There was a meeting, someone shared their screen, a colorful icon appeared in the corner of Word, and the consensus was: "we now have AI." Weeks later, the complaint came from two completely opposite directions: "it's useless" or "we're already using Copilot." Both groups were right. They were just talking about entirely different products.
Microsoft calls everything "Copilot." The free browser assistant, the chat included in the corporate subscription, and the paid tool that reads your emails, knows your calendar, and summarizes your meetings. One name. Three experiences. No explanation in between.
Three products wearing the same face
Microsoft organizes Copilot into tiers, but doesn't seem eager to make that clear in its marketing materials.
| Free Copilot | Copilot Chat (included in M365) | M365 Copilot (paid) | |
|---|---|---|---|
| Cost | Free | Included in M365 subscription | ~$18-30/user/month (add-on) |
| Accesses your files | No | No | Yes |
| Accesses email and meetings | No | No | Yes |
| Work IQ (your work context) | No | No | Yes |
| Works inside Word, Excel, Outlook, Teams | No | Limited (since Apr/2026) | Yes |
| Enterprise data protection | No | Yes | Yes |
| Available models | OpenAI (default) | OpenAI (default) | GPT (OpenAI) + Claude (Anthropic) |
| Agents | No | Pay-as-you-go | Yes |
| Best for | Personal and general use | Corporate entry point | Real integrated work |
The first tier is free Copilot: accessible from any browser, no account or subscription required. It's a web-grounded chat assistant. It answers questions, summarizes articles, generates text. It knows nothing about you.
The second is Copilot Chat for business: included at no additional cost for any organization with an eligible Microsoft 365 subscription (Business Basic, Standard, Premium, E3, or E5). It's still a web-grounded chat, but with commercial data protection: your prompts are not used to train models. This is what most companies have today, even if they don't realize it.
The third is Microsoft 365 Copilot: a paid add-on on top of the base license. It's the only one of the three that knows your files, your emails, your meeting history, and that actually works inside the apps.
What you really get without paying anything extra
The free Copilot Chat (the corporate subscription one) does useful things. It answers web-based questions, generates text drafts, and analyzes files you paste manually into the chat. For anyone who has never used an LLM at work, it's a reasonable starting point.
The limit shows up fast: it doesn't know who your clients are. It hasn't read the contract you closed last week. It has no access to the email you forgot to answer. It doesn't know your company's context. Every conversation starts from zero.
That has a technical name: the absence of Work IQ. It's the intelligence layer that, in the paid tier, gives Copilot real context about your work. It understands your professional relationships, indexes your content semantically, and pulls information from emails, meetings, and chats without you having to ask. Without it, Copilot answers questions. With it, it understands the work.
2026: the year the demo got smaller
The free tier isn't standing still. It's shrinking.
In April 2026, Microsoft limited the free Copilot Chat inside Office apps. Users who had been using the assistant directly in Word or Excel, without a paid license, started hitting restrictions. Full in-app access now requires a license.
In August 2026, Deep Research, one of the most useful features in the free tier (generating detailed reports with full citations), was retired. Its replacement, called Researcher, is only available in paid plans.
This isn't coincidence. It's strategy. Microsoft is turning the free tier into a demonstration of what the paid product delivers. It works just enough to show the concept, not enough to replace the real thing.
GPT or Claude: a choice only the paid tier offers
In the free tier and corporate Copilot Chat, the model running underneath is OpenAI. Full stop.
In the paid M365 Copilot, that changed in 2026. Users can now choose between GPT (OpenAI) and Claude (Anthropic) inside Copilot Chat, Excel, Word, PowerPoint, Copilot Studio, and the Researcher agent, all within the same license, at no additional cost.
It's a clear signal that Microsoft is moving away from its exclusive reliance on OpenAI and betting on a multi-model strategy. For the end user, it means having real options based on the type of task. For the market, it means no AI vendor is guaranteed a permanent seat at the table.
One caveat worth noting: Claude models are processed outside Microsoft-managed environments, with data transferred to Anthropic's infrastructure. And in regions such as the European Union, EFTA, and the United Kingdom, Claude is not enabled by default: administrators must activate it manually in the Microsoft 365 admin center.
The first step that actually changes things
If the organization already has a Microsoft 365 Business subscription (Basic, Standard, or Premium), the real first step is Microsoft 365 Copilot Business: an add-on at approximately $18 to $21 per user per month, billed annually. It's not a standalone product. It only works on top of an existing base license.
The real cost for a small company, say 10 users, is the base license plus the add-on. Depending on the base plan, that's somewhere between $28 and $52 per user per month total. Not cheap. Not expensive for what it delivers. But it's a decision that deserves to be made with open eyes, not under pressure from a sales deck.
The name doesn't tell the whole story
The confusion around Copilot is not a communication accident. Identical names for different products create the illusion that the company "already has AI," which reduces internal resistance. And they create enough frustration to make the upgrade to the paid product look like the obvious solution.
The point isn't whether it's worth paying or not. The point is knowing what you have, what it does, and what it doesn't, before any other conversation. Most organizations in 2026 still don't know exactly which tier they're on. That, on its own, is a productivity problem.
Sources
- What's the difference between Microsoft 365 Copilot and Copilot Chat? — Trusted Tech Team
- Free Copilot is turning into a demo as Microsoft shifts real features to paid tiers — Windows Central
- Microsoft Copilot Pricing in 2026 — GeoToolbox
- Anthropic's Claude Models in Microsoft 365 Copilot: What's Available in 2026 — ITechGuides
- Expanding model choice in Microsoft 365 Copilot — Microsoft 365 Blog