Now that Copilot for Microsoft 365 can be purchased by anyone (with no minimum license count), organisations are starting to think about it more seriously as they form AI strategies and budgets. Looking across Microsoft's family of Copilots, some are free, some are licensed, some are general, and some are targeted as specific personas - but most would agree it's Copilot for Microsoft 365 which stands as the principal Copilot for workplace use. We could be moving from an era where countless hours go into creating and consuming information in very manual ways to a new era where generative AI is doing more of the work - to write that report, create that presentation, or write the words to respond to that e-mail. Those are creation examples, but when AI can summarise, identify key points, generate follow-up actions, and even identify areas of accord and discord, so many of the consumption-based subtasks we do also become more optimised and accelerated too. With the most expensive price tag, Copilot for Microsoft 365 is also the one where the decision-making for the investment is most complex.
Something I spoke about in a recent talk (at the European SharePoint, Microsoft 365 and Azure Conference) that some people latched onto is how surprising the numbers are in terms of time-savings needed for Copilot to pay for itself. The license is a significant investment of course at $30 or £24.70 per user per month with a 12 month commitment - whichever way you slice it, that's an expensive proposition given that the list price of E3, the entire productivity suite for enterprise users, is $36 or £33.10 per user per month. When seen as a "AI bolt-on" the cost of Copilot is indisputably high, and perhaps unsurprisingly when Microsoft announced pricing the common response seemed to be "far too expensive, it doesn't make if it costs nearly as much as the entire suite". There are lots of ways to look at this, but despite the similarities (both Microsoft offerings, both related to productivity, both additive to each other) a direct comparison of one vs. the other actually doesn't make too much sense to me personally - the propositions and value provided are so different.
Principles for a Copilot value case
Before we look at the numbers, let's agree on three things:
- The value case for Copilot for Microsoft 365 shouldn't hinge on time savings and an easily-modelled financial equation alone - there are other benefits which are less easily quantified which constitute value. Every organisation will need to form their view on this, but I list examples later in the article.
- Time savings have to result in genuine gains - whether it's five minutes or five hours, most organisations will take the view that any time saved needs to translate into real value. In other words, there's no ROI if the organisation doesn't benefit from the additional time, perhaps because the time benefit goes exclusively to the employee instead or it simply doesn't go on productive work
- Basing the model on known or anticipated use cases doesn't work - you can try to predict use cases ahead of time, but the reality for both Copilot and generative AI on the whole is that the business will find benefit in unpredicted ways. Better to pilot the technology in some way and see what happens
A simple ROI model
The calculator below models the break-even point for Copilot for Microsoft, based on time-savings alone, for three different salaries. I'll go into details below but it uses UK parameters for employer tax and so on to arrive at the "true" total cost of an employee per day, but the currency used is Euros since that's where most of my readers are.
The real point of course, is that it doesn't take five hours or even two hours per month saved for Copilot to pay for itself. So long as we can stand behind them, the time savings required are quite minimal:
As the salary increases even less time needs to be saved of course - but even on the lowest salary we're talking only 36 minutes per month. This is the surprise to many people.
Some detail on the calculation:
- The calculator uses UK parameters, in fact the true cost per day of an employee in our company (Advania UK). This means the current employer tax rate (National Insurance in the UK) and a 4% pension contribution, but excluding other aspects sometimes modelled such as an allocation for office space etc.
- I haven't looked, but I suspect these percentages won't vary wildly across countries enough to skew the overall model dramatically
- Although the tax parameters used etc. are UK, the currency used is Euros to reflect my readership
- The Excel is linked below if you want to download and amend
If using or pointing people to a web page works better for you,
Dan Toft has taken this and created a great online calculator which also allows you to edit the parameters -
ROI Calculator (dan-toft.dk). You'll need to be able to calculate the total cost from a base salary yourself (i.e. calculations for employer taxes and pensions aren't built in), but it depends what you need. Excellent work Dan.
The wider value case for Copilot for Microsoft 365
I mentioned earlier that measuring the ROI for Copilot based on time savings alone is only part of the picture, that it's not just about productivity gains and time efficiencies. I used this slide in my talk to expand the discussion to some of the wider benefits:
There's obviously quite a lot wrapped up into those four bullet points and they're not quantitative benefits you would model into a licensing business case, but the positive impact on the employee experience and output needs to be considered somewhere. I feel there's a reduction in cognitive load, and switching between different contexts and tasks becomes easier and less painful. When creating content, regardless of how good you are as a writer your output can be improved - Copilot will often bring in a point you hadn't considered or simply articulate the message better than you would. That's not to say that Copilot outputs are always ready to go or it's able to do the work for you - that would be lovely, but more often than I iterate with further prompts and/or add/edit/delete to what Copilot has created. Nevertheless, I'm faster on quite a few tasks and Copilot's ability to research and bring in facts or approaches others have used helps on the quality front.
As referenced in the last bullet, one area Copilot is particularly helpful in is comms and e-mail. There's drafting e-mails of course, and being able to ask for a summary of my inbox in the last week and pull out any actions I need to take is extremely powerful - even if I scan through the mails myself too, I'll spend less time doing so. Using the "Summary by Copilot" feature to summarise the main points of a long individual e-mail or thread works very well too - picking up context and making a judgement at speed on any action/response makes moving through your inbox simpler and quicker. Finally, the "Coaching by Copilot" capability in Outlook is surprisingly useful too - there's an initial novelty of having your communications and tone judged at first but we all write mails at speed often without considering enough quite how it might read on the other side, and it has enabled me to catch a couple of sub-optimal communications. I'm a senior leader in our company, and perhaps Copilot is right to catch me on phrases such as (real example here) "it seems bonkers to me that...." and suggest some wording that might be more appropriate! You can take it or leave it depending on the context (and there's an argument that some authenticity often comes from our from-the-hip communications), but having things pointed out at least prompts the reflection and supports the choice.
All in all, there are lots of benefits beyond the hard numbers. It's also an interesting thought that as employees increasingly expect a high-fidelity employee experience and toolset that allows them to give their best, Copilot for Microsoft 365 does make a clear statement on that and perhaps becomes a differentiating factor between organisations and teams battling for talent.
License strategies for Copilot for Microsoft 365
So, do you license everyone or just a subset? Start big or with a small, focused pilot? No single answers on this of course, and it's going to be fascinating to watch how the Copilot era unfolds and how organisations approach the investment and benefits realisation. I won't share all the guidance we're giving to clients, but starting with a pilot covering different user types and personas makes sense for any significant investment in new technology like this - and that's how most 1000+ seat organisations I've spoken to are starting. With regards to coverage, clearly the investment required for Copilot is dramatically different if licensing 10-20% of the business compared to 100% - and this differential obviously scales to big numbers for the largest organisations. To license all users at list price for 30,000 employees would cost over £10m, and no less than £33.6m for 100,000 employees. No doubt those are hypothetical scenarios since such a deal would be heavily negotiated as part of an Enterprise Agreement (and/or perhaps in exchange for a high-profile case study - look out for those soon), but it is illuminating to consider the difference between licensing some and licensing all.
My feeling is that most orgs will structure the case based on licensing a subset of users according to persona/role and the value conferred. This makes sense because no-one would argue that all roles will benefit from Copilot and gen AI to the same extent, and licensing users who simply aren't adopting the tool heavily doesn't make sense either.
Along with the information governance/data security piece (something we've spent a lot of time on developing services for), the different aspects of licensing mean that there can be a few steps on the Copilot for Microsoft 365 journey for most companies who are buying in. Hopefully this post on some of the economics has been useful though.
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