How AI Will Change Microsoft 365 Pricing


Reports about how artificial intelligence (AI) is sweeping the IT market are everywhere. There are nearly as many definitions of AI as there are providers marketing it.

Microsoft defines it this way: “AI is the simulation of human intelligence by machines, especially computers. AI can perform tasks that usually require human intelligence, such as visual perception, speech recognition, decision-making and language translation.”

In Microsoft Office, text, spreadsheet and presentation documents have not changed a great deal over the last decade. And, while this suite of offerings is still the centerpiece of its software-as-a-service solution Microsoft 365, the cloud subscription has grown to include new information and user security services, along with greater compliance services.

We expect Microsoft’s next move to be integrating AI into Microsoft 365. The company has already announced that, in the coming months, it will be layering AI features into Microsoft 365 via its Copilot technology, which is a known tactic to “seed” its customer base in anticipation of repackaging and repricing subscription bundles.

What Microsoft 365 Customers Can Expect Next

The challenge will be in ensuring that its AI features provide real operational value and benefit to enterprise subscribers. As we know, AI poses potential risks. Given those, how can enterprises determine if Microsoft’s AI features are right for them and if the increased costs will be justified?

We expect that, as Microsoft begins its fiscal year 2024, which starts July 1, 2023, it will begin to roll out sales and marketing initiatives positioning AI capabilities in Microsoft 365. Enterprises will need to be prepared to decode AI-related vernacular, such as rules-based AI, machine learning, deep learning and natural language processing, to understand its applicability to their business needs.

As history has shown, the advent of new technology often follows a similar path, with lots of hype and less specificity in terms of practical use cases, user training, deployment costs, governance, ROI and risk. And, while Microsoft paints a robust picture of the potential of AI in Microsoft 365, the question remains for enterprises about how far they will want to wade into the “AI river” with Microsoft’s AI-augmented products.

Will Microsoft 365 + AI Warrant Higher Subscription Prices?

The value proposition for Microsoft 365 today does not warrant a price increase. Will a repackaged and repriced Microsoft 365 with AI warrant one? Enterprises that moved to Microsoft 365 E5 and who thought they had capped their exposure to increased subscription costs by doing so may be in for a surprise.  

Prior to repackaging and repricing Microsoft 365 bundles, the company will likely propose the currently available Viva products, which purports to contain AI functionality. Enterprises should be skeptical about using Viva as the starting point for their AI journey with Microsoft. Instead, companies should assess their current service utilization to determine whether increased, or new service, consumption will generate material economic value.

Tools are available today that can drill into all the Microsoft 365 utilization datapoints needed to assess where both value realization and value leakage are occurring. If a foray into nascent Microsoft AI technologies is deemed appropriate, it should be funded with the ever-present “overspend” in today’s Microsoft 365 relationship.

AI Evolves in the Workplace of the Future  

AI from Microsoft will evolve over time. And early adoption is always subject to risk. The concept of the modern workplace – where the tension between in-office and at-home work continues to unfold – is likely to be the context in which AI evolves. Enterprises will need to understand how and where work will be done to properly design and deploy their AI strategies, so they are sure to carefully balance security, governance and privacy.

The “X” factor in all this is the potential for governmental regulations for AI. We anticipate increased government intervention, which could result in some costly reset actions for enterprises that are early AI adopters.

We should all be wary of the early hype surrounding Microsoft’s AI offerings. Working with a qualified advisor can help you understand how to avoid unexpected surprises and costs from Microsoft. ISG Provider Lens publishes studies to help enterprises navigate the Microsoft ecosystem. Contact us to find out how we can help.


About the author

Louis Pellegrino

Louis Pellegrino

Louis joined the ISG team in early 2014 after nearly 20 years with Microsoft Corporation. Louis has compiled a track record of Enterprise client success underpinned by customer focus, strategic thinking, organizational agility, problem-solving acumen and impactful knowledge transfer which has established his reputation as a Microsoft licensing expert.

During his time with Microsoft, Louis worked in both the Consulting Service Group as a Practice Manager and in the Worldwide Licensing and Pricing Group as a Director responsible for designing and negotiating Global Volume Licensing relationships. As a highly effective and influential communicator/negotiator, Louis has delivered consistent business results across both revenue and quality of service performance targets.