I’ve spent a lot of time recently walking clients through the different AI options in Microsoft, discussing what each model offers and designing solutions that fit their business needs. As I explained the pros and cons of the various licensing approaches, it struck me that a clear, structured summary would be useful beyond those conversations, something that captures the key differences, the scenarios where each shines, and the watch-outs to be aware of.

The challenge is that Microsoft has layered AI across multiple levels of its ecosystem, each with its own licensing model, capabilities, and considerations. Understanding these levels is critical, not only to maximise value, but also to avoid unnecessary spend or compliance risks.

Below, I’ll walk through the main levels of Microsoft AI, from the free entry points (assuming you have Microsoft 365 Business licensing) through Copilot and Power Platform to advanced Azure AI Foundry integrations, outlining what each includes, where it fits, and what to watch out for.

1. Free Copilot Chat (Browser-Based, for All Microsoft 365 Licenses)

What it is:

• Available to all Microsoft 365 users directly in the browser.
• Now replaces the traditional Office.com homepage.
• Equivalent to a ChatGPT-style assistant, but secured within your Microsoft tenant.
• Allows natural language Q&A, research, brainstorming, and simple generation tasks.

Why use it:

• Prevents users from pasting company data into external AI tools like ChatGPT.
• Provides safe experimentation with AI for all staff.
• Great entry point for knowledge workers with no additional cost.

Pros:

• Free with your Microsoft 365 license.
• Secure environment for staff.
• Simple and accessible, low barrier to entry.

Cons / Watch-outs:

• No deep integration with productivity apps (Word, Excel, etc.).
• Limited to general chat and research.
• Can create a false sense of “full Copilot” capabilities.
• If left un-restricted, these users can access Copilots (from options 2 and 3 below) and use them, on a consumption pricing model

Scenarios of Value:

• Employees brainstorming content ideas.
• Summarising web research.
• Drafting lightweight responses.

2. Microsoft 365 Copilot (OOTB Personal Productivity)

What it is:

• Licensed per user as an add-on.
• Brings AI directly into Word, Excel, PowerPoint, Outlook, and especially Teams.
• Think of it as AI embedded into the apps people already spend their day in.

Examples of Value:

• In Word: Draft proposals or rewrite content in seconds.
• In Excel: Identify trends, build pivot summaries, or generate formulas without deep syntax knowledge.
• In Outlook: Books meetings, summarises email threads and drafts emails.
• In PowerPoint: Create full decks from a content like Word document or notes.
• In Teams: Real-time meeting summaries, action extraction, and highlights.

Pros:

• Seamless, intuitive integration with everyday tools.
• Saves significant time in repetitive knowledge work.
• Great for personal productivity improvements at scale.

Cons / Watch-outs:

• Requires per-user licensing.
• Adoption maturity varies, without training, staff may underutilise it.
• Doesn’t solve custom business process-level automation, only personal efficiency.

Scenarios of Value:

• Staff-heavy organisations looking to increase daily productivity.
• Teams with frequent meetings that benefit from summarisation.
• Knowledge workers spending time on content creation.

3. Microsoft 365 Copilot Agents (Affectionately “Mini Agents” in Teams)

What it is:

• Included with the Microsoft 365 Copilot license mentioned above.
• Built with prompts, Online or Microsoft-based knowledge sources
• Agents are pre-configured conversational assistants surfaced in Teams and across OOTB apps.
• Users can swap agents within the Microsoft 365 apps depending on the task.

Key Points:

• No extra cost for licensed Copilot users when building and using these Copilots.
• Limitations: number of agents per Teams, memory rows, access types, and where it can be deployed.
• Hidden risk: Copilot Chat-only users (Level 1, without a Copilot license) can still see these agents—but if they use them, the organisation incurs consumption-based charges.

Pros:

• Expands value beyond personal productivity into semi-custom assistance.
• Accessible directly in Teams and other apps.
• High ROI when designed for common business tasks.

Cons / Watch-outs:

• Governance is essential to avoid unexpected consumption costs.
• Limited data and action capabilities compared to full-fledged Copilot Agents.
• Limited flexibility compared to Copilot Studio or Power Platform AI.

Scenarios of Value:

• Building a helpdesk assistant surfaced in Teams.
• Department-specific FAQ bots (e.g., HR policy assistant).
• Simple task routing (shift rosters, IT ticket queries).

4. Power Platform AI Builder

What it is:

• AI capabilities embedded into the Power Platform.
• Provides prebuilt AI models such as OCR, sentiment analysis, image recognition, and entity extraction.
• Often overlooked because it’s not branded as “Copilot.”

Licensing:

• Uses AI Builder credits (consumption-based).
• Costs scale with usage volume rather than per user.

Pros:

• Quick and affordable entry into AI-driven automation.
• Tight integration with Power Automate and Power Apps.
• Ideal for automating document-heavy or repetitive tasks.
• Pre-built models can be customised and worked into your Power Platform solutions.

Cons / Watch-outs:

• Limitations within the prebuilt models (though extensible).
• Scaling up usage requires careful monitoring of credits.
• Less “sexy” than Copilot, so often overlooked by decision makers.

Scenarios of Value:

• Automating invoice OCR and processing.
• Analysing sentiment from customer emails.
• Image tagging for field service apps.

5. Custom Copilot Studio

What it is:

• The next step up: create your own copilots tailored to business processes.
• Supports custom knowledge bases, process flows, integration with Power Automate, and external APIs.
• Spectrum of use cases: from lightweight FAQ bots to autonomous agents that trigger workflows themselves.

Licensing:

• Consumption-based pricing model.
• Different connection and complexity types are charged at different message rates
• Costs vary based on usage and complexity.

Pros:

• Highly customisable, aligns closely with unique business processes.
• Can integrate with multiple business systems and apps, including Power Platform.
• Can all other Agents, APIs, external systems, or Azure Foundry.
• Enables advanced scenarios like proactive notifications or workflow orchestration.

Cons / Watch-outs:

• Governance is critical, scope creep can lead to runaway consumption costs.
• Requires design maturity and business alignment.
• Higher complexity compared to OOTB copilots.

Scenarios of Value:

• Creating a customer-facing support copilot embedded in a portal.
• Automating cross-departmental workflows with escalation rules.
• Building proactive agents that notify staff of regulatory breaches.

6. Azure AI (Azure Foundry)

What it is:

• The most advanced option, anything from prebuilt vision and speech models to custom large language models.
• Full flexibility: video recognition, anomaly detection, predictive analytics, and beyond.
• Can integrate with Copilot Studio, Power Platform, or standalone apps.

Licensing:

• Consumption-based, seperate to Copilot and other licensing models here.
• Highly variable costs depending on workload scale and model types.

Pros:

• Unlimited flexibility, if you can imagine it, you can build it.
• Enterprise-grade capabilities.
• Best for organisations ready to embed AI deeply into core systems.

Cons / Watch-outs:

• Requires significant expertise to design and manage.
• Cost predictability can be challenging.
• Risk of over-engineering if business case isn’t clear.

Scenarios of Value:

• Video analysis for security or compliance.
• Large-scale customer sentiment and trend analytics.
• Bespoke AI models for industry-specific needs.

Choosing the Right Level: A Decision Framework

When advising clients, I recommend looking at three key dimensions:

1. Can it be done OOTB?
2. What’s the actual process you’re trying to automate? Don’t choose the tool, design the process and solution, and functionality required.
3. Who is the audience? Consider licensing
4. What’s the scale? Now vs future state
5. Have you considered governance?

Closing Thoughts

Microsoft’s AI ecosystem isn’t “one size fits all.” Each level, from free Copilot chat through to Azure Foundry, serves a different purpose.

• For safely introducing staff to AI, start with the free browser-based Copilot.
• For personal productivity, Microsoft 365 Copilot delivers daily time savings.
• For task-specific automation, explore AI Builder and mini agents.
• For business process transformation, Copilot Studio shines.
• For industry-grade innovation, Azure Foundry unlocks full potential.

The key is to align the AI level with your organisation’s maturity, use cases, and governance model. Make the wrong choice, and you risk underutilisation or cost blowouts. Make the right choice, and you’ll embed AI where it matters most—delivering measurable business value.