3,

• Microsoft 365 A5,

• Microsoft 365 A3,

• Microsoft 365 Business Premium,

• Microsoft 365 Business Standard,

• Office 365 E5,

• Office 365 E3,

• Microsoft 365 F1,

• Microsoft 365 F3,

• Office 355 E1,

• Microsoft 365 Business Basic.

Microsoft 365 CoPilot is an additional cost

Fact #2. As you can rightfully infer from the above, Copilot will not be included in any of the M365 or O365 packages unless Microsoft brings in something new, like a hypothetical Microsoft 365 E7 – more on that later.

Regardless of what you already pay for M365, Microsoft Copilot for Microsoft 365 is an additional cost.

The budget increase is stunning

Fact #3. The price is the same regardless of the underlying M365 license. Therefore, if you, hypothetically, decide to license every user with Copilot, the relative growth of your Microsoft 365 licensing budget will depend on your current licenses: 

Giving CoPilot to frontline workers

Fact #4. Frontline workers licensed with M365 F3 aren't yet able to use CoPilot, but that is promised to change in April 2024. If you decide to give them CoPilot now, you'll have to migrate them to at least M365 E3, which means a total increase of 8.25x.

Yes, you read that right. It's an 8.25x or 725% increase.

We would certainly recommend holding off until it becomes available for M365 F1 and F3.

However, it's not all doom and gloom! Let's discuss the positives and strategic manoeuvres to keep the costs in check.

You don't have to buy it for every user

CoPilot isn't a compulsory purchase for every user in your organisation. You decide who needs it. Maybe it's your top-tier executives, the sales hotshots, business data wranglers, or anyone who spends more time with spreadsheets than humans.

On that note, is rolling CoPilot out to every white-collar worker justified, as some workers may never use it? Some enterprises we work with are considering licensing over 20% of their workforce, and some have already done it.

It isn't easy to estimate the potential return of a company-wide deployment without seeing and using the final product. When considering that path, consider investing in training and adoption, including associated costs.

Publicly traded companies could use the momentum to adopt CoPilot company-wide and increase capitalisation by riding the AI tools hype. We could imagine a case in which a cleverly marketed $30 million per year investment could raise the company's value by billions.

Benefits of Microsoft 365 Copilot

Microsoft demonstrated exciting use cases that improve work experience, remove creative blocks and speed up decision-making.

• Copilot can help write emails. In not-so-old news, Octopus Energy in the UK increased customer satisfaction from 65% to 80% by using generative AI to write emails.

• Copilot can help with data analysis in Microsoft Excel. You can use human language instead of writing formulas yourself.

• You can ask it to create proposals in Microsoft Word and presentations in Microsoft PowerPoint.

If you already have plans and ideas for using Copilot, please let us know, as well as your thoughts about the price.

Estimating the ROI

Here is a sketch ROI assessment. Imagine a busy sales executive or a data analyst on a $50,000 annual salary. Crunch the numbers, and you'll see that each hour of their time costs you about $30. If Copilot can help them save just one hour a month, you've got a 1:1 return on investment. With the advertised capabilities of CoPilot, they should be saving even more time.

Our consulting business has been using an alternative AI, ChatGPT, since its commercial introduction. Our ROI was 30:1 in the first half of 2023 and reached up to 100:1 by the end of the year. And that is without the enterprise data integration that Copilot offers out of the box. It uses your enterprise data to learn about you so that it can help you better than ChatGPT.

Speaking of data privacy concerns, Microsoft states in its AI usage terms that your confidential data will not be used to train or retrain their AI models, which means that your data remains yours and won't leave the boundaries of your enterprise.

Cost planning and cost avoidance

Most of you will be challenged to justify the exploding costs, regardless of how good your business case and the ROI predictions are.

You don't need to be a rocket scientist to understand that Microsoft and its partners will start aggressively selling M365 CoPilot to you starting tomorrow. Most of our enterprise clients, whose Microsoft Enterprise Agreement expires soon, already have M365 Copilot offered as one of the renewal options, even if they didn't ask for it. You are next.

So, let's talk about cost planning and cost avoidance.

Will it definitely be $30 per user per month for your organisation?

Rest assured that Microsoft is listening to the feedback. They may keep the price as-is for a while and then adjust it based on sales success. A previous example: Microsoft halved the price of Power Platform licenses in 2022 when they ran out of early adopters, and the pipeline began to dry out. But will they? We have a few reasons to doubt it.

Firstly, if you are large enough and have an Enterprise Agreement, you would typically expect your CoPilot licenses to be discounted already. As you probably know, the Microsoft Enterprise Agreement programme has "programmatic levels"—company-size-dependent discounts. Therefore, we would normally not expect large enterprises to pay the same $30 per user per month. Normally. That's the keyword. The actual situation is far from normal.

As it currently stands, the price of $30 per user is quoted to every client, regardless of the size.

Microsoft is very confident in Copilot's success, and there is no desire to discount it "programmatically". It will be $30 per user for everyone, at least in the foreseeable future unless you have bulletproof leverage and an excellent negotiation strategy.

Prepare to negotiate a discount, but watch out for hidden traps

Negotiate, and don't hesitate to negotiate aggressively. The salesperson on the other side of the table is handsomely rewarded for selling flagship and hot-off-the-press products. You, on the other hand, are facing the risk of investing in an unknown.

Be aware that as one of the options, Microsoft may offer "step discounting": pay less in the first year and gradually increase the payments every subsequent year. If they don't offer that, ask them to include it as an option. It is only logical that there is 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 is 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.

Whatever you choose, think strategically. The discounts you get the first time won't translate into a similar deal at the next renewal. You've probably already learned that lesson when you migrated to M365 E5.

Start slowly, deploy gradually

Some of you will choose a more cautious approach: procuring a few licenses for a proof-of-concept deployment.

CoPilot is not an "enterprise product". You don't have to purchase it for everyone. So, assign it to a small group of those who will use it the most: early adopters, data analysts, chief salespeople, and anyone else who is keen to try or maybe already understand how to use artificial intelligence assistants.

Learn from their experience, develop an adoption strategy, and then slowly roll out CoPilot to other users in your organisation.

And that's the approach that we recommend to medium-sized and small businesses.

And again, regardless of how many licenses you procure first, negotiate a discount. It's a new product. You have all the right to do so.

Will there be Microsoft 365 E7 with bundled Copilot?

Maybe. We have been speculating about the possible introduction of the next level "all-inclusive" Microsoft 365 plan since the beginning of 2022.

Microsoft 365 E5 quickly became less all-inclusive almost from its introduction. Microsoft introduced new add-on licenses and services nearly monthly, and this went relatively unnoticed until the end of 2022 when Microsoft introduced Teams Premium.

Even more widely anticipated add-ons were introduced at the beginning of 2023. However, Microsoft kept holding off on introducing the new Microsoft 365 plan. This can partially be explained by the fact that the adoption of Microsoft 365 E5 isn't yet going at a satisfactory rate.

However, many experts see CoPilot for Microsoft 365 as the "scale-tipping" reason for the new "all-inclusive" plan. If Microsoft brings in something like Microsoft 365 E7 or Microsoft 365 E5+, it needs to rethink the positioning of its lesser plans, E3 and E5, and we don't think it'll be an easy transition.

Copilot vs Copilot Pro vs Microsoft 365 Copilot

Copilot Pro is aimed at individuals on a Microsoft 365 personal or family subscription who can also get a cut-down Copilot free.

The smallest of them all, Microsoft Copilot (formerly Bing Chat Enterprise), draws on the vast data of the Bing search index to provide answers, summaries, and visualisations.

Copilot (formerly Bing Chat Enterprise) can summarise, analyse, or visualise information on web pages, PDFs, and internal documents. It also supports the generation of bullet points, outlines, graphical artworks, and even engaging conversations. It is ideal for users who need to quickly interact with, analyse, and leverage information from the public web.

Licensing: Copilot is effectively free for private use and is included in M365 E3/E5 and M365 A3/A5.

Frequently asked questions

What exactly is Microsoft Copilot for Microsoft 365?

Copilot for Microsoft 365 is a Generative AI assistant add-on designed to enhance your work experience by aiding in tasks such as email drafting, data analysis in Microsoft Excel, and creating proposals in Microsoft Word and presentations in Microsoft PowerPoint. It integrates with your enterprise data to better understand and assist you, promising a significant return on investment if implemented strategically.

How much does M365 CoPilot cost?

The subscription fee is $30 per user per month, and there are no Enterprise Agreement or Academic discounts so far.

Is M365 Copilot generally available?

Yes, Copilot for Microsoft 365 is available to every organisation starting from January 16, 2024, including educational institutions. There is no minimum license limit, but your existing M365 plan must be "eligible".

Can Copilot be added to any Microsoft 365 package?

Copilot is an add-on license to Microsoft 365 E3, E5, A3, A5, Business Premium, and Business Standard, as well as Office 365 E3 and E5. It's not available for frontline workers with the M365 F3 license. More packages are to become eligible in April 2024.

How can I ensure a reasonable ROI when investing in CoPilot?

To maximise ROI, we recommend having a strategic deployment plan and identifying the teams or individuals who would benefit the most from CoPilot's features. Consider the potential time-saving and productivity boost it can bring to roles like sales executives or data analysts. Alternatively, you might explore opportunities to increase a public company's value by leveraging AI capabilities company-wide.

Is CoPilot included in E5?

No, CoPilot is not included in the E5 package. It's an add-on that comes at an additional cost, irrespective of the Microsoft 365 package you are currently subscribed to. This means that even if you are on the E5 plan, you must budget for CoPilot separately.

Will Microsoft 365 CoPilot be free?

Microsoft 365 CoPilot is not free. It's positioned as a premium add-on with substantial benefits, and it comes with a cost of $30 per user per month.

Is Copilot free with Office 365?

No, CoPilot is not available for free with Office 365. It is an additional feature that aims to enhance productivity and streamline tasks, and it comes with its own separate cost.

How to license M365 Chat?

M365 Chat in Teams requires a full Copilot for Microsoft 365 license assigned to the user.

Work with an independent negotiation expert

With the scale of the impact on your IT budgets, profitable CoPilot implementation is not an easy task. Find an expert who is not dependent on license sales, and assess your deployment roadmap from various angles.

We would be delighted if you consider SAMexpert to be your trusted advisor on this journey. Message us using the form below, and one of our senior negotiation experts will be in touch with you as soon as possible. We usually respond in one business day.