The last three years have seen Microsoft pivot to a hard focus on AI, similar to how the company turned to the web browser and internet in the late 1990s or tried to shoulder up to Apple and Google in mobile in the late 2000s. These days, it seems like every product and group in Microsoft is either finding a way to co-opt the Copilot brand, or forcibly bolting Copilot to some otherwise unrelated technology in an effort to ride the AI wave and be relevant. But unlike those earlier pivots, the AI tsunami comes with the massive expense of building out datacenter infrastructure with expensive servers, thereby forcing Microsoft to cut costs and try to increase revenue elsewhere to feed the beast. 

It’s understandable from a business strategy perspective. Microsoft views AI as an existential development and so do investors looking for the Next Big Thing to move the line and up and to the right. Microsoft’s own lore tells the company it can dominate if it just focuses enough, as it did against Netscape in the “browser wars,” and also warns of the high cost of losing out, as it did with mobile (and Nokia). 

But for the millions of customers that rely on Microsoft for stable, predictable technology, especially the businesses that view tech as a reliable tool for more traditional markets, Microsoft’s focus on AI comes as a heavy tax on the more “boring” technologies they depend on.  

This isn’t entirely new. Customers are used to being pushed in Microsoft’s strategic directions—whether it’s the transition from on-premises Office software to hosted Microsoft 365 services, or changes from perpetual licenses to subscriptions. It usually comes with a mix of carrot and stick, with Microsoft cajoling customers forward with new features or temporarily lower prices and pushing from the rear by withholding features from legacy products and reducing interoperability with newer services. 

However, the focus on AI is having a greater impact than Microsoft’s previous obsessions strategic pivots. 

The Impact of Betting the Company 

In 2025 Microsoft laid off more than 15,000 across the company. Combined with RTO mandates designed in part to encourage remote workers to resign, many teams were drastically reduced or eliminated. This has scaled back or delayed roadmap milestones on several services, and Microsoft has been even more aggressive at culling long-running “previews” and sunsetting software (just look at our Roadmaps for the growing list of deprecations and retirements.) 

Meanwhile, several long-standing products suffer from benign neglect – still supported but without new features – while reports of quality issues with staple software like Windows client seem to grow. Other groups have been given aggressive revenue goals or sales targets, forcing them to focus on increasing average revenue per user (ARPU) with new add-on licenses and reducing the avenues for customers to negotiate discounts or even directly do business with Microsoft. This includes the broad move of smaller Enterprise Agreement (EA) customers to the Microsoft Customer Agreement (MCA), and the discontinuation of existing discounts for online services provided across all of its EA tiers. 

And although there are undeniable use cases for AI, Microsoft’s relentless rebranding, repackaging, and false starts (Windows Recall, for example) have left customers confused. To make matters worse, heavily marketed new AI capabilities are often attached to Microsoft’s Frontier program which, similar to the older Windows Insider program, provides preview access to features that are unfinished and may never actually ship in a finished state. 

All of this makes doing business more complex for customers operating in an already uncertain environment, and can force unwanted change and uncertainty in places where organizations would prefer stability. But it pushes customers to where Microsoft wants them to be and helps move their AI efforts forward.  

What’s a Disgruntled Customer to Do? 

However, quitting Microsoft isn’t what most customers want either; nobody looking for stability wants that kind of complex change. The current situation emphasizes the importance of not taking the Microsoft relationship for granted or leaving it on “cruise control”, and not assuming that Microsoft will develop their products with your needs first and foremost in mind, especially if your company doesn’t fit the mold of AI-forward “Frontier Firms.” 

Customers need to take an active approach to managing their relationships with Microsoft around the services and software they use, focusing relentlessly on what benefits their own businesses even if it doesn’t align with Microsoft’s strategy. Research and analysis from independent sources (yes, like Directions on Microsoft) can be an invaluable tool. But it’s just as important to internalize that what your business needs and what Microsoft wants are probably not one and the same. 

Strategies exist that you can leverage, even if you’re not fully aligned with what Microsoft wants: 

Give a little, get a little. Microsoft’s sales force is getting high pressure to sell AI services. Use that to your advantage when negotiating your contracts. Maybe buy more M365 Copilot than you planned, in exchange for concessions on things you need like ESUs, exceptions for special use cases, or credits for services that your business already relies on. 

Avoid the FOMO. Yes, there are plenty of white papers and customer cases that Microsoft will tout, and maybe a magic quadrant or two. But there are lies, damned lies, and statistics. When Microsoft says everyone is using Copilot, do they mean the expensive M365 Copilot, or that every search typed into Edge is technically a “Copilot search?” Keep clear of false urgency, and focus on what best benefits your business needs. 

Let some of the dust settle. The landscape is still rapidly changing, even if M365 Copilot technically went GA in late 2023 (as Copilot for Microsoft 365!) Rebranding and repackaging is ongoing, agents have become the newest hot thing, many heavily promoted features are only previews, and industry alliances are still shifting. Act judiciously and focus on solutions with real benefit—the cost of adopting too early based on promises and previews can be higher than a missed opportunity. 

You can learn more about making the best of your relationship with Microsoft from the Directions on Microsoft Briefing podcast, or the Directions YouTube channel. 

What challenges is Microsoft’s AI monomania creating for your business, and how are you handling it? Email me at jgaynor@directionsonmicrosoft.com.  

Microsoft will be increasing pricing for its commercial Microsoft 365 and Office 365 suites beginning July 1, 2026.   

Company officials attributed the increase to the inclusion of AI capabilities such as Copilot Chat, along with security and management add-ons it is bringing to the Office and Microsoft 365 commercial suites. 

Microsoft 365 E3’s list price will increase from $36 USD per user per month to $39 USD per user pe month. Microsoft 365 E5 also will increase by $3 USD per user per month — from $57 USD to $60 USD. The Microsoft 365 F1 SKU is going from $2.25 USD to $3 USD per user per month; F3 is going from $8 USD to $10 USD per user per month. Officials said nonprofit pricing will be “adjusted in line with commercial pricing, as it is tied to commercial rates through a fixed percentage discount.”  Government Office suite pricing is going up, as well; in some cases phased over two years.

In 2022, Microsoft increased prices of most of its Office 365/Microsoft 365 subscriptions, also citing the expansion of features as the reason. At that time, E3 went from $32 USD to $36 USD per user per month, but held the price of E5 steady at $57 USD per user per month  to try to increase usage of that particular version. In 2024, Microsoft also increased prices of its on-premises Office servers by 10%. 

More Built-In Features 

In a Dec. 4 blog post, Microsoft officials detailed some of the features the company recently added and/or planned to add to Microsoft 365 suites for no additional charge. Among those features: 

• M365 plans now include Copilot Chat Word, Excel, PowerPoint, Outlook, and OneNote. Microsoft will still contine to charge an additional $30 USD per user per month for a full M365 Copilot license (on top of the more expensive Office subscriptions). 

• Microsoft 365 E3 and Office 365 E3 are getting Defender for Office Plan 1’s enhanced email security features. 

• Microsoft 365 E3 and E5 are getting certain Intune capabilities, including Intune Remote Help, Intune Advanced Analytics and Intune Plan 2. E5 customers also get Intune Endpoint Privilege Management, Enterprise Application Management and Microsoft Cloud PKI. (These capabilities will continue to be available as separately priced add-ons.) 

• Microsoft 365 E5 customers are getting Security Copilot features. (Currently, only M365 E5 customers who purchased Security Copilot are getting these, but the plan is to make them available to all M365 E5 users “in the coming months.) 

Teams Pricing Tweaks 

In other related pricing news, Microsoft recently tweaked its availability and pricing for its Microsoft 365 suites with and without Teams.   

Starting Nov. 1, as the result of an agreement with the European Commission, new customers worldwide were able again to purchase M365 and Office Enterprise suites that include Teams. And per European Commission requirements, Microsoft increased the delta between the price of M365 and Office 365 suites with and without Teams. 

The new pricing:  

• M365 E3 (with Teams) is $36 USD per user per month 

• M365 E3 (no Teams) is $27.45 USD per user per month. 

• M365 E5 (no Teams) is $48.45 USD per user per month 

• M365 E5 (with Teams) is $57 USD per user per month 

• M365 F3 (no Teams) is $6.93 USD per user per month 

• M365 F3 (with Teams) is $8 USD per user per month 

(Note: These prices will all be increasing as of July 1, 2026, as noted above.) 

Microsoft also agreed to provide better interoperability and data portability as part of its agreement with the European Commission. The company said it will allow third-party communication and collaboration solution providers to access M365 and Teams the same way other software companies developing add-ins do.  

Microsoft also said it plans to make available application programming interfaces (APIs) that enable access to customer data from Entra ID, Exchange Online, SharePoint Online and OneDrive in a way that is “effectively equivalent” to what Teams accesses from these services. And it will provide APIs and tools to help customers export their information from Teams for use in other third-party solutions, if desired. Microsoft didn’t provide timing for any of these commitments. 

By Barry Briggs

Let the semantic-layer wars begin!

A little over a month ago, I made the less-than-prescient claim that “Microsoft has done little to nothing about a semantic layer.” But – in fairness to me – I also mentioned “rumors of a stealth mega-project underway at Microsoft to build some sort of ‘semantic layer’” that might compete with leaders in the field like Palantir, Celonis, AtScale, and others.

At Ignite two weeks ago, a succession of speakers elaborated upon a new brand, called “IQ,” that purportedly brings new intelligent capabilities to Fabric, Microsoft 365, and Azure AI Search, called, respectively, Fabric IQ, Work IQ, and Foundry IQ. (These appear to supersede an earlier capability called Context IQ, introduced in 2021.)

Let’s unpack these important announcements. First, we’ll discuss what they are and what they can do for you; then we’ll compare and contrast them with other offerings in the industry, notably Palantir, and what it means for them; and lastly, what’s likely to come next.

The Three IQs

As I mentioned, at Ignite Microsoft announced three new features under the IQ brand; each of these layer on top of existing products with the goal of further empowering both end users and the AI agents that Microsoft expects will become prevalent. Each, in different ways, builds a “knowledge graph” of the underlying data store – that is, links and relationships between disconnected pieces of data. Such a graph might, for example, connect a database of employees with a facilities database, enabling insights for how well office space is used, if teams are collocated, and so on.

In each of the three new capabilities Microsoft builds on existing layers.

Work IQ unsurprisingly leverages Microsoft 365’s Graph API – which already maintains many such relationships – and adds so-called “memory” features, learning and recalling users’ actions and habits. Thus a user might ask Microsoft 365 Copilot to “find the email from Susan a few weeks ago, put in the pricing she suggests into a contract like the one we did with Acme, customize the logos appropriately, and generate a Word document,” or “create a detailed financial model of the proposed acquisition of Contoso” in Excel.

In Fabric IQ, Microsoft again leverages an existing capability, in this case the semantic models created in support of Power BI applications, to create a knowledge graph of the department or enterprise. Alternatively, data professionals can create their own ontologies (maps or blueprints of the relationships between key subject areas); for example, product > part > supplier > contract > terms, using a new Fabric ontology tool (in preview).

Microsoft claims that Fabric IQ helps resolve core business concepts (“customer,” etc.) and illuminates relationships to other entities. (As we’ll see, this is harder than it sounds.)

Moreover, with two new agent types, Data Agents and Operations Agents (the former being in preview all year), enterprises can deploy sophisticated chatbots and even operational (IoT) agents that monitor devices in real time and predict and prevent failures, respectively. (Note that both of these agents are designed to work without Fabric IQ but have more capabilities with Fabric IQ.)

Finally, Foundry IQ, based on Azure AI Search (and built by that team), helps developers quickly index enterprise data sources and make them available to whatever agent might need them. Instead of a RAG application querying a single data source, Foundry IQ simplifies the ability for such apps to examine a range of sources.

The New New Application Stack

Back in April, I posited that Microsoft’s vision for the AI-centric application stack consisted of a UI layer (Copilot); logic (AI agents); data (Fabric, et.al.); and hardware (massive data centers).

We need to tweak the stack a bit: Microsoft has added a new “semantic layer” to its data sources, with the goal of enabling agents (and humans) to make increasingly better decisions. (I say “increasingly” because over time agents – in theory – learn and fine-tune their actions.)

What Could Possibly Go Wrong?

It’s a compelling vision, but it’s likely that the pesky realities of enterprise data will slow adoption. Few enterprises have a well-architected enterprise data model (EDM), as we discussed in our previous blog post. So – for example – what happens when the carefully designed definition for “customer” created in the ontology tool conflicts (say, in something as trivial as the number of address lines) with that in one or another system? Or when a salesperson insists on one definition and the finance analyst, another?

Creating an ontology, in Fabric or elsewhere, is a major effort and requires on-going maintenance, so there’s no getting out of the hard work. For example, the Fabric ontology tool can discover Azure hosted data and build the foundation of an ontology on what it sees, but bringing in external data sources like an Oracle cloud database takes manual effort.

Even with auto-discovery, the people you charge with building and maintaining the ontology will face a hill of challenges, determining how one data source relates to another, what column names to use, how to resolve ownership of data that appears in two sources, creating additional dimensions (data from data) to address a business demand, and configuring triggers that allow data in one source to act on data in another source. And what happens when one of the external data sources inevitably changes? And, they have to do all this while following the security requirements and data sovereignty of each data source.

Still, the appearance of semantic-layer technologies across Microsoft’s portfolio can enable some powerful usage scenarios – yet another reason, perhaps, for enterprises to embark on data hygiene projects. (I recommend, based on experience, to start at the department level before taking on something as massive as a full EDM: quick wins to show value and focusing on where the data is created can accelerate adoption and convince skeptics.)

The Semantic Wars: Who Do You Back?

Since the announcement of the “IQs,” lots of virtual ink has been spilled comparing them to established vendors, most notably Palantir. Here’s a quick summary of the situation as it stands today:

• Work IQ, Fabric IQ, and Foundry IQ are new (with many of the features still in preview) and not yet widely adopted; however, for Microsoft-centric enterprises they’re likely the right choice, since they build upon and leverage existing features in the underlying platforms and services.
  
• The IQs are three disconnected services which – frankly – highlight Microsoft’s organization chart and will add complexity to creating agents that must span all enterprise data.
  
• Palantir’s Foundry (yes, the same name) is more mature and widely adopted, particularly in operational IoT scenarios. Its strategic focus is to help enterprises build a “digital twin” of their operations.
  
• Palantir’s metamodel consisting of entities and relationships (semantic layer); actions and functions (kinetic layer); and security and permissions (dynamic layer) is well thought out and cohesive. But Palantir relies on a hands-on consulting engagement with their own “forward-deployed engineers” or Accenture, Deloitte, and/or others to create the specific instances of the metamodel, which can be expensive and time-consuming.

What’s Next?

There’s undoubtedly more to come in the world of IQ. I’d hardly be surprised to learn of a “Purview IQ” which could leverage Purview’s Unified Data Catalog to reach into non-Microsoft data like Snowflake or Databricks, or even data in other clouds.

Similarly, I’d also expect IQs on each of the Dynamics 365 applications – Finance, Supply Chain Management, HR, and so on, with a Copilot UI on each of them. (Let’s just hope the “IQ” brand doesn’t get quite a dilute as “Copilot.”)

Are Systems of Intelligence Here?

Whew!

My personal opinion is that of all the announcements at Ignite, the IQs will become the most important and consequential. Perhaps indeed we are at the dawn of what Geoffrey Moore and George Gilbert called (all the way back in 2015) “systems of intelligence” that can “[mine] engagements in real-time to anticipate, influence, and optimize customer experiences.  In their most advanced form, these systems learn both from the user’s interactions as well as external observations such as an extended network of relationships.”

Do I need an IQ layer? Drop me a line at bbriggs@directionsonmicrosoft.com.

Microsoft’s annual Ignite conference for IT professionals, developers, and partners, is kicking off this week in San Francisco. CEO Satya Nadella is not the lead keynoter this year; instead, the newly minted CEO of Microsoft’s Commercial business, Judson Althoff, is doing the honors. (Nadella is busy extolling the virtues of Microsoft’s sprawling network of “fungible fleets” in its new AI superfactories.) 

To no one’s surprise, this year’s Ignite will focus on all things AI-related — and especially agent-related.  

Microsoft announced ahead of the start of Ignite on Nov. 18 that it is adding Anthropic’s models to Microsoft Foundry (the rebranded Azure Foundry), giving the company bragging rights to being “the only cloud providing access to both Claude and GPT frontier models to customers on one platform.” Microsoft execs said they will provide access to Claude across Microsoft’s Copilot family, including GitHub Copilot, Microsoft 365 Copilot, and Copilot Studio. Microsoft committed to invest up to $5 billion in Anthropic; Anthropic committed to purchase $30 billion in Azure compute capacity from Microsoft.

Directions‘ Top Ten Ignite Picks 

Here are our picks for the top 10 announcements that could impact enterprise customers and partners moving forward into 2026. In no particular order: 

1. The Agent 365 control plane: Microsoft inadvertently published some information about Agent 365 a week ago. As anticipated, this “control plane” is all about making autonomous agents more centrally manageable and secure by treating them more like user accounts. Agent 365 includes the Agent SDK, which is required to build Agent 365-aware agents and publish them to the Agent Store. These Agent 365-aware agents will integrate with Microsoft security controls, policies, compliance capabilities, and Office apps without needing custom integrations, Microsoft says. The Entra Agent ID piece is available in the Microsoft 365 admin center for those in the “Frontier” early-access program. We’ve asked Microsoft about any additional licensing and pricing required for Agent 365, but no word back so far. 

2. Work IQ links agents to work data: Microsoft has been working on adding AI smarts to its Office apps since 2021, if not before, under the “Context IQ” program. Work IQ looks to be either a rebrand or an evolution of Microsoft’s Context IQ technology.  Like Context IQ, Work IQ is a layer that connects to organizational and personal data such as files, emails, meetings, etc. and can “build memory” based on users’ preferences, habits, and workflows. As Context IQ is already part of the Microsoft 365 stack, Work IQ already is built in, as well. But now developers can access Work IQ to build agents via APIs. 

3. Even more IQ madness — Fabric IQ and Foundry IQ: There are other “IQ” branded layers in the Microsoft AI stack that are meant to help agents understand what users are doing, where to find information, and what the business data means. Fabric IQ, now in preview, extends the unified semantic layer already provided in Power BI across 20 million models to business operations, Microsoft says. Foundry IQ, also in preview, is built on top of Azure AI Search and is meant to be the “next generation of retrieval-augmented generation (RAG),” according to the company, providing a way to connect agents with data from a single knowledge base.  Microsoft is rebranding its family of Azure AI services, Logic App Connectors, and MCP servers as “Foundry Tools.”

To understand why these IQ pieces matters at a higher level, Directions analyst Barry Briggs recently blogged about why a semantic layer is so crucial to making AI useful. 

4. Microsoft 365 E5 users get Security Copilot: Security Copilot will be included for all Microsoft 365 E5 customers. Eligible E5 customers will get 400 Security Compute Units (SCUs) per month for every 1,000 licensed users (US$1,600 in value), up to 10,000 SCUs per month (US$40,000 in value, with 25,000 E5-licensed users). If you need more, it’ll be $6 per SCU on a Pay-As-You-Go basis.) Microsoft will begin offering this bundle starting today for existing E5 customers who already have Security Copilot and for all other E5 customers “in the upcoming months.” Security Copilot will continue to be available for customers without E5 separately.  

5. “Agent Factory” plan bundles Microsoft Foundry, Copilot Studio: As Microsoft has continued to add more “pro” capabilities to its Copilot Studio agent-building platform, it’s also been building out agent creation and management features in Microsoft Foundry. It is introducing a new “metered” Agent Factory plan that will allow developers to build and manage agents in Foundry and/or Copilot Studio and deploy their agents anywhere, including Microsoft 365 Copilot. We’ve asked for more details on how this new plan will be licensed and priced, but no word back so far. Update (Nov. 18): A Microsoft spokesperson said the company had “nothing to share” on how the new metered plan will be priced/licensed or if it will be required for developers who want to tie into Work/Fabric/Foundry IQ.

Update (Nov. 18): Aha! It looks like Microsoft’s recently announced Agent Pre-Purchase Plan (P3) is key to how Agent Factory service will be priced. P3 will let customers access both Copilot Studio and Foundry services through one pool of funds. Customers will be able to buy Agent (ACUs) up front in a one-year metered plan.

6. A cheaper Microsoft 365 Copilot plan for SMBs: Microsoft quietly has been offering some hefty volume discounts to its largest customers interested in Microsoft 365 Copilot, priced at $30 per user per month. Starting in Dec. 2025, it also will offer a monthly $21 per user option for customers with fewer than 300 users. The new plan is called Microsoft 365 Copilot Business. 

7. New Dedicated Word, Excel, PowerPoint agents: Microsoft 365 Copilot will feature dedicated Word, Excel and PowerPoint Agents — first available through the Frontier test program — that can create Office content directly from Microsoft 365 Copilot Chat. If you’re confused about the difference between the existing Office Agent, these new single-app agents and the existing “Agent Modes” in various Office apps, join the club. We’ve asked Microsoft to explain what’s what. No word back so far. Update (Nov. 18): Microsoft’s blog post about the coming Office agents sheds (very little) light on what these things are. But it seems the new Anthropic-based agents are going to be available with M365 Copilot Chat, rather than in the individual Office apps, as the “Agent Modes” are. Microsoft believes customers will start in Chat with the agents and then move to the Modes to complete tasks.

8. Windows 365 to become an agent destination: Windows 365 for Agents will allow developers to build and deploy agents that can do things like open apps, process data and automate tasks on Cloud PCs. Developers can access Copilot Studio in Windows or the Researcher agent in Linux in their secure Cloud PCs. Developers interested in trying out Windows 365 for Agents can join a waiting list. 

9. SQL Server 2025 is GA: The latest version of SQL Server, which Microsoft calls “the AI-ready enterprise database,” is now generally available. This release provides advanced semantic search and improved natural-language access. It also features updated identity and encryption integration, GitHub Copilot integration, and support for database mirroring in Fabric. Microsoft says the 2025 release is the most significant SQL Server release in a decade for developers. In other database news, Microsoft says Azure DocumentDB (at one point called “Azure Cosmos DB:) is now GA and and Azure HorizonDB, a new PostgreSQL cloud database service for building or modernizing mission-critical apps, is now in private preview.

10. Windows as an “agentic OS”: Because no Microsoft product can advance without an AI story, Windows 11 is in the process of becoming an “agentic OS” — much to the opposition of many long-time Windows loyalists. Microsoft is adding its own agents and an “Ask Copilot” link to the Windows taskbar to try to increase Copilot usage. It’s also building in agent connectors (like a File Explorer and Windows Settings connector); and testing in private preview an Agent workspace where agents can interact with software in an isolated, policy-controlled, auditable environment. Model Context Protocol (MCP) support in Windows 11, in preview, will let agents to access those connectors to complete tasks for users. 

Ahead of Microsoft’s Ignite conference next week, rumors are swirling about Microsoft launching an “Agent 365” platform. If the tips pan out, Agent 365 could become a way for Microsoft to unify how the increasing number of autonomous agents will be managed, licensed and priced across Microsoft 365, Dynamics 365 and the Power Platform, going forward. 

Microsoft seemingly inadvertently published a screen shot featuring the “Agent 365” branding earlier this month as part of a Microsoft 365 Admin Center post (which the company has subsequently unpublished). Microsoft also removed the connected roadmap entry (518220) about agentic users from its Microsoft 365 Roadmap.  

The screen shot was featured in MC1183300, which Microsoft initially published on Nov. 6 (and a copy of which is here). That message described “agentic users” as “a new class of AI powered digital entities designed to function as autonomous, enterprise-grade virtual colleagues.” Agentic users, unlike bots, will be provisioned as “full-fledged user objects,” with identities in the organization’s directory (via Entra ID or Azure AD), email addresses, Teams accounts and presence in the org chart. 

Agent templates, which are preconfigured digital worker profiles, will be available in Microsoft Teams and the Microsoft 365 Agent Store, according to the message. Targeted rollout of these agentic users is supposed to begin in mid-November on the desktop platform for Teams and Microsoft 365 Copilot, the message says. And admins will be the ones assigning the required “A365” license at the time of approval, with “no additional Microsoft 365 or Teams license required.” 

In early Oct. 2025, Microsoft announced the Microsoft Agent Framework, which is an open-source software development kit and runtime for building and managing multi-agent systems. And this past spring, Microsoft took the wraps off another piece of the supporting puzzle: Microsoft Entra Agent ID, which is designed to help manage agents’ identities, lifecycles and permissions across Microsoft Copilot Studio, Azure AI Foundry, and later, Security Copilot, Microsoft 365 Copilot and third-party solutions. 

Pricing and Licensing Details Not Yet Clear 

While Microsoft has priced Microsoft 365 Copilot at a flat $30 per user per month, it hasn’t delivered a clear, consistent approach to licensing and pricing agents.  

It has folded some of its agents, like Researcher and Analyst, into Microsoft 365 Copilot for no additional charge. But in the case of SharePoint Agents and Copilot Studio, which customers can use to build agents, agents are priced based on a number of factors. Agents are charged via meters that count the consumption of a Microsoft-defined unit called Copilot Credits (formerly “messages”). Copilot Credits are billed on a pay-as-you-go (PAYG) basis or by purchasing capacity packs up front for a discount. In Oct. 2025 (called Pre-Purchase Plan or sometimes P3) allows upfront purchasing of Copilot Credits on an annual basis with discounts that increase with the number of Copilot Credits purchased. 

It does seem as though the new Agent 365 licensing model could apply to both Microsoft-built and custom agents. And under the new model, every agent would need a license, in the way that every user needs one now. 

Rich Gibbons, of Cloudy with a Chance of Licensing fame, has wondered whether Microsoft is planning to price and license its agents by role, meaning there could be an Agent 365 for HR, for Sales, etc. Or maybe Microsoft is looking to enable agent pricing and licensing based on more granular job functions with certain industry domains, like booking patient appointments in the healthcare field, as Dynamics 365 Consultant Muhammad Hammad Wali suggested in a post on LinkedIn. 

Hopefully Ignite will bring answers to at least some of our Agent 365 questions. 

Microsoft’s continued huge and growing capital expenditure spending was the big story this week. For customers, the key take-away from Microsoft’s Q1 FY’26 earnings is Microsoft is still in a supply-constrained state for cloud compute, with its executives saying they don’t see the situation changing until sometime after June 2026. The extent to which this will affect current and future Azure customers isn’t clear. 

Microsoft’s Q1 revenue was $77.7 billion, up 18 percent, and net income at $27.7 billion. The Intelligent Cloud business, which includes Azure, brought in $30.9 billion, up 28 percent. Microsoft rarely discusses Azure revenue figures, though last quarter execs did say Azure and related cloud services surpassed $75 billion in fiscal 2025. Microsoft also no longer publicly discloses the point contribution of AI to its Azure numbers. 

Last quarter, Chief Financial Officer Amy Hood said Microsoft expected supply constraints to ease in fiscal 2026. But that’s no longer the case. 

“We know we’re behind. We do need to spend,” said Hood. 

In fiscal 2026, which began July 1, Microsoft plans to increase AI capacity by 80 percent and nearly double its datacenter footprint over the next two years, CEO Satya Nadella said. Microsoft currently has more than 400 datacenters; its newest ones tend to be larger, square-footage-wise. 

Hood said Microsoft will increase its spending on GPUs, CPUs, and datacenter leases in fiscal 2026. In Q1, Microsoft’s capital expenditures were $34.9 billion, higher than the $30 billion officials were predicting last quarter.  

Hood said roughly half of Q1 capex spending went toward CPUs and GPUs that support increasing Azure platform demand, first-party apps and AI solutions and R&D by its product teams, plus replacement for end-of-life server and networking equipment. The other half was for “long-lived” assets that will support the platform for the next 15 years and beyond, including finance leases for large datacenter sites. 

Still No M365 Copilot Sales Disclosures

Commercial bookings were up a whopping 112 percent this quarter — “significantly ahead of expectations,” Hood said. A substantial part of this  is from Azure commitments from OpenAI, she said, as well as continued growth in the number of 100-million-dollar-plus contracts for both Azure and Microsoft 365. (It’s worth noting these numbers do not include the $250 billion Azure commitments from OpenAI that the two companies announced earlier this week, as part of the details of their new partnership agreement.) 

Unsurprisingly, Microsoft still did not disclose sales numbers for Microsoft 365 Copilot during its Oct. 29 earnings call. Officials said the company’s “family of Copilots and agents” surpassed 150 million monthly active users across Microsoft 365 Copilot, GitHub Copilot, Security Copilot and other “high-value domains.” Last quarter, officials said that number was 100 million. 

For what it’s worth, officials also claim that Microsoft now has 900 million monthly active users of our AI features across its products. 

Microsoft-OpenAI: A Bit More Peace of Mind 

Speaking of the updated Microsoft-OpenAI partnership deal, there seems to be little new that will affect Microsoft customers directly, beyond some possible peace of mind that Microsoft will continue to have access to OpenAI IP for several more years. 

Microsoft is getting a 27 percent equity stake in OpenAI’s new for-profit entity. Microsoft no longer has a “right of first refusal” on new OpenAI cloud workloads, but it will retain IP rights to OpenAI models and products through 2032. OpenAI can jointly develop some products with other companies, but API products are exclusive to Azure. And once OpenAI declares it has achieved the elusive Artificial General Intelligence (AGI) mark, which affects Microsoft’s access to its technology, a panel of unnamed experts will have to verify that claim. 

“This punts into the long grass the idea that Microsoft might lose its exclusive access to OpenAI’s fundamental models. Specifically, OpenAI can no longer just declare it has reached AGI and use that to bring on other API providers,” said Directions on Microsoft analyst Greg DeMichillie. 

“If you are using Azure OpenAI but were afraid that somehow OpenAI would pull the rug out from under you and you’d be left stranded, that doesn’t seem like a concern anymore,” DeMichillie added. 

Microsoft disclosed that its investment in OpenAI resulted in a $3.1 billion ding to net income in the quarter. By The Register’s calculations, that could mean that OpenAI itself lost $11.5 billion for the quarter. 

This blog post is a little different. I’m not going to tell you about the pros and cons of a Microsoft technology – rather, I’m going to talk about a missing Microsoft piece of the puzzle.

Maybe it’s even the Redmond giant’s Achilles’ heel.

As AI transforms practically everything about how we work, it’s become clear that a well-managed and well-governed data estate is critical for its success in the enterprise (see my video). But even with data that’s appropriately secured, and whose regulatory compliance is constantly monitored with Purview and other tools, the question remains: how can AI put all this data work?

Sisyphus and the Enterprise Data Model

We in IT have struggled for decades with so-called “islands of data,” that is, incompatible clumps of information squirreled away in ERP, CRM, Support, Legal, IoT, e-Commerce, and other systems. One application’s “customer” is another’s “contact” or yet another’s “client,” or “lead,” or “account.” Some keep two address lines for the individual, some four; some have a 5-digit ZIP code (in the US), some nine; and keeping them all in sync is, in a word, a nightmare that can cost enterprises millions.

To simplify this, information architects and data managers have struggled for years to build an “enterprise data model:” common definitions of key subject areas (“customer,” “product,” etc.). With such common definitions – a blueprint, if you will – all departments and applications can have a shared understanding of the subject area, can better achieve compliance goals, can improve communications, and can streamline application integration efforts.

And there have been many attempts to create industry-standard models, and some have been useful. But there’s a key missing point here, which is that data models encapsulate a company’s competitive differentiation. (Think about it. It’s true.) Standardize the data model, eliminate your differentiation.

Because of that, data models that affect competitive differentiation – how a company thinks of customers, products, pricing, discounts, and so on – necessarily change rapidly, much faster than an EDM could track.

Yet…the dream remains…wouldn’t it be nice if there were one single data model for each subject to which all applications aligned?

Well, yes. But it’s been an uphill battle (thus Sisyphus). Why? Creating and deploying an EDM is excruciatingly expensive, painful, and difficult, both in terms of the human cost of negotiating common models as well as the technical costs. While potentially streamlining integration (no more “T” in ETL!), simplifying process modeling, and other cost-saving benefits, the cost and risk of updating applications schemas is so high that it’s never been seen as a worthy effort.

Until now, maybe?

Maybe, Just Maybe, the Enterprise Data Model is Possible

But imagine – just for a moment – if you could describe, even at a very high level, your core business entities. (A quick note on terminology. When we (and vendors) say “subject area,” “business object,” and “business entity” we mean pretty much the same thing: the nouns that run your business, as in a customer buys a product. See how hard it is to agree on terminology?)

Say business folks and IT staff can come together and decide, “here’s the authoritative definition of a retail customer” for our company.

Then (keep imagining) you push a button and automagically, using automated connectors, software reaches out to applications and maps your definition to real data in the real world. And maybe it (perhaps with human help) creates relationships (a retail customer “is a” kind of customer, “has an” account manager, and so on).

Companies like Celonis, Palantir and AtScale propose to do just this. On top of the oceans of data collected in Snowflake, Databricks, or Fabric, then, these models form the foundation of what my friends George Gilbert and Peter O’Kelly call a “semantic layer,” imposing order on chaos.

The Enterprise Digital Twin: Stir in AI, and Magic Happens

The vision for both companies: to create an AI-powered “digital twin” of the entire enterprise. Think of it as the organization’s automated pan-intelligent COO: you can issue it commands, you can ask questions of it, and expect it to know everything that’s going on, everywhere in your business.

Greatly Simplified View of Enterprise Ontology

Celonis uses sophisticated process mining to discover both how data is used in processes, and the often myriad variations of processes hidden in the data. By shining a light on enterprise processes — remember, a company is nothing less, nothing more than a collection of processes – you can optimize them. Where are the bottlenecks? Why, for example, when a customer orders a widget does it sometimes take weeks to fulfill?

Whereas Palantir focuses on prediction, simulation, and coordination based on holistically linked real (and real-time) data. So if CEO wants to know “how will raising the price of a widget by 5% in Japan affect revenue and profitability?” – in theory with such a digital twin those sorts of questions could be answered.

Color Me Skeptical

Now at this point I have to inject some personal experience and opinion. I’ve been involved with efforts to build an EDM in large enterprises; it’s unspeakably hard, for all the reasons noted above. It’s very labor-intensive and detail-oriented: at one company I recall seeing a model for “customer” printed on a plotter that stretched out across an entire conference room table (in 8-point font!). Fundamentally: useless.

I’m willing to keep an open mind – but for any such endeavor like this I would caution all: show ROI quickly. Do pilots. Look for quick wins. Focus on department processes, not the full enterprise to start. Demonstrate the value as quickly as possible!

Where is Microsoft?

Now I’m sure you’re saying: Barry, this is the Directions on Microsoft blog, and you’ve barely mentioned Microsoft!

True! Microsoft, of course, has made massive investments in data management, most recently with Fabric, its answer to Snowflake and Databricks (and others). And let’s be clear, what’s different about today is the presence of these massive data lakes, lakehouses, and so on, that consolidate data in ways we were never able to before.

But, to date, Microsoft has done little to nothing about a semantic model. Purview does have a Business Glossary of common business terms – but it’s not linked to real data in any way. Mary Jo reminds me that they bought a process mining company called Minit back in 2022 – it, however, seems to have been folded into Power Automate. And (just to confuse matters) there’s Flow Builder, which industry watcher Jukka Niiranen speculates could replace Power Automate. But Power Automate – like the Power Platform generally – isn’t targeted at enterprise-scale, enterprise-class scenarios. And it doesn’t pretend to create a “semantic layer.”

And yet this semantic layer may be the thing that truly unlocks the power of AI in the enterprise.

I’ve heard rumors of a stealth mega-project underway at Microsoft to build some sort of “semantic layer” that competes with Palantir and Celonis. Is it real? Is it good? Is it Minit reborn? (If you know, drop me a line). We’ll see.

For now, it seems like a gap. And it may be a big one.

Do I have gaps in my thinking? Drop me a line at bbriggs@directionsonmicrosoft.com. And if you haven’t read The Laws of Business Process, well, you really must.

Just a couple of weeks ahead of the end of support for Windows 10, Microsoft has started rolling out its most recent Windows release: Windows 11 25H2. This is a fairly minor update with only a handful of features of potential interest to enterprises.

At the moment, Windows 11 25H2 is available to “seekers,” meaning it requires users to either search for updates or to download and install it. The 25H2 release also is available via Windows Autopatch; the Microsoft 365 Admin Center; Microsoft’s Software Download Service; and Visual Studio Subscriptions. Version 25H2 will become available via Windows Server Update Services (WSUS) on Oct. 14, 2025, with the October security update. After that, over the coming months as it usually does, Microsoft will broaden the pool of devices deemed as “eligible” for the release and ultimately deem it ready for enterprises to install.

Microsoft is delivering Windows 11 25H2 via an enablement package to those already running Windows 11 24H2. This means 25H2 is based on the same code base and servicing branch as 24H2, and the enablement package (eKB) will make moving to the latest release quicker and hopefully less problematic than a full OS refresh. Those on earlier versions of Windows will have to do a full system upgrade to get 25H2, however.

(Note: Microsoft used this same enablement-package strategy when introducing Windows 11 23H2, but not when it rolled out 24H2. The official reason for the pause with 24H2 was Microsoft changed too much of the Windows “foundational” code base, mainly by adding a lot of AI-focused functionality, to deliver the new version via an enablement package.)

A Handful of Brand-New Features

Microsoft has been rolling out new enterprise-focused features for Windows 11 24H2 on a regular cadence (which it calls “continuous innovation”). The company already released features like Quick Machine Recovery and hot patching for Windows Enterprise clients as part of these earlier feature updates, and these features are baked into 25H2.

On the very short list of what’s brand-new as of Windows11 25H2:

• Ability to remove certain inbox apps using Intune or Group Policy (for Windows 11 Enterprise and Education only), including Xbox gaming apps, Paint, consumer Outlook and more
• Wi-Fi 7 Enterprise profile supported
• Removal of PowerShell 2.0 and Windows Management Instrumentation command-line (WMIC) – which potentially could break some custom admin scripts
• “Advancements in build and runtime vulnerability detection, coupled with AI assisted secure coding” (with no additional explanation from Microsoft as to exactly what these features entail)

Windows 11 25H2 also includes several AI features that only work on Copilot+ PCs with dedicated neural processing units (NPUs), including Windows Recall, Click To Do, and enhanced Windows Search.

As detailed on its Windows IT Pro blog, Microsoft also has released the Windows 11 25H2 Security Baseline, Administrative templates (ADMX), and an Evaluation edition of Windows 11 25H2.

 Windows 11 Enterprise and Education customers get 36 months of support for the 25H2 release, starting September 30. (Home and Pro users get 24 months of support, as usual.)

He’s not a household name like Bill Gates, Steve Ballmer or Satya Nadella. But Judson Althoff — Microsoft’s latest exec to get a “CEO” title — now runs the entirety of Microsoft’s Commercial business. And that business comprises most of the company (about $220 billion of the company’s $282 billion in revenues in fiscal 2025). 

Althoff has been at Microsoft for almost 13 years. Before that, he was with Oracle, heading up worldwide alliances, channels and embedded sales for 11 years. 

In 2021, Microsoft already had begun moving Althoff up the org chart. At that time giving then-Executive Vice President Althoff the reins of Microsoft unified Global Sales and Marketing with its Worldwide Commercial Business. With that move, Microsoft was doing what a number of its competitors were: Flattening the hierarchy (a bit) and consolidating leadership. 

Different company watchers have different takes on the significance of Althoff’s latest promotion, announced on Oct. 1. 

Some are saying they see the move as a succession set-up play. As far as I know, there hasn’t been much, if any, public chatter about Nadella being ready to cede the CEO crown after 11 years in that role. But by giving Althoff the expanded role of leading commercial sales, marketing, operations, and engineering globally, Microsoft might be giving him a test-run as the next CEO of the company, some speculate.  

In his memo about Althoff’s promotion, Nadella said the reorg will “allow our engineering leaders and me” to focus on technical work “across our datacenter buildout, systems architecture, AI science, and product innovation.” Maybe this transition is the precursor to Nadella making a long, slow exit, similar to the way Gates became Chief Software Architect, relinquishing the CEO title to Ballmer back in 2000 (and only finally giving up his day-to-day duties in 2007)? Or maybe Nadella and Althoff will be co-CEOs at some point, with Nadella remaining the board chair? 

Nadella in (Non-Founder) Founder Mode? 

GeekWire had an interesting take, postulating that Nadella will now be freed up to take on more of a “Founder Mode” position, meaning he will be able to have more of a hands-on approach to areas (AI, AI, and more AI) in which he’s most interested.  

“Nadella’s always been more engineering-focused. It’s one of the things people talked about when he succeeded Ballmer,” said Directions on Microsoft analyst Jim Gaynor. “Meanwhile, Althoff has success in sales and commercial business. It really can just be a matter of placing Althoff where he’s strong so Nadella can focus on his own strengths and passions where they benefit Microsoft.”   

Althoff is not the only exec at Microsoft besides Nadella to have been granted a CEO title. Phil Spencer, CEO of Gaming, Ryan Roslansky, CEO of LinkedIn, and Mustafa Suleyman, CEO of Microsoft AI, are part of that club, as well.  

Althoff’s promotion comes on the heels of his two-month sabbatical following the latest round of Microsoft layoffs of an estimated 9,000 people, many of them in Althoff’s sales organization. 

By Barry Briggs

Compliance covers an ever-increasing, absolutely mandatory spectrum of activities, processes, and technologies with which your enterprise must concern itself.

The Compliance Imperative

Why compliance? Well, to start with, the penalties for noncompliance today can be severe. Just to note a few:

• Violations of the General Data Protection Act (GDPR) can mount as high as 4% of your company’s annual revenue. (Yes, GDPR is a European regulation, but if you do business in Europe, then you’re affected. And many countries and US states have followed suit with similar regulations.) Just ask Meta, hit with a €1.2b fine in 2023.
• Violations of the CAN-SPAM Act, which regulates unwanted email (all those opt-out and unsubscribe messages you see at the bottom of marketing emails? – that’s in response to CAN-SPAM) can reach over $50,000 per email.
• Violations of federal banking laws, such as anti-money laundering (AML) monitoring, have resulted in fines in the billions of dollars.

Fact: Compliance Has to Compete

Today’s CIO has to juggle numerous competing priorities, from adopting disruptive technologies like AI, to cybersecurity, maintenance (usually a huge and necessary part of any IT budget), technical debt, incremental feature improvements (like those in Power BI) and so on. Increasingly, however, regulatory compliance plays a role in every single IT expenditure and priority.

As AI becomes a key and pervasive mandate through nearly every enterprise, it opens up huge new risk areas for the compliance professional.

AI Changes Everything: Or Does It?

Recently I spoke with a senior compliance manager in one of the world’s top consulting organizations. When I asked how AI changes his job, his answer surprised me. “At one level,” he said, “AI changes nothing.”

He explained that the basic principles of compliance haven’t changed. Organizations must define a company-wide strategy for compliance by understanding which regulations and standards apply, who is accountable, and the tools and processes by which compliance will be assured; then continuously monitor activities to prevent intentional or inadvertent violations; and react to both internal activities (such as copying a sensitive file to a USB stick) and external requests (such as eDiscovery or a GDPR Subject Rights Request).

He went on to say, however, that AI increases the surface area that the compliance professional must manage and oversee. It’s certainly possible for individuals to use AI for (for example):

• Asking Copilot investment advice – and possibly (intentionally or not), pursuing insider trading;
• Finding inadequately protected sensitive data and exfiltrating it;
• Instigating discriminatory hiring practices with biased AI screening;
• Infringing on copyrights and/or plagiarizing;
• Violating patient, user, or employee privacy;

And so on. Many of these can happen even with the best of intentions so it’s key to develop comprehensive training and processes and use technologies to prevent them.

That’s where Microsoft Purview comes in.

Is Purview a Compliance Panacea?

Purview is Microsoft’s umbrella brand for a variety of risk and compliance related services, grouped and shown below. But not even all these varied capabilities suffice for the compliance professional.

There are two reasons Purview alone isn’t enough:

• You’ll need more than just Microsoft Purview services for compliance: you’ll need Entra (to manage user identities and access); Defender, for security incident management; Priva, for privacy management, and Azure services for roles and permissions. You might also need to access specific services via their own portal, such as Fabric, for application-specific, fine-grained controls.
• No doubt there are industry-specific regulations which apply to your organization for which you’ll need third-party tools. For example, banks and financial services institutions are required to maintain certain cash reserves; healthcare firms must have and maintain Business Associate Agreements (BAAs) with vendors; and so on.

Purview’s Expanded Purview Means You Need E5

All that said, Microsoft has made tremendous investments in Purview over the past few years; its capabilities have grown significantly and there’s lots that both use and address AI in the enterprise. But – there’s an essential truth here – effective compliance at the enterprise level pretty much requires a Microsoft 365 E5 license. Microsoft’s advances and innovations come at a cost – and, sorry to say, you’ll probably need them.

Here are a few examples:

The Compliance Manager runs “assessments” against over 300 international regulations and provides a score and suggested actions for improvement. But E3 only assesses against a generic, Microsoft-supplied amalgam of various regulations – a sort of least common denominator. If you want assessments against specific regulations – like PCI-DSS or the EU’s AI Act, or any others, you’ll need E5.

Information Protection, aka data classification, lets you assign labels to your content – a foundational part of data governance. But if you need to do it at scale – and who doesn’t – across SharePoint libraries, or by using AI to classify: you’ll need E5. Similar restrictions apply to classification’s cousin, Data Lifecycle Management, that provides data retention capabilities. (Pro tip: remember classification and retention are separate services.)

Similarly, Purview’s eDiscovery service offers features like reconstructing Teams conversations and accessing Microsoft 365 Copilot interactions – only in E5. Core features are offered in E3: but make sure your legal and compliance teams think they’re sufficient. They’re probably not.

Insider Risk Management – only available in E5 – helps organizations detect risky behavior, be it malicious or unintentional, such as IP theft or regulatory violations.

However, one piece of good news is that Purview’s new Data Security Posture Management (DSPM) for AI is available in lower tiers of Purview.

Think of DSPM for AI as a dashboard consolidating information from across the organization. You can use it to monitor AI usage, including with third party sites like ChatGPT and Claude; to see where sensitive data was accessed by AI tools; and to see where “risky” chats might be happening. It’s useful – and commendable – that this is available to non-E5 organizations.

Gotchas and Other Things to Know

While, as we’ve said, the principles of compliance haven’t changed, AI expands the surface area that compliance managers and tools have to monitor. There are a few things you should remember:

• Purview’s services are impressive. But they’re next to useless unless your employees have been trained, both in the importance of compliance and in the necessity of using the tools.
• AI eats data everywhere it finds it. It’s vitally important to protect your data estate as I described in my data governance video.
• To get the most from Purview, you’ll need E5. But remember a key Directions on Microsoft maxim: everybody who benefits from an E5 license must have one.
• For many of its services, Purview scans Microsoft 365 data and makes decisions – if it violates regulations, suggests risky behavior, and so on. Beware, however, of false positives.

Finally, as I’ve noted, remember that Purview is only one of likely many tools you’ll use for compliance. (In a recent webinar, I polled the audience and found over half used five or more compliance technologies.)

Disagree? Think I should comply with shorter blogs? Drop me a line at bbriggs@directionsonmicrosoft.com!

Microsoft is adding Anthropic’s models to Microsoft 365 Copilot, alongside the existing OpenAI models that are already at the heart of it. Microsoft is kicking off this process by adding Anthropic’s Claude Sonnet 4 and Claude Opus 4.1 as model choices for those using the M365 Copilot Researcher Agent and for those building agents in Microsoft Copilot Studio. Claude will be coming to more elements of M365 Copilot in the future, Microsoft says. 

Some reports claim Microsoft is doing this because the company, via its own testing, has found Claude to generate better results than OpenAI’s GPT. Other reports claim Microsoft is expanding the available models as a way to protect itself against being too dependent on OpenAI. Microsoft’s official reason for the move: It “advances our commitment to bring the best AI innovation from across the industry to Microsoft 365 Copilot.” 

Regardless of the reason, commercial customers interested in using Claude alongside and/or instead of GPT-based models in M365 Copilot and Copilot Studio definitely need to read the fine print. Because Claude is hosted on AWS, not Azure, by using Claude customers forego a lot of the protections they get when using OpenAI’s GPT and GPT-based solutions. 

According to an article on connecting to AI models on Microsoft Learn: 

“When your organization chooses to use an Anthropic model, your organization is choosing to share your data with Anthropic to power the features. This data is processed outside all Microsoft‑managed environments and audit controls, therefore Microsoft’s customer agreements, including the Product Terms and Data Processing Addendum do not apply. In addition, Microsoft’s data‑residency commitments, audit and compliance requirements, service level agreements, and Customer Copyright Commitment do not apply to your use of Anthropic services. Instead, use of Anthropic’s services is governed by Anthropic’s Commercial Terms of Service and Anthropic’s Data Processing Addendum.” 

The Agent Rollout Parade Continues 

It’s not just on the model front that Microsoft has been adding more customer choice. Last week, Microsoft provided an update on some of the many agents it first introduced in Nov. 2024 at its Ignite conference (or, in some cases, even before last Nov.).  

Microsoft is building out a fleet of agents designed to be embedded in Teams, SharePoint and Viva Engage, among its other products. The company is trying to improve the value proposition of its Microsoft 365 AI tools by enabling them to work collaboratively, instead of only standalone as “personal” assistants, and is relying on agents to do so. 

“Agents are where the value prop is,” said Directions on Microsoft analyst David Berry.  “They are purpose-built, narrow focus like mobile apps and it’s easier to build a business case around with higher visibility and quantifiable returns in many cases.  This makes them easier to point to and understand than an LLM (large language model).”   

“It’ll be interesting to see if Microsoft keeps including them in the M365 license or move some out to the PAYG (Pay as You Go) model,” Berry added. 

The company already rolled out its Researcher and Analyst agents and made them available for no additional charge to Microsoft 365 Copilot subscribers but limits a user’s combined queries to 25 per month. It also recently rebranded and repositioned its Finance, Sales and Service “role-based” Copilots and added them to Microsoft 365 Copilot subscriptions for no additional charge (rather than the $20 per user per month additional fee that some of them cost previously). 

You Get an Agent… and You… and You 

If you (like our analysts at Directions) thought keeping up with the Microsoft Copilot proliferation was challenging, buckle up for the agent onslaught. 

Microsoft is advocating that there should be an agent for every Teams meeting, specifically the Facilitator Agent. Facilitator will be able to do things like create an agenda, take real-time notes, capturing and assigning tasks, creating documents, capturing ad-hoc discussions. Facilitator is now available to those with a Microsoft 365 Copilot license; the task management and documentation creation components are still just in public preview. 

Microsoft also is pushing the idea that there should be an agent for every Teams channel. These Channel Agents can create status reports for projects; provide answers based on the channel’s previous conversations, meetings, plans; and stay up to date on the status of action items. Channel Agent is in public preview for those with a M365 Copilot license, with general availability scheduled to kick off in Jan. 2026. 

And there also should be an agent for every community, in Microsoft’s world view. Viva Engage community members can test the Community Agent, meant to assist with proactive support, creating responses, and controlling posting responses. The Community Agent in Viva Engage is in public preview for those with a M365 Copilot license. 

SharePoint is getting a Knowledge Agent, now in public preview, and due to start rolling out in Jan. 2026. Knowledge Agent can assist with content management, tagging and classifying files with metadata, improving sites and helping organize libraries. And a Project Manager Agent for Planner and Teams is coming, as well. This agent already is in public preview for those with a M365 Copilot license for Teams Meetings and Channels. As the name suggests, this agent helps create and keep track of plans and tasks. 

In late August, Broadcom announced (yet another) change to how they license VMware Cloud Foundation (VCF), the suite that includes VMware vSphere, vSAN, NSX, and cloud management software. That change goes into effect next month, on Oct. 16^th. 

VMware customers have traditionally had a license portability entitlement, allowing them to move their licenses between datacenters and even to other providers of VMware hosting. At the same, third-party VMware hosters like Microsoft’s Azure VMware Solution (AVS) and Amazon Elastic VMware Service (EVS) could also resell VCF licenses to their customers, allowing them to sell a comprehensive service. 

This latest change moves VCF to what Broadcom calls a “license portability-only operating model.” This means hyperscalers like Microsoft and Amazon can’t bundle VCF licenses in their offerings, and customers have to purchase licenses directly from Broadcom (or its reseller partners) to bring with them in a “bring your own license” (BYOL) scenario. 

Microsoft: A Less Safe Haven as of Oct. 16 

Since 2024, Microsoft has been promoting AVS as a safe haven from Broadcom’s licensing changes and price increases, even offering discounts and price guarantees for customers willing to make commitments of one, three or five years called reserved instances. Customers that have taken advantage of reserved instances won’t see any changes until their term expires, and of course Microsoft urges customers who want to extend their commitment to contact their sales team. But for new AVS customers or existing customers adding additional AVS nodes, making AVS purchases after Oct. 16^th means buying VCF licenses from Broadcom instead of getting everything from Microsoft. 

This is also a play by Broadcom to have a more direct role in the customer relationship, ensuring their sales team is involved with the end-customer even in hosted managed services like AVS. It also makes it easier for Broadcom to change (increase) pricing in the future, bypassing hosters like Microsoft and Amazon who might be able to exert more pressure due to their scale. 

Microsoft’s own announcement assures customers “These updates are about licensing only—there are no product changes to how Azure VMware Solution works. Microsoft will continue to deliver Azure VMware Solution as a fully managed VCF private cloud service on Azure.” The five-year AVS reserved instance Microsoft’s been offering means AVS will continue at least that long. And the BYOL version of AVS, already available worldwide, “is priced lower than AVS with bundled VCF subscription” although, at this writing, pricing is not yet available on the public AVS pricing page. 

But this may cool what has been a cordial relationship between Microsoft and VMware in recent years, even after the Broadcom purchase. Microsoft’s already more aggressively positioning Azure Local as a competitor to VMware on-premises (with recent updates to Azure Migrate easing migration from VMware to Azure Local), and AVS has always had the underlying motive of getting customers into Azure by any means possible.  

With Broadcom’s latest move to insert themselves into the AVS customer relationship, and Microsoft’s increased willingness to set aside anything that doesn’t immediately benefit the company’s focus on AI, AVS could have a more limited future once the current batch of reserved instance customers nears the end of their terms. 

This week, Microsoft announced it is rolling out Copilot Chat and web-grounded agents to the major Office applications.  Given the naming confusion around the Copilot brand, the significance of this may not be entirely clear to everyone. In short, what’s happening is Microsoft 365 subscribers will get Copilot Chat in Word, Excel, PowerPoint, Outlook and OneNote —even if they aren’t among those covered by M365 Copilot licenses costing $30 per user per month. 

Although M365 subscriptions jumped this year, which Microsoft attributed in part to M365 Copilot, Microsoft is still looking for ways to drive even more of the add-on M365 Copilot licenses. With its self-professed goal of a Copilot on every device, Microsoft arguably sees anything less than 100% adoption by its clients as unacceptable.  

What’s In the Box? 

What do you really get though, with chat in the apps?  Users not licensed for M365 Copilot will be able to open Copilot Chat in a task pane on the right side of the app. This gives you access to the chat interface you know from the M365 Copilot app and website.  Copilot Chat is tuned to respond based on that app you’re in. So, Copilot for Word will be focused on helping with documents, Copilot for Excel on data analysis, etc.   

What you don’t get are the in-app Copilot companions and builders, indicated by an AI icon, that come with the M365 Copilot license.  If you don’t have them, you may not miss them and when you do have them, you may find them annoyingly underfoot.  However, they can be useful once you get used to them by providing AI-assisted actions, like drafting and revising text using natural language prompts, using auto-rewrite, or creating a summary of the content. Each application has a slightly different implementation of the companions and have actions related to the specific app. 

What Can It Do? 

The unlicensed Copilot Chat in Office apps is still constrained to web-grounding, so there’s no access to work data via the Microsoft Graph.  Users can upload work files to the chat though to provide business context or use the built-in Context IQ which enables you to use a “/” in the prompt to open a file picker dialog with files relevant to you.  Adding business context is practically the great equalizer with the licensed version though, since this is one of the better ways to draft new Office files.  (And, in fact, Copilot for Word does not draw on business data in the Graph to create new documents anyway.)  

With Copilot Chat, you also have access to web-grounded agents but accessing business-grounded agents still require the pay-as-you-go model (PAYG).  And some agents, like Microsoft Researcher and Analyst, are not available as PAYG. They are available for no additional cost only to M365 Copilot licensees. 

What Does It Mean? 

Ultimately, the unlicensed Copilot Chat brings a boost of AI-powered productivity to Office apps, providing app-aware assistance that can streamline common tasks for all Microsoft 365 users. While its capabilities are limited compared to the full M365 Copilot, it still delivers practical value, especially for those not ready or able to invest in the full version. For many, this may be enough—at least for now. Yet, it’s clear that Microsoft is steering users toward the full benefits of the licensed tier, making this feature a likely gateway for broader adoption later. 

Microsoft is rebranding and repricing some of the products it had been selling as individual Copilots beginning in Oct. 2025. 

Microsoft is renaming its Sales, Service and Finance Copilots, as it announced in a blog post on September 10. It is now calling these three copilots “Microsoft 365 Copilot for Sales,” “Microsoft 365 Copilot for Service,” and “Microsoft 365 Copilot for Finance.” 

Microsoft had launched its separate Sales, Service and Finance Copilots over the past couple of years. It had priced these as US$20 per user per month add-ons to Microsoft 365 Copilot, itself priced at US$30 per user per month.

The Verge reported last week that Microsoft was planning to make these three Copilots available as part of Microsoft 365 Copilot for no additional charge. Currently, Microsoft’s pricing pages do not reflect pricing changes. But that’s going to happen next month, a company spokesperson confirmed. 

“The role-based solutions previously known as Copilot for Sales, Service, and Finance will be available for all Microsoft 365 Copilot customers, at no additional cost, starting mid-October. There will be no changes to functionality for existing role-based Copilot customers,” the spokesperson said. 

Don’t Blink or You’ll Miss the New Branding 

In recent weeks, Microsoft has been modifying the branding of some of its Copilots in its documentation, changing the names of several former Copilots to “agents.”  For example, Copilot for Finance, which never exited preview, was rebranded as “Finance agents” in March 2025. Now, Microsoft seems to be rebranding it again as “Microsoft 365 Copilot for Finance.” 

Until this week, Microsoft also had begun rebranding its Copilot for Service as “Microsoft 365 Copilot Service Agent.” But now that branding seemingly has changed to “Microsoft 365 Copilot for Service.” 

In case you’re wondering if this new wave of Copilot-focused naming means Microsoft is slowing down the agent-buzzword train, the answer is no. The Microsoft 365 Copilot Sales, Service and Finance offerings are going to be available in Microsoft’s Agent Store – which Microsoft also is now calling the “Microsoft 365 Copilot Agent Store.” 

Microsoft also seems to be doing some similar rebranding around Viva, based on a Microsoft Support page listing. The Microsoft Viva Engage Copilot is no longer in active development. Microsoft is now working on adding features to “Microsoft 365 Copilot in Viva Engage,” and dropping all work on Engage Copilot v.1. There’s been no word so far if Microsoft also is planning to add its various Viva Copilots to Microsoft 365 Copilot at some point.

Last week, I asked Microsoft if the company was trying to clean up its Copilot branding by focusing on its three main Copilots: Copilot (the consumer-focused Bing Chat-based Copilot), Microsoft 365 Copilot, and GitHub Copilot. A company spokesperson told me Microsoft “had nothing to share at this time.” 

As Directions on Microsoft has pointed out over the previous year, Microsoft’s many Copilot-branded offerings are not based on the same core technologies, nor do they pull from the same datasets.  Microsoft still has not shared Microsoft 365 Copilot sales numbers, leading some to wonder whether its relatively high price has hindered corporate adoption.

“If nothing else, it’s good to see Microsoft realizing the chaos the ‘single brand’ of Copilot has created for this fleet of disparate and disconnected services. Hopefully this is the beginning of a trend to harmonize the branding—and ideally the licensing—of Microsoft’s broad range of Copilots,” said Directions analyst Wes Miller.

By Barry Briggs

Recently OpenAI open-sourced two Large Language Models (LLMs); seemingly moments later, those models were made available on Azure AI Foundry and on the AI community website Hugging Face.

What are open-source language models and what do they mean for enterprise usage and applications? And what is driving the urgency some feel in releasing open-source models?

Weight a Minute!

LLMs, at their core, are based on multi-layer neural networks. Each little circle in the (highly simplified) diagram below represents a “neuron,” a small amount of code; typical LLMs have hundreds of billions or even trillions of these – which is why highly parallelized GPUs are well-suited for LLM workloads. The key element of neurons is the “weight:” how much importance the model places on the result of each calculation in each neuron.

Think of the inferencing process as solving a large mathematical equation with billions of variables each “weighted” by a number, where A, B, and C and so on are the weights:

Here’s the point: the weights are the secret sauce, somewhat analogous to the source code, of LLMs, the core IP – and thus the models behind OpenAI’s ChatGPT were closed-source, specifically meaning the weights used in the 175-billion parameter model were not disclosed.

(There’s much, much more to it of course: current LLMs owe much of their efficacy to an epochal paper published in 2017 called “Attention is All You Need,” which described how data is consumed and transformed in models – hence “Generative Pretrained Transformer” or GPT. But I digress…)

Customizing Models

Enterprises quickly realized that LLMs could be incredibly powerful and useful within their applications and environments. But how to safely connect or integrate an LLM with potentially sensitive enterprise data?

RAGs

One of the first, and still perhaps the most prevalent approaches is called RAG, or Retrieval Augmented Generation. RAG apps, as they’re termed, connect models to data via search techniques.

Here a model (hosted within the organization’s security boundary, such as an Azure tenant) parses the user’s question, extracts relevant terms, queries the connected HR application, and then formulates a natural-language response.

RAG apps are conceptually straightforward, relatively easy to create, and, if properly developed, secure. They are particularly useful for rapidly changing data such as news. However, the search process (which can involve multiple steps) can introduce latency and if the retrieved information is long, such as a multi-megabyte PDF, it can add expense (since costs are based on token count) and even overflow the LLM’s context window.

Fine Tuning a Closed Model

Fine tuning allows organizations to adjust the internal operation of the LLM itself. In fine tuning, developers “feed” enterprise data to an LLM (against, if using Azure, hosted inside the organizational tenant) having the effect of changing the LLM’s weights. That in turn (typically) creates a new instance of the model.

Fine tuning a closed-source model involves uploaded text or images in specific formats to the model via an API. It’s useful for scenarios in which specialized terminology such as medical or legal terms are needed, or enterprise-specific jargon such as product names and descriptions, equipment manuals, scientific writing, proprietary terminology, and in general in scenarios where the data does not change frequently. Morgan Stanley uses a fine-tuned LLM based on GPT-4 to assist its financial advisors with complex questions.

However, fine tuning closed models can incur costs – invoking the fine-tuning APIs can be expensive, and inferencing fine-tuned models generally comes with additional cost.

Finally, and perhaps most importantly, closed models such as GPT-4o cannot be hosted locally, that is, on-premises, precluding a number of important use cases: meaning that their use incurs cloud costs.

The Emergence – and Importance — of Open-Source Models

Open-source models are freely available, downloadable, and, most importantly, expose their weights directly for fine-tuning. In the last few years we’ve seen, perhaps somewhat surprisingly given the investment required to create them, numerous “open-source” models appear.

Open-source models can be fine-tuned (a process not dissimilar to training) locally on customer hardware – even on your PC – so that experimentation, testing, and deployment can happen inexpensively. Software encodes the input data (say, reference material of some sort) and then adjusts the weights of the model.

Thus, for example, dozens of fine-tuned LLMs have cropped up in nearly every aspect of healthcare and medicine (see a survey here); one, called Clinical Camel, uses a fine-tuned version of Meta’s LLaMa-2 model as a diagnostician, with impressive results. Other use cases include LLMs in edge computing, financial fraud detection, smart cities, eLearning, and manufacturing, among others.

While OpenAI published arguably the first open-source model, a reduced version of GPT-2 in 2019, it has since fallen behind: a tsunami of open-source models, many from China, have emerged. Indeed, when open-source DeepSeek (from Chinese firm High-Flyer) launched earlier this year with performance comparable to OpenAI’s latest models, markets briefly tumbled.

Which is why, finally, OpenAI’s release of open-source GPT models is significant, and why Microsoft was quick to incorporate them into Azure AI Foundry. Note, in the chart above from the (extraordinary) benchmarking site Artificial Analytics, that prior to gpt-oss’s launch, the top right quadrant would have been primarily populated with Chinese models: Alibaba’s Qwen, Minimax, DeepSeek, and ZAI (GLM).

The Geopolitics of It All

As early as 2017, China’s State Council declared AI a national priority. Many believe its development and promulgation of open-source models enables “soft-power” politics in developing countries that would otherwise be unwilling to pay for higher-priced models.

And the efficacy and popularity of these models has (some would say finally) gotten the attention of American government and industry. In rapid order came the White House’s “AI Action Plan” on July 23^rd, the release of OpenAI’s gpt-oss models to great hoopla just days later, Microsoft’s announcement of their availability on AI Foundry, and the creation of the ATOM Project (American Truly Open Models) shortly thereafter (full disclosure: I am a signatory to ATOM).

Open, But Not Necessarily Free

(Microsoft sources: gpt-oss; gpt-5.
*Input charges may be less if prompts reused or cached.)

Now, squirreled away at the bottom of Microsoft’s announcement is the pricing of the gpt-oss models: that’s right, on Azure, the open-source models are not free! The larger of the two models costs $0.15/1 million input tokens and 60 cents per million output tokens; the smaller model, which can run on a single VM, is charged based on the VM cost. But – and here’s the deal – as we’ve said, these models can be downloaded and run for free on customer hardware.

Of course, OpenAI and Microsoft want to maintain some differentiation between open-source and premium, paid-for models; GPT-5 (on Azure, nearly 10x as expensive as gpt-oss, and not downloadable) supports many more features, has been extensively red-teamed, and is integrated with AI Foundry’s model router, a cost-saving feature.

What to make of all this?

A while back, I made the claim that models are increasingly commoditized. And with the emergence of open-source models customers can fine-tune them to meet the specific needs of their scenarios.

All this means there’s lots of choice, and customers will have decide which upon which criteria they choose their models. Will it be on the basis of cost? The ability to download them? The use of Responsible AI guardrails? National origin?

As is the case so often the answer is: it depends.

Think I need some fine-tuning? Drop me a line at bbriggs@directionsonmicrosoft.com.

No models were harmed in the creation of this blog post.

Microsoft has been working to move more customers off Enterprise Agreement (EA) volume licenses for the past few years. But it is really stepping up the war on the volume discounts on which these customers counted starting in Nov. 2025. Starting then, Microsoft will be discontinuing existing discounts for online services provided across all of its EA tiers, as well as for products covered by the Microsoft Products and Services Agreement (MPSA). 

Volume-licensing customers of all sizes, especially larger customers earning larger discounts, could be hit with substantial price increases as a result. In practice, the biggest and most strategic Microsoft customers already are likely getting better deals than the built-in volume discounts by negotiating with Microsoft. But the change will likely mean that fewer customers will be able to count on guaranteed discounts, leading to more budget pressure. 

Microsoft announced on August 12 plans to flatten these programmatic volume discounts across its online services — including Microsoft 365, Dynamics 365, Windows 365, and all security, compliance and identity management products. On-premises software products are not affected, and education and federal/state/local government customers are exempt. 

Before this change, volume customers typically received discounts of anywhere from 6% to 12%  on their online services purchased via EAs, with those purchasing more getting the biggest discounts. “Level D” customers which have 15,000+ users have received the automatic 12% discount on their EA services purchases. The coming Microsoft discount change – which we at Directions on Microsoft already are calling “Microsoft’s One Big Beautiful Licensing Announcement” — will affect Level B through D SKUs. Listed prices will be adjusted to match the Level A list price, which is the same as the Microsoft website price, according to Microsoft.  

Microsoft’s official reason for the coming change in services discounts: “This update is part of Microsoft’s ongoing efforts to simplify licensing and improve pricing clarity for our customers.” 

“With a standardized Online Services starting price for all customers across both Enterprise Agreement and Cloud Solution Provider, partners can invest time in pitching their value-added services instead of explaining the complexities of pricing structures,” explained Microsoft in an update to its volume-licensing hub on Microsoft Learn. 

It’s All About the Money 

But neither customers nor licensing experts buy that explanation. Instead, they say the move is part of Microsoft’s ongoing push to move all but the largest commercial customers from EAs to other types of channels like Microsoft Customer Agreements (MCAs) and MCAs for Enterprise (MCA-E).  

Microsoft has been actively working to require smaller and mid-size customers to work with Cloud Solution Providers (CSPs), while grabbing the largest volume customers for itself. The thinking: By eliminating volume discounts and taking the biggest customers direct, Microsoft will be able to grow its services revenues faster. 

For EA contracts which started on or before Oct. 1 2025, the no-programmatic discount rule kicks in only when, subsequent to Oct. 31 2025, customers add an online service that they had not previously purchased. For all EA contracts started on or after Nov. 1, the no-programmatic discount applies for all purchases. 

In 2017, Microsoft dropped Azure price level discounts, and in 2018, it eliminated the volume discounts for its smaller volume-discount customers (known as Level A).  

Microsoft’s rounds of layoffs during the first part of this year already meant that some customers lost their dedicated Microsoft account managers, noted Directions on Microsoft‘s Rob Horwitz. And the coming volume-licensing changes are going to make the situation even more confusing.

“Some programmatic discounts are being eliminated. The names of some things are changing. But the importance of and procedures for preparing for an upcoming contract negotiation remain largely unchanged ,” Horwitz said. “For example, it is still important to assemble and manage your internal contract negotiation team, clarify your current use and future needs for Microsoft products, understand the special concessions that you got last time that must be maintained, and develop financial models for various scenarios.”

And that’s where an advisory service like Directions on Microsoft can be invaluable to companies who are going to have to learn to navigate this new Microsoft licensing landscape, he added.

Microsoft beat its own and Wall Street’s expectations with its Q4 FY25 earnings, and the company’s stock price and market cap hit all-time highs this past week. Nice if you’re a shareholder or employee who survived the latest rounds of layoffs. But if you’re a Microsoft enterprise customer, what’s your takeaway from all this? 

There are some clues in the numbers that Microsoft did — and didn’t — disclose in its Q4 report. 

Azure, By the Numbers 

For the first time ever, Microsoft provided an actual Azure revenue number as part of its Q4 report. For years, the company has declined to do so, speaking only in growth percentages without disclosing revenues, seemingly to prevent itself from being compared to AWS and Google Cloud. 

Microsoft’s overall revenues for FY25 were $282 billion. Azure revenues were slightly less than half of the $168 billion in “Microsoft Cloud” revenue the company measured for fiscal 2025. (“Microsoft Cloud” is Microsoft’s own metric consisting of cloud revenues from Azure, Microsoft 365, Dynamics 365, some components of GitHub and LinkedIn and more.) 

For its fiscal 2025, ending June 30, 2025, Azure and “other cloud services” surpassed $75 billion in revenue, up 34 percent year-over-year, Microsoft said, and it’s estimated to grow another 37% in Q1 FY26. Comparatively, AWS is at an annual revenue run rate of more than $123 billion, and Google Cloud at more than $50 billion. 

Oddly, Microsoft’s latest earnings report didn’t disclose how much of its Azure revenue was attributable to AI. During the past several quarters, Microsoft provided either a number of points or a percentage of Azure revenues that came from AI workloads. Officials didn’t say why they decided against providing that figure this time around. 

Microsoft execs instead emphasized that Azure revenues in FY25 were attributable across “all workloads.” They said Microsoft now has more than 400 datacenters across 70 regions, and that cloud demand remains higher than supply. In Q4 alone, Microsoft’s capital expenditures were $24.2 billion, with most of that going toward datacenter leases, servers, GPUs and other infrastructural components. Microsoft plans to continue to grow capex, predicting Q1 FY26 capex spending would hit $30 billion.  

Microsoft 365: Numbers Shared and Not 

Meanwhile, Microsoft 365 commercial had a strong Q4 as well, with revenues up 16%. Microsoft officials attributed seat growth primarily to new small-and-midsize businesses (SMBs) and frontline workers. They attributed growth in revenue per user to high-end E5 subscriptions, as well as Microsoft 365 Copilot. 

Microsoft has not released an updated number as to what percentage of the Microsoft 365 commercial base is on E5 in years. In 2022, that number was just 12%. Each year since then, Microsoft sales has made migrating and upselling customers to E5 a priority.

Microsoft also has yet to release a number as to how many Microsoft 365 Copilot subscriptions it has sold. Instead, like it used to do with Azure before this quarter, Microsoft execs continue to provide difficult to quantify numbers about Copilot sales and adoption. 

For example, officials said the company now has 100 million monthly active users “across our family of Copilots” in both the commercial and consumer space, but it’s not clear if this figure includes M365 Copilot Chat, which is free for business customers with M365 subscriptions. Microsoft also said GitHub Copilot now has 20 million users and the Dragon Copilot had 13 million “physician-patient encounters.” They added that Microsoft 365 Copilot saw “the largest quarter of seat adds since launch,” in Q4 FY25, and a record number of customers returning to buy more seats. But there was no actual Microsoft 365 Copilot number or any talk of revenues coming from M365 Copilot during the earnings call. 

Reading the Earnings Tea Leaves

There are some takeaways from these numbers (and non-numbers) that are likely to affect enterprise customers in the coming year.  

First, Microsoft’s pressure to adopt its various Copilots won’t be letting up. It’s a safe bet to assume adding more commercial Copilot seats and licenses will be a key part of any Microsoft licensing negotiation.  

Ditto with the priciest Microsoft 365 tier. Microsoft and partners will continue their mission of getting even more customers to go with E5. Those who already are there should expect Microsoft to be pushing paid add-ons to their E5 subscriptions for things like Teams Premium, SharePoint Advanced Management (for the entire company, not just M365 Copilot users), etc.  

Company officials noted on the earnings call that Microsoft Purview data governance and security tools are already used by three quarters of Microsoft 365 Copilot customers, but there’s still room for more add-ons there, too. 

“Customer adoption of Copilot and AI is Microsoft’s biggest priority,” said Directions analyst Jim Gaynor. “And there will be the need for even more add-ons, as organizations realize they need things like Purview, SAM, and Azure AI Content Safety to complete the picture. Microsoft’s relying on that to keep increasing their revenue.” 

Remember the introduction of ChatGPT on that momentous day in November 2022? Since then Copilots and chatbots have sprung up everywhere, social media is flooded with AI-generated posts, and enterprise-class agent-based applications are all the rage among techies and analysts. What an extraordinary time! 

I was asked recently where AI, and for that matter, enterprise computing will be in five years. With the rapid pace of change it’s obviously more challenging than ever to say – but after some thought here’s where I came out. 

No warranties or guarantees given or implied!  

The Conservative View

I provided two possible views: a “conservative” one, in which AI is gradually and incrementally absorbed into the enterprise ecosystem, and a “radical” one in which AI changes everything.  

The conservative view holds that, over time, applications absorb AI functionality, and we come to expect AI in all of them; in short, AI capabilities become an application convention just like, say, the Office ribbon or Copy/Paste. Copilots gradually improve. They connect to every application and data source in the enterprise in a safe, secure fashion (and as I describe in my discussion on data governance, protecting your data could in fact, occupy all five years!). Copilots live not just in Office but everywhere; perhaps Microsoft will even offer a “Copilot certification” for third-party apps to use its libraries and models and the Copilot trademark. 

Less rote, pedestrian code is written by humans but, conversely, a higher premium is placed on developers and architects who can piece together the Copilot or Claude Code or Gemini code fragments into ever higher- and higher-value applications. Profound coding knowledge is still essential, but more and more developers check AI-generated code – rather than write it. 

In this view, autonomous LLM-powered agents achieve a certain level of acceptance but (like Lotus Notes Agents, introduced way back in 1993) compete with existing and entrenched RPA apps. Moreover, users and enterprises, perhaps rightly, have limited trust in agents to perform mission-critical functions given their nondeterministic, statistical, probability-based nature and their tendency to hallucinate. 

The Radical View 

AI in this view changes everything in the next five years: we won’t recognize the new world of computing. 

Imagine, for a moment, a contact center application completely comprised of agents.  

In this completely-made-up example, a Channel Agent manages the various customer contact channels (phone, email, etc.), perhaps assigning different priorities to regions at different times of the day. A Customer Analysis Agent identifies the customer and perhaps determines the likely cause of the call; a Routing Agent sends the call to either the agent or human most likely to successfully resolve it; and so on.  

These agents are continuously trained on the vast amounts of (now well-governed) data in the enterprise, allowing them to quickly build and adapt data models, identify emerging trends and adjust business processes accordingly – and in general relieve IT of much of its traditional tedium. 

IT Development in Flux

In theory, “developers” of the future create no procedural code; coding becomes a lost, or rare, art. Because all the agents are programmed, in effect, in English, the application can be completely customized to the very specific needs – indeed, nuances – of the organization, and (again in theory) could be easily changed as business needs mandate. There are no packaged ERP or CRM applications – rather, vendors provide infinitely customizable agents which IT teams with “SDKs” describing how to create the appropriate prompts. 

Nevertheless, IT technologists remain a valuable and scarce resource. Profound knowledge of the inner workings of LLMs, the mechanics of exposing data safely and connecting LLMs to them, keeping these new ecosystems of agents and data secure, and creating the necessary goals and reward systems to achieve business goals: all these valuable new skills power the new IT. 

What About Office? 

Remember: the only reason Excel, PowerPoint, and Word are separate applications is because they were created in a time when PC memory maxed out at 640 kilobytes. Now most enterprise laptops sport (minimally) 16 gigabytes, or over 26,000 times that original, oh-so-primitive capacity.  

Today, how many of you have all three open right now? (I do.) And we still need to know the silly, arcane, and dated methods of cutting-and-pasting between them. (Edit / Paste-Special? Really?) 

So perhaps all the metaphors upon which we depend today undergo a growth spurt: with no need to respect hardware limitations, and LLMs’ extraordinary ability to quickly ascertain user intent, we no longer need separate applications for word processing, presentation graphics, and numerical analysis all possessing unintuitive menu hierarchies, quirky ribbons and distinct UIs. 

In other words, could the Office apps dissolve and be replaced by…something else? A unified, all-in-one application for content creation, presentation and dissemination? (Maybe we’re already seeing the beginnings as OpenAI and Perplexity (and even Microsoft, sort of) introduce their own AI-native browsers).  

Which Will It Be? 

It’s my assertion that the mission of IT, ultimately, is to give control of the business to the business; that is, to enable, in real time, digital systems to respond to business leaders’ direction. Why couldn’t a CEO simply speak into some UI, “Decrease the price of our Widgets in Japan by 5% tomorrow – and provide an analysis the next day showing which market demographics and segments responded?”  

So, which will get us there faster: incremental evolution or a revolution in IT? Of course, I don’t know – but I suspect we’ll see a continuing tension between a natural IT conservatism (if it works, don’t break it) set against the rapid, nonstop acceleration of AI – and the overarching necessity of driving competitive advantage.  

Scary, fun, or just plain crazy? Drop me a line at bbriggs@directionsonmicrosoft.com and let me know what you think.  

Microsoft recently announced SharePoint Advanced Management (SAM) was rolled into M365 Copilot licenses for no additional cost.  Originally, Microsoft licensed SAM separately, so this is a big advantage for organizations wanting to roll out M365 Copilot.   

Or is it?  

Although Microsoft touts SAM as helping prepare organizations to deploy M365 Copilot, its tools are intended to identify and potentially resolve problem areas in SharePoint and OneDrive for Business and, consequently, is supposed to be licensed for everyone.  As a result, this “no cost” pitch is creating confusion among customers.  If organizations want to use SAM for rolling out M365 Copilot, does everyone in your organization need a M365 Copilot or a SAM license? 

Microsoft is working to drive adoption of M365 Copilot, its flagship AI service, and knock down barriers to deploying it for its customers.  Part of that strategy appears to be coupling SAM with M365 Copilot so that when an M365 Copilot license is purchased, SAM is enabled for the customer’s tenancy by default. This may not be a bad thing technically since SAM provides several tools for identifying and remediating high risk areas including oversharing, permission sprawl, site sprawl and outdated content. However, these risks also impact enterprise search as well as SharePoint in general.  M365 Copilot just happens to amplify their exposure. 

Since SAM’s capabilities apply to enterprise search and SharePoint (after all, it’s SharePoint Advanced Management, not Copilot Advanced Management), it would seem to support the idea that SAM licenses should be required for all users of SharePoint and OneDrive for Business.   

Ultimately, all customers are governed by Microsoft’s Product Terms. When you read the Product Terms and SAM product documentation, there is no indication that the standalone SAM User SL (at US$3 per user per month) is waived for anyone other than people with M365 Copilot licenses.  Consider an organization that buys M365 Copilot licenses (at US$30 per user per month) for 10% of its employees. Having to license SAM for the remaining 90% of its employees could double its expenditure.    

Where the confusion comes in is with Microsoft’s public blog posts and account team conversations with company representatives using language like “no cost” and “tenant-level service” for SAM. This language can be misleading (and has no legal standing anyway).  

Based on current information, we believe this “no cost” language appears to refer only to licensed M365 Copilot users, and “tenant-level service” does not equate to a tenant-level license (as they don’t even exist).  The result: When you start using SAM to prepare for M365 Copilot, you may be exposing your organization to a licensing violation since — in the future– Microsoft could argue your non-licensed M365 Copilot users benefited from the SAM tools and must be licensed. 

What Are Your Options?

If you decide to deploy M365 Copilot, what are your options related to SAM?  

You may want to get written confirmation from your Microsoft account manager that, given your use of SAM is for the deployment of M365 Copilot, that SAM User SLs are not required for unlicensed M365 Copilot users.  However, while this may offer you some protection, you still run the risk that Microsoft may decide to enforce the licensing at your next renewal.  Alternately, you can evaluate a third-party product (also a cost) or inform your administrators not to use SAM, being aware that SAM capabilities can be auditable.  

Often Microsoft licensing is convoluted. I don’t think anyone at Microsoft is intentionally trying to trap customers into buying SAM as much as they are driving M365 Copilot usage.  However, the fact remains, the current Microsoft Product Terms (and SAM documentation) say every user who accesses a licensed online service must have a User SL.  And it is not uncommon for Microsoft to take a more laid-back view of licensing rules while it tries to get a technology adopted by customers, only to embrace a stricter interpretation once the technology becomes mainstream.  

By Barry Briggs

Let me start with a perhaps-controversial statement: It’s my opinion that every Chief Technology Officer and, for that matter, every Enterprise Architect, every Solution Architect, and every Information Architect should code. Coding is the only way that you can stay grounded in the fundamental, ultimately rigidly binary, logic of how computers work; what their limitations are; and what the limitations of humans writing code are. Frankly it’s easy to draw a block diagram of boxes and arrows on the whiteboard; translating that into working, secure software is an entirely different matter altogether.

Most importantly: To effectively manage dev teams, we have to understand what they’re doing, how they’re doing it, and the challenges they face.

These days the buzz is about “vibe coding,” meaning using AI to write code, maybe even whole programs. And as the Wall Street Journal informs us, even professional developers use it now. 

Is vibe a revolution in coding? Can it help a longtime programmer? And how should executives think about it?

I’m a professional developer. And a six-time CTO. I decided to find out.

The Problem

Hopefully you’ve all noticed that we at Directions have upgraded our website . (And if you’re not a subscriber: you’re really missing a lot of great content.) I wanted to do some analytics on the data and, long story short, I needed to extract it – all of it – from our back-end WordPress site.

We’ve all known for a while you can use GitHub Copilot and many other coding assistants to help with coding. Copilots are now available in Visual Studio, Visual Studio Code; and if you’d rather, Gemini, Perplexity, Cursor, and Claude Code can write code for you too. More on that later.

Like all coders, after a time I found myself “in the zone” with headphones on, totally focused, immersed in the logic, adding features, refactoring, discovering and handling exceptions, the world completely shut out. (It’s really kind of wonderful.)

But things have changed – bigly –  and if you’re a coder, or, more importantly, if you manage developers, you need to know.

The New Dynamic

Not that long ago if your code (yours, not mine) had an error, you spent time Googling various sites – Microsoft’s documentation, the developer problem-solving site StackOverflow, Reddit, and blogs – trying to find how to fix it.

Then Copilots arrived and you could ask them – maybe tentatively, as in the early days the results might be questionable.

But now the dynamic has reversed. As a good friend of mine noted, no longer are Copilots assisting us; we humans assist the Copilots! As an experiment, within the Visual Studio IDE, I simply asked Copilot to “create a console app, load all the JSON files in d:\files and parse them into a C# class.” Done. Then I asked it to count the number of entries with specific metadata tags, to get an idea of how our coverage was distributed.

Done. Boom.

It was fun; it was fast; but I began to wonder: was I really coding?

Hold that thought.

It wasn’t perfect. Occasionally Copilot wrote code that either didn’t work or didn’t compile, usually because it had found sample code somewhere that used a deprecated API, or whatever. Usually these were simple fixes, but it meant I had to type more prompts like “please fix line 366” and the like. Would I have gotten it right the first time? Hmmm.

Interestingly, I fed many of the prompts to other LLMs – Gemini, Claude, Perplexity – and in some cases their code was improved, while in others the code was, well, even worse.

And – cautionary note. In a project I was doing with Azure AI Foundry, I got the following error:

There was an error generating a response. Chat history can't be saved at this time. Error code: 401 - {'error': {'code': 'PermissionDenied', 'message': 'The principal XXXXXXXXX-XXXX-XXXX-XXXX-XXXXXXXXXX lacks the required data action Microsoft.CognitiveServices/accounts/OpenAI/deployments/chat/completions/action to perform POST /openai/deployments/{deployment-id}/chat/completions operation.'}}

I had no idea what this meant – seemingly something about Managed Identities. I asked every LLM: Claude, Gemini, Azure Copilot, ChatGPT, Perplexity, GitHub Copilot, and received different answers from each one. And all were wrong. Great.

The Meaning of Vibe Coding

The real question for technology executives is – do AI assistants accelerate development? And can you replace developers?

My answer on the first one is: the jury’s out. On the second: categorically no.

Why?

• Copilots can save an immense amount of time on the minutiae of looking up API calls, parameters, and advising coders on their correct usage. And they can write functions that actually work, as I mentioned above. And fix simple bugs. That’s kind of awesome.
  
  
• But when the routine doesn’t work, you need someone who understands all that minutiae to dissect the code and fix it. For example, I ran into a minor problem with a Unicode string in the data. Copilot’s answer was misleading and its solution wrong. But because I understand Unicode and its use, I could fix it quickly. Point: you need experienced coders.
  
  
• A totally empirical and anecdotal finding – but for me important – was that while I increasingly relied on Copilot to do rote coding, I spent nearly as much time typing prompts as I would have typing code.

Vibe Coding in the Enterprise: Lessons for the CxO

To be clear, these days my apps are what we might call “quick and dirty.” Enterprise-class robust? Hardly.

Having sat through countless architecture and code reviews at Microsoft and elsewhere, I have a pretty good idea of what it takes to pass muster. Copilot-written code needs every bit as much scrutiny and review as human-written code – more, I’d say. Repeating the point: You need experienced programmers!

That said, the ability of the Copilots to connect to enterprise code repos, to leverage organizational coding standards, even to generate and run unit tests, are all remarkable but in no way obviate the need for skilled technical talent. Instead, you should expect more. If these tools amplify productivity, then set more ambitious goals. For your developers – and for your organization.

Have you vibe-coded? What do you think? 

I’m at bbriggs@directionsonmicrosoft.com. 

Some customers will be able to buy access to critical security updates for obsolete versions of Exchange Server and Skype for Business Server starting August 1, 2025. The just-announced Extended Security Updates (ESUs) programs for Exchange and Skype for Business reduce risk for customers migrating to Exchange Server SE and Skype for Business Server SE, which will soon be the only supported versions of those on-premises servers.  

The following versions are eligible for ESUs: 

• Exchange Server 2016 CU23 

• Exchange Server 2019 CU14 or CU15 

• Skype for Business 2015 

• Skype for Business 2019. 

All of those versions leave product support on Oct. 15, 2025. Microsoft had said it would not offer any support for these Exchange and Skype for Business versions after that date, and was strongly urging customers to treat Oct. 15 as an absolute (while admittedly tight) deadline for migration. Microsoft is still urging but also hedging by offering access to critical security updates through Apr. 14, 2026, via ESUs. 

How the Exchange, Skype ESUs Are Different From Other ESUs 

Exchange and Skype ESU licenses and media will not ship the same way as Windows, Windows Server, and SQL Server ESUs. Instead, Exchange and Skype for Business customers must apply for the ESU programs through their Microsoft account team (who will provide pricing details) starting Aug. 1, 2025. Microsoft does not specify which customers are eligible, but they must not be able to finish migrating before Oct. 15. And they must be big enough or important enough to have a Microsoft account team assigned. 

Importantly, these are brief ESUs – only for six months – and there’s no guarantee there will be any Critical or Important security updates to release; the program is “just in case” insurance. Also, Microsoft claims the ESU period won’t be extended, saying “you don’t need to ask.” But they were adamant that support for those older versions would end in Oct. 2025, too. 

Related Resources

Announcing Exchange 2016 / 2019 Extended Security Update program. 

Announcing Skype for Business 2015 / 2019 Extended Security Update program. 

After much hype, Microsoft 365 (M365) Copilot Search is rolling out. Part of the set of M365 Copilot Wave 2 spring release announcements, M365 Copilot Search will be available to M365 Copilot licensees by August 2025.   

M365 Copilot Search is optimized to find specific content items and can do it without knowing precise terms or keywords.  It’s the next evolution of a universal search tool Microsoft has been trying to land since 2017 to span across SharePoint, Office apps, email and more, intending to keep users in their flow.   

M365 Copilot Search extends the M365 Copilot product to provide contextual results to people writing natural language queries while respecting the security boundaries of their organizations.  This is potentially an improvement over the current Microsoft Search feature found in the top bar of SharePoint and the Office apps, which is more reliant on traditional keyword searches and can produce unsatisfactory results. Unlike M365 Copilot though, it does not leverage Bing search. 

How M365 Copilot Search Works 

M365 Copilot connects to content in your organization through the Microsoft Graph and uses semantic indexing to map relationships and contextual information to locate relevant files for you.  As a result, you don’t necessarily have to recall the exact title of that document you worked on to search for it with M365 Copilot Search as long as you can recall something relevant about the document or even who worked on it with you.   

At least to start, M365 Copilot Search will be available through the M365 app and website only to M365 Copilot-licensed users, making it unlikely it will replace Microsoft Search for the time being.  Its home page can almost act as a personalized dashboard (distantly related to SharePoint’s MySite concept) which some people may find useful as a starting point for their days.   

Aside from the Search box, M365 Copilot Search has two core sections loaded with content relevant to you: Recommended and Quick access.  

The Recommended section reflects recent documents with which you engaged as determined by M365 Copilot Search using a combination of Microsoft Graph, M365 Copilot and user context to determine what shows.  Each recommendation includes a couple of pre-defined prompts intended to help you work with the content.  There seems to be a fixed number of these prompts, and you might find their value, like Summarize recent changes and List key points, subjective based on the file. Clicking on one of the prompts will take you to M365 Copilot Chat.  

Quick Access categorizes your content into three self-described tabs: Recent, Shared and Favorites. M365 Copilot Search allows you to filter on not only the typical Office and PDF file types, but also Copilot chats, notebooks, pages and creator, for a current total of 20 file types.  All three tabs indicate when you last interacted with the file and can indicate your action.  

I’m not convinced how helpful these actions are yet. Some actions like “You frequently edit this” and “You recently opened this” aren’t particularly useful to me since I know what I’m working on, but actions indicating who shared or sent a file might be.  Inspired by the “Who can see this?” feature discussed below, I’d like to see this space also used to indicate a file’s sharing risks, including Anyone links, Everyone Except External Users and external (guest) users. Oversharing is a critical problem in many organizations and specifically when using M365 Copilot so this enhancement could help  fix it.  

Another AI enhanced feature in Quick Access is file summaries.  Hovering over a file list in Quick Access will pop up a dialog that generates a synopsis of its content, so you don’t have to open the file to check what it contains.  It may take a few seconds to generate it based on the file, and right now it seems to support mostly the Office file types.  Hopefully, these summaries will include Teams meetings and invites soon.  It’s interesting that this feature isn’t available in the Recommended section or in search results, or at least not yet. 

A Potentially Powerful Tool… But Is It Powerful Enough?        

Speaking of search results, the search results can be filtered and sorted like regular search engines and have nine default enterprise search verticals (filters), like Files, Sites and People.  M365 Copilot Search can use OCR to find text in images as well as look into transcripts of videos and meetings, and inside Power BI reports.  An intriguing feature on the context menu is “Who can see this?”.  “Who can see this?” opens a convenient Manage Access dialog box which displays the People, Groups and Links associated with that particular file. Given the risks of oversharing in the age of Copilot, this can be a really useful feature and I’m a little surprised it’s not available on the Recommended or Quick access context menus also.  

M365 Copilot Search blends traditional search with AI chat, appearing to offer a potentially powerful productivity tool for users managing an ever-increasing volume of content.  Like M365 Copilot, users will likely have to spend some time learning how to write their search prompts to get the most out of their queries.  Since Copilot Search relies on organizational data, users are required to have a M365 Copilot license. While this capability may be valuable, it alone may not be compelling enough for most organizations to bite.  

“Bet-the-business” strategies aren’t forever. A prime example: Microsoft’s years-long efforts to grow its consumer and enterprise mixed-reality hardware, software and services. 

Just a few years ago, in 2022, Microsoft CEO Satya Nadella was touting the idea that Microsoft could be a leader in multiple metaverses, from gaming to commercial. On the enterprise side, the company was positioning its HoloLens, Mesh, IoT services and digital twins as key components of its evolving enterprise metaverse stack.  

After a string of setbacks for the HoloLens (ranging from leadership issues to problems with a $22 billion deal for ruggedized HoloLens hardware for the U.S. Army), Microsoft announced it would completely discontinue support for its HoloLens 2 headsets of Dec. 31, 2027.  

Now it’s also dismantling Mesh, its set of technologies that enable shared 3D virtual environments. In 2024, Microsoft made Mesh generally available in Teams meetings so that users who weren’t physically co-located could share an “immersive” virtual space. The Mesh platform, which some likened to the virtual 3D world known as Second Life, never really caught on. Then “return to office” initiatives started undoing remote and hybrid work arrangements, and AI overtook the metaverse/Web 3.0 buzzwords on Wall Street and beyond.

Mesh’s ‘Evolution’ = Discontinuation 

In a message on the Microsoft 365 Admin Center in May, Microsoft officials told customers to expect Mesh to “evolve.” At that time, in MC1074973, Microsoft said it would be retiring the Mesh Toolkit effective June 24, 2025. At the same time, officials said: 

“Microsoft is excited to continue investment in immersive experiences, and we will continue to share more information about how Mesh is evolving,” 

A month later, customers learned how Microsoft defined “evolution.” Microsoft issued a new message (MC1111181) that noted Mesh was being retired and replaced with Teams immersive as of Dec. 1, 2025. Microsoft is pulling the plug on the Mesh PC and Quest apps, the mesh.cloud.microsoft website and the Immersive Space (3D) view in Teams as of that date. 

Confusingly, immersive events in Teams will remain, which are different from the Immersive Space view in Teams. Immersive 3D meetings in Teams are for small (up-to 16 people) casual meetings, scrums, standups, brainstorming sessions, etc. Mesh events were for up to 330 people for things like all-hands, town halls, onboardings, etc. Mesh events also let companies create interactive objects and highly customized 3D spaces like a virtual version of a company lobby, while Teams immersive relies on pre-created meeting “spaces”. 

“Mixed reality just didn’t become the big opportunity that Microsoft hoped at the time,” said Directions on Microsoft analyst Jim Gaynor. “Retiring Mesh looks like the last stages of winding down something that’s not a priority for Microsoft any longer as they keep pruning away things that don’t contribute to AI and Copilot.”  

Teams immersive is accessible via the Teams calendar. “To schedule an immersive event, select the drop-down next to New Event, then choose Immersive event,” Microsoft explains.

The progress of artificial intelligence in the last few years, we’d all agree, has been phenomenal. Five years ago, trapped in the misery of Covid, none of us foresaw the emergence of ChatGPT and its follow-on effects – that Microsoft would invest $13 billion in OpenAI, that Nvidia would be approaching a $4 trillion market cap, that tech vendors are scrambling to build data centers. If everything’s about AI these days, then capex truly has become strategy. 

But can machines ever approach the human capacity for intelligence?  

It’s not – at all – an abstract question. Because if OpenAI ever achieves Artificial General Intelligence (AGI), as it’s called, then, contractually, they are no longer bound by the exclusivity clause in their contract with Microsoft.  

If you’re Satya Nadella, that’s a big deal. Microsoft bases much of its market leadership in AI on its exclusive access to OpenAI models, which underly all those Copilots and Copilot Studio, and are available for use in Azure. 

What is AGI?  

A very good question, and one which has many possible answers. Some argue that it’s passing the famous Turing Test: which is, briefly, that conversation with a computer is indistinguishable from chatting with another person. By that measure, we may have already achieved AGI.  

Another test (called generality) involves how broad a range of topics an AI can be used for. An LLM trained on the entire internet can chat with you about much more than one trained just on your local enterprise data. Here again, we seem to be doing pretty well: a recent Harvard Business Review study showed that the top use case for AI in 2025 is…wait for it…therapy and companionship. Numbers two and three: “organizing my life” and “finding purpose.”  

Check it out: 

Top 10 GenAI Use Cases  
Harvard Business Review 

In 2023, Mustafa Suleyman (now CEO of AI at Microsoft) and Michael Bhaskar (AI strategy and communications at Microsoft) suggested a more quantitative test: give an AI $100,000, let it invest, and turn that sum into $1,000,000. Such a task involves complex reasoning, analytics, and forecasting.  

We’re not there yet.  

So which is it? It matters, because Microsoft and OpenAI are furiously negotiating over whether the latter’s models can be more broadly available, whether OpenAI can go public, and how much Microsoft’s stake in the company will be. 

How Do We Measure AI and AGI? 

To know if we’ve achieved AGI, we have to be able to measure it. 

Several organizations have proposed tests. Lab42, headquartered in Davos, Switzerland, offers a battery of reasoning tests to measure just how “intelligent” an AI can be. Here’s a sample problem from their website:  

Google’s DeepMind approaches the problem differently. It suggests a 2×2 matrix classifying “Levels of AGI,” in effect describing an AI as either narrow (can only handle certain types of problems) vs general (can handle a wide range of problems) on the one axis; and performance, that is, the extent to which an AI can mimic humans, on the other. A Level-0 application could be (for example) a calculator, with no AI; Level-5, somewhat terrifyingly, is termed “superhuman,” exceeding human capabilities. (Luckily, we haven’t achieved that yet.)  

And there are lots of other possibilities. We could simply give it IQ tests, or current events tests, or empathy-emulation tests, or all of these and more.  

Ultimately, I suspect, it will come down to a value judgment based partly on how well a given AI performs on quantitative tests – and how human it “feels.”  

Which will make that pesky clause in the Microsoft-OpenAI contract difficult to resolve.  

Efficiency and Innovation 

Today, organizations spend large sums of money on fundamentally two types of initiatives: innovation and operational efficiency. (It’s true when you think about it.)  

Every AI use case I’ve seen is about operational efficiency. AI can make your employees better writers, better coders, in general more productive – in many cases much more productive (full disclosure: I used AI to research this article – but not to write it.) 

I’ve yet to see an AI that’s truly innovative. It’s difficult to imagine that AI could, independent of any human assistance, come up with a revolutionary product like the iPhone, for example. Sure, it could make an existing product better, improve production times, and so on – but true innovation?  

To me that’s true “intelligence” and that’s our job, and always will be. 

Progress, Determinism and Probability 

Lastly: many have commented that our march to AGI has slowed, that progress in AI has plateaued. True, training and inferencing have become more efficient (see previous paragraph): Nvidia’s chips have gotten faster and denser, data centers are springing up everywhere (remember, capex=strategy) And OpenAI and others are testing new techniques like reinforcement post-training fine-tuning (basically you tell the LLM the right answer and it adjusts its weights accordingly).  

Thus with continuing incremental improvements and the economics of scale, on the whole things arguably will gradually get better and perhaps cheaper (we’ll see).  

But let’s remember: LLMs today are fundamentally probabilistic: they use advanced statistical algorithms to infer what the next best word or next best sentence in a response to a prompt might be. (Is post-training RL “cheating?” You be the judge.) That’s very different from how traditional, deterministic software applications work, in which you are guaranteed the same output for the same input. 

In my opinion, what’s missing in current LLMs is a solid grounding in common-sense knowledge. “A dog is a mammal” – everybody instinctively knows that. Not an LLM, though – it reasons over its training base to determine that statement’s probability. It’s usually going to get it right – but it’s not guaranteed.  

Therefore I suspect that the next major leap in AI will occur when LLMs can refer to a systematized ontology of indisputable facts to reduce probabilistic errors and hallucinations.  

Net: it may be a while before an AI can truly pass as human. 

Microsoft and OpenAI

Let us know!  

Yes, we’ve digressed (but wasn’t it fun?).  As I write this, Microsoft and OpenAI are trying to resolve their differences – who will win? Does it matter? What do you think?  

I’m at bbriggs@directionsonmicrosoft.com.  

Microsoft is increasing its campaign to give Windows 10 customers a safe exit strategy before it cuts off support (and specifically security updates) for that OS version in October 2025. Microsoft is doing this in two ways: By trying to get more individuals to sign up for Windows 10 Extended Security Updates (ESUs) and by going public with more details of how it plans to make Windows 11 more secure — and hopefully more compelling. 

With less than four months to go before the end of Windows 10 support on Oct. 14, 2025, Windows 11 adoption remains lackluster. Most independent estimates claim as many as half or more of all Windows PCs are still on Windows 10. Some of these users just don’t like Windows 11; others cannot install it because their older PCs do not meet the hardware requirements. And unsupported Windows 10 PCs will make the overall Windows ecosystem less secure by making endpoints vulnerable to attacks.

Individuals Get More Windows 10 ESU Options 

Earlier this week, Microsoft announced it would give users a couple of additional ways to get one year of extended support for Windows 10, enabling them to keep getting important security updates beyond Oct. 2025. 

Enterprises already can enroll in the Windows 10 ESU program via a Microsoft Volume Licensing program. They also will get the option to purchase ESUs from Cloud Service Providers starting Sept. 1.  

As previously announced, Microsoft is charging commercial customers USD $61 per device for Windows 10 ESUs for the first year, with the price doubling in Years 2 and 3. Microsoft is charging educational institutions USD$1 per device for Windows 10 ESUs for Year 1, with the price doubling in Years 2 and 3. The only way Windows 10 commercial customers can get Windows 10 ESUs for no additional charge for three years beyond the Oct. 2025 cut-off is to subscribe to Windows 365 and use it from a  Windows 10 device locally or run a Windows 10 instance in an Azure Virtual Desktop. 

Individuals/consumers running Windows 10 have a couple of new options to get ESUs. In addition to the already announced $30 USD single-year ESU option, Microsoft will allow individuals to redeem 1,000 Microsoft Rewards points to pay for the one-year ESU for Windows 10 or use Windows Backup to sync their settings to the cloud and get the one-year ESU for free. Starting in July, customers will see these new ESU options via an enrollment wizard that will be available via notifications and in Settings on their personal Windows 10 PCs. 

Microsoft announced in May that it was extending the period during which it would provide security updates for Microsoft 365 apps running on personal and commercial Windows 10 PCs through Oct. 10, 2028. They also will get feature updates for Microsoft 365 apps through August 2026, Microsoft officials said. 

Making Windows 11 More Resilient 

Microsoft also provided more specifics this week around its Windows Resiliency Initiative, which it announced last year. One of the biggest changes, which Microsoft will begin testing in private preview among select security vendors in July, is moving antivirus and endpoint detection and response (EDR) apps out of the Windows kernel. Microsoft has been working with a variety of security vendors to head off update meltdowns like the one from CrowdStrike that hit millions of Windows machines worldwide last year. It’s not clear when these changes will make their way to Windows 11 customers 

Microsoft also is planning to make available later this summer a new Quick Machine Recovery feature that is meant to help organizations quickly restore machines that cannot boot. Microsoft said the QMR feature will be generally available to all Windows 11 24H2 devices starting this summer. And as part of that summer update, Microsoft also will be replacing the Blue Screen of Death with a new Black Screen of Death that will provide clearer information on the screen about issues requiring reboots. 

In addition, Microsoft is rolling out “in the coming weeks” a feature called Connected Cache that is meant to help organizations improve bandwidth when upgrading to Windows 11, handling Windows Autopilot device provisioning, performing Intune application installations and incorporating Autopatch monthly updates. 

Microsoft also announced recently plans to clean up legacy drivers that Windows Update pushes to users’ devices when installing updates. Microsoft is making the change to reduce security and compatibility risks, officials said. 

Related Resources 

More Options for Windows 10 ESUs 

How to Enable Extended Security Updates for Windows 10

Update on the Windows Resiliency Initiative 

Windows Resiliency Initiative Will Affect Windows and Anti-Malware (Directions members only) 

Microsoft is adding a new Sovereign Private Cloud option to its set of cloud services available in Europe. It also is expanding its existing Cloud for Sovereignty service with new features for European customers and renaming that service to “Sovereign Public Cloud.” 

Microsoft announced its new Sovereign cloud strategy for European customers on June 16. Earlier this month, rival AWS announced plans to launch later in 2025 a new European Sovereign Cloud company, designed to be locally controlled in the European Union, staffed by EU citizens and subject to EU laws. Last month, Google updated its own sovereign cloud services and added a disconnected, air-gapped option for customers with strict data security requirements, as well as a new Google Cloud Dedicated option for local and regional partner deployments. 

Calls for European countries and customers to reduce their reliance on the biggest U.S. cloud providers due to fears of political and trade havoc have definitely hit a nerve with Microsoft and other leading cloud companies.  Microsoft’s new sovereignty announcements come on the heels of it announcing five new digital commitments meant to reassure European customers that Microsoft has their back, in spite of the chaos caused by the current U.S. government regime with tariffs, regulation, threats over data access and more.  

Expanding the Public Sovereign Cloud Footprint 

Up until now, Microsoft’s Sovereign cloud offering, launched in 2022, initially was built to host Microsoft 365, Dynamics 365 and Azure. Microsoft positioned it as an offering for highly regulated customers and government agencies throughout the world in select markets worldwide. At the time, Microsoft defined “sovereignty” fairly loosely; It was a term describing where data resided, but also applied to security, compliance, and policy requirements that were particular to various countries’ governments. 

The Sovereign Public Cloud, currently in preview, is slated to be generally available in all European Azure regions in 2025. Sovereign Public Cloud is getting a new Data Guardian feature meant to ensure EU customers’ data is stored and processed exclusively in Europe and controlled exclusively by Microsoft employees based in Europe. The Sovereign Public Cloud also is now supporting customers and/or their partners who want to control the key management for the encryption of their data. Additionally, the Sovereign Public Cloud is getting a new service for administering the sovereignty functions called Regulated Environment Management. 

“Sovereign Public Cloud ensures customer data stays in Europe, under European Law, with operations and access controlled by European personnel, and encryption is under full control of customers. This is enabled for all customer workloads running in our European datacenter regions requiring no migration,” Microsoft officials said. 

Sovereign Private Cloud features Azure Local, Microsoft 365 Local 

Microsoft’s new Sovereign Private Cloud offering is for those who want to run their apps either on site, in partner datacenters or elsewhere in their own country. Microsoft says it will support hybrid or air-gapped (isolated) operations, and is built on top of Azure Local, the product formerly known as Azure Stack HCI. 

The Private Cloud option also supports “Microsoft 365 Local,” which brings Office server software like Exchange Server and SharePoint Server to Azure Local running in a customer’s own datacenters or sovereign cloud environments. Microsoft says Private Sovereign Cloud is for governments, critical industries and regulated sectors needing the highest standards of data residency, operational autonomy and disconnected access. 

As part of its June 16 announcements, Microsoft also gave the existing set of Sovereign Cloud offerings run by select partners a new name. These are now called “National Partner Clouds.” Partners working with Microsoft on these clouds include Accenture, Crayon, Capgemini, Dell Technologies, IBM, NTT Data, Orange, Telefonica, Vodafone and more. 

Directions on Microsoft asked Microsoft whether it plans to make these new Sovereign Public Cloud features and the new Private Sovereign Cloud offering available beyond the EU. We asked for any pricing and licensing details that the company can share. We also asked if Microsoft planned to make Microsoft 365 Local available outside of its Private Sovereign Cloud service. So far, no word back on any of these questions. 

Update (June 17): A Microsoft spokesperson replied with answers to all three of our questions.

Regarding pricing and licensing information: “Microsoft’s Sovereign Public Cloud and Sovereign Private Cloud solutions are currently in preview and set to be generally available in all European cloud regions later this year. We will share more details on costs, if applicable, as offerings become available.”

Regarding making the updated Sovereign Cloud offerings available beyond Europe: “We are starting with 15 EU/EFTA countries and will add additional countries and regions, aligned to customers’ needs.”

Regarding making Microsoft 365 Local available outside of the Sovereign Private Cloud: “Microsoft 365 Local is a deployment and management framework that enables customers to run Microsoft productivity workloads like Exchange Server and SharePoint Server on Azure Local infrastructure. We are not announcing licensing changes for those products as part of this approach.”

Microsoft is warning Microsoft 365 enterprise customers of some changes coming in July 2025 that could affect how and how often organizations will get Office app updates on Windows desktops. Organizations that have been juggling updates via the Semi-Annual Enterprise Channel in a way that allowed them to only update their apps once a year are going to be forced to update twice annually, thanks to the coming new policies. 

Microsoft published information on pending update changes to the Microsoft 365 Message Center (MC1087098) on June 2. Administrators need to take action quickly to ensure desktops continue to get regular feature and security updates. 

Microsoft officials said they are making the changes in order to “streamline updates and align with customer needs.” In other words: We are rolling out new features, especially AI/agentic ones, at a fast clip and we want customers to get access (and pay us, if possible) as soon as possible. 

Currently, Microsoft offers three primary update channels for M365 Enterprise App customers: The Current Channel; Monthly Enterprise Channel; Semi-Annual Enterprise Channel. (It also has a Semi-Annual Enterprise Preview Channel and Semi-Annual Enterprise Extended Channel.) Microsoft uses these channels to provide both feature updates and security and non-security updates for Microsoft 365 desktop apps. 

Up until now, those who opt for Current Channel get new Microsoft 365 Apps features as soon as they’re ready, which means typically at least once a month. Monthly Enterprise channel gets new or updated app features on the second Tuesday each month. Those in the Semi-Annual Enterprise Channel also get feature updates on the second Tuesday, but only in January and July. Semi-Annual Channel Preview is for customers who want to preview new features coming to the Semi-Annual Channel ahead of deploying them. The Semi-Annual Extended Channel is for updates delivered to subsequent releases of previous forks. 

What’s Happening When 

Beginning in July 8, 2025, Microsoft will no longer provide updates via the Semi-Annual Enterprise Channel Preview. Officials said organizations should move devices on this channel to another supported channel if they want to keep getting early access to new features and security updates. And as of March 10, 2026, it is dropping support for Semi-Annual Enterprise Channel Extended. 

Microsoft is making other channel changes starting in July 2025. The Monthly Enterprise Channel will get rollback support for two months, up from one. The Semi-Annual Enterprise Channel will be supported for fewer months — from 14 months to 8 months. (The eight months includes 6 months of regular support plus the 2-month rollback period.)  

The Semi-Annual Enterprise Channel will be meant for unattended devices, going forward, according to Microsoft. (Up until now, Semi-Annual Enterprise Channel was for “non-interactive devices and those running specialized or business critical workloads that require extensive testing” before new features are implemented.) 

“Bottom line: You have to deploy new Office versions twice a year if you are on the Semi-Annual Enterprise channel – up from once,” said Directions on Microsoft analyst Rob Helm. 

Currently, via the Semi-Annual channel, Microsoft supports new Office app releases for 14 months. That means that enterprises can deploy new versions of Microsoft 365 Enterprise apps in January, ignore the July updates and then deploy the newest versions the following January. The supported roll-back window meant if there were any issues with the new Office apps, companies could revert to a version that was more than a year old until the problems were fixed or a newer version of the apps was available.  

Organizations can change the Microsoft 365 Apps update channel for their devices using Group Policy, the Office Deployment Tool (ODT), Configuration Manager, Intune Administrative Templates, and/or the Microsoft 365 Apps Admin Center. 

Related Resources 

Microsoft 365: Retiring and modernizing the Semi-Annual Enterprise Channel for Windows desktop apps  

Updates Coming to Microsoft 365 Apps Channels 

From 2020: Microsoft starts pushing enterprise to pick up the Office app update pace 

How to change Office update channels 

Microsoft has once again “clarified” rules that change how Dynamics 365 user license compliance is measured but could also simplify how to determine what user licenses are required. Many Dynamics 365 Finance + Operations customers should spend time now cleaning up security roles assigned to their users, before Microsoft potentially claims they are out of compliance. (Note: this change does not impact Dynamics 365 CRM customers.) 

What Happened?

On May 3^rd, 2025, I was going through the latest Dynamics 365 Licensing Guide to look for changes, when I noticed the addition of a sentence in Appendix E on page 56:

“Licensing requirements for these applications are determined by the role-based security assigned to each user.” 

“These applications” refers to the Dynamics 365 Finance and Operations applications: Finance, Supply Chain Management, Commerce, Project Operations, and Human Resources. 

The significance of the sentence is that the user licensing requirements for Dynamics 365 Finance and Operations applications have shifted from “what a user actually did” to “what a user could potentially do.” 

Previously, organizations were on the hook for a Dynamics 365 license based on the application users accessed, the routines they ran, and the type of data they updated. Microsoft provided some reports that gave guidance on what license users “might” require, but the ultimate test of license compliance was based on activities users performed. This could only be determined by viewing audit logs, which had their own limitations, or by evaluating the custom screens or custom applications users accessed, because these custom screens and applications programmatically limited what users could do. (In Nov. 2024, I wrote extensively about how to tackle user license compliance for our members in “Dynamics 365 User License Compliance: A Struggle that Benefits Microsoft.”) 

However—and this is a big however—going forward, the new sentence “clarifies” that what a user actually does is no longer relevant, because organizations are now on the hook for a Dynamics 365 license or licenses that cover security roles assigned to users. 

Why is this a Concern?

I’m concerned for companies who have enjoyed Microsoft’s relaxed approach to user license compliance and have routinely handed out higher security roles than needed, which now exposes the organization to new (sorry, “clarified”) license requirements. 

The licensing change won’t severely impact everyone, especially not those customers who were diligent with assigning security roles, but I do think it will be a problem in the following scenarios: 

Security roles applied for convenience. Many admins took the easy approach and assigned users with as many security roles as needed to get the user working and meeting any potential request, reducing the need for the user to come back and ask for more rights later. Is this a best practice? No. But we all know that it happens. 

Customizations using default security roles. This is the biggest issue. Most customers customize Dynamics 365 Finance + Operations in some way. They modify Dynamics 365 screens to remove certain fields or add access to other data, and some customers build or purchase custom applications that augment the Dynamics 365 service and access data directly. In these situations, an admin must still assign users with a security role, and those security roles (especially the default ones) often contain rights beyond what a user needs for the custom scenario. This is generally acceptable, because the custom screen or application limits what a user can do, so giving them excessive rights is a low risk. 

However, with the new sentence in the Licensing Guide, all users are required to have a license based on the security roles they are assigned, whether or not they actually perform activities allowed by those security roles. 

What Should Customers Do? 

Don’t panic. Although the change is in place as of May 2025, there is no automatic compliance check that will lock users out if they don’t have the right licensed assigned. What you should do is start planning for your next audit or renewal, so I recommend the following steps. 

1. Talk with your Dynamics 365 security admins and find out how big of an issue this is. They will have the best sense of the magnitude and risk for your organization. 

2. Adopt a “least access” approach to security roles. In other words, do the right thing and only assign users the security roles and features they need, rather than being overly generous. In many cases, this will involve building custom security roles that only grant rights to the features and data users actually need. Custom security roles are a common approach and nothing to be feared. 

3. Clean up existing security role assignments. Microsoft is previewing new license compliance reports that compare the security roles a user has (and therefore the license required) with the licenses users are assigned. The reports can highlight when users are under licensed, but I suggest using it as a starting point to determine if users have excessive security roles or could benefit from a custom security role that has a lower licensing requirement. 

4. Talk with developers who customize the Dynamics 365 service and determine if they used default security roles or custom security roles to provide access to their custom solution. Typically, custom solutions benefit from custom security roles that grants the least number of rights and therefore the lowest possible license requirement. 

Do you really read the Licensing Guide each Month? 

It’s been asked this many times and yes, I read through the new Licensing Guide every month, looking for changes that impact customers.  

I also keep a copy of most of them, in case I need to look back through time. I’m not sure anyone needs a “Dynamics 365 (On-premises) Enterprise Edition – Dec. 2016” licensing guide, but I have one. 

In a similar situation, last April, I wrote about how Microsoft “clarified” licensing rules about Dynamics 365 and Power Apps last April as well in “Dynamics 365 rights in Power Apps Subscriptions: Changes on the horizon.” 

Related Resources

Directions kit “Dynamics 365.” (Directions members only)

Licensing Reference Set for Dynamics 365 (Directions members only)

Microsoft has announced the planned retirement of SharePoint Alerts for SharePoint Online by July 2026.  SharePoint Alerts have been around since the dawn of time so if you have used SharePoint for a while in your organization, there’s a good chance you and your users will be affected as early as September 2025.  

If your organization is new to SharePoint, don’t get started now with Alerts. Evaluate using SharePoint Rules or Power Automate which are now the preferred methods of sending alerts (aka notifications). 

SharePoint Alerts are email or text notifications users can set up to track activity in the SharePoint sites they use.  Alerts apply to lists and document libraries and can be an extremely helpful tool when used wisely.  When users configure an alert, they can select the type of change that will trigger them, such as when anything changes, when someone else changes an item, or when someone else changes an item created or modified by the user.  To manage notification overload, users can also specify how often to receive alerts: immediately, daily or monthly.  Since this is a user-managed tool, you can imagine how many of these alerts may exist in your environment. 

SharePoint will turn 25 years old next year.  There’s a lot of legacy technology in the platform and the alert mechanism is among them.  It’s being replaced by a choice between SharePoint Rules and Power Automate, both using more modern technologies.  That doesn’t mean there won’t be pain.  Users are accustomed to the current alerts and must be prepared for the switch.  It’ll be a new experience which means organizations will have to educate and train them on which approach will be used (or both) and how to adjust their ways of working. 

What’s Microsoft’s Plan (and Yours)?

While Microsoft announced the end of SharePoint Alerts will be July 2026, it will begin turning off new alert creation as early as July 2025 for customers new to SharePoint.  Existing customers may start seeing new alert creation turned off starting in September of 2025.   

Start planning for the transition and exploring the modern approaches of SharePoint Rules and Power Automate.  To help with planning, you can use the Microsoft 365 Assessment tool to identify Alert usage and begin to understand the size of the task at hand. Users will begin seeing warning banners on various configuration pages in SharePoint so it’s important that you have a plan to communicate it out to your organization before panic ensues. 

Evaluate your options between SharePoint Rules and Power Automate.  You will have to determine when to use what and educate your users on the approach(es).  SharePoint Rules are native to SharePoint, but Power Automate is licensed and may incur additional costs.    

Communicate your plan to your users. And communicate it again. 

The Wrap Up

At this time, there is no indication from Microsoft of a migration approach from alerts to either SharePoint Rules or Power Automate.  This also only appears to apply to SharePoint Online for now.  However, since Microsoft removes other legacy technology from SharePoint Server, it may be coming to you in the future.   

Is this important to you?  Let me know what else you want to hear about by emailing me at dberry@directionsonmicrosoft.com.  

Microsoft’s annual Build developer conference is happening this week in Seattle. No big surprise: All things AI and, specifically, agents, are at the top of the announcement list. Surprise: There was quite a bit of news for those still developing on Windows, too. 

In no particular order, here are my top 10 takeaways from Day One of Build: 

1. Multi-agent is the new hot.  Organizations will soon be able to build multi-agent systems in Copilot Studio, where agents delegate tasks to one another. The agents can be built with the Microsoft 365 Agent Builder, Azure AI Agents Service, and Azure Fabric. The Copilot Studio capability to build multi-agent systems is now in preview. 

2. NLWeb is a way to turn websites into agentic apps. Natural Language Web (NLWeb) is a Microsoft-developed project for simplifying the natural language interface for websites. (It’s not clear what, if any, connection that OpenAI has with NLWeb. Other current sponsors of NLWeb include O’Reilly Media, Snowflake, Shopify, Chicago Public Library.) Microsoft says NLWeb was conceived and developed by R.V. Guha, former Google Tech Fellow who recently became a Microsoft CVP and Tech Fellow. Guha is the creator of RSS, RDF and Schema.org. 

3. GitHub Copilot is moving from pair programmer to peer programmer. GitHub Coding Agent (“Project Padawan”) is now generally available to all Copilot Enterprise and Copilot Pro+ customers. The agent is best suited to low-to-medium complexity tasks in well-tested codebases and can handle things like adding features and fixing bugs to extending tests, refactoring code, and improving documentation, Microsoft says.  

4. Copilot Studio is getting more and more “pro” dev features. As was evident at Ignite last fall, Microsoft increasingly is positioning Copilot Studio, its low-code/no-code development platform, as a tool for professional developers who need more powerful tools to build more complex agents. Microsoft is working on exposing a set of M365 Copilot APIs for developers. (So far, only the retrieval API is available in preview.) Microsoft is working to close the gap between Foundry and Copilot Studio by enabling a Bring Your Own Models from Azure Foundry capability, which is currently in preview. 

5. The MCP protocol is becoming increasingly key to building agents. Microsoft has joined the Model Context Protocol (MCP) Steering Committee is integrating MCP support across GitHub, Copilot Studio, Dynamics 365, Azure, Azure AI Foundry, Semantic Kernel, Foundry Agents and Windows 11. “Think of MCP as a universal USB-C connector for AI,” linking apps, agents and tooling in a standardized way. 

Windows: The Best AI Dev Platform?

6. The Windows 11 Copilot Runtime has been renamed “Windows AI Foundry.” AI Foundry is now Microsoft’s brand for the local-platform versions of Azure AI Foundry and are built for model selection, optimizing, fine-tuning and deployment across client and cloud. Microsoft officials say that Windows ML is the built-in inferencing runtime on Windows. Microsoft also announced a local version of AI Foundry for the Mac. Both of these local Foundry offerings are generally available. 

7. Microsoft is open sourcing the Windows Subsystem for Linux (WSL). They’ve already open sourced the “Mariner” Linux underpinning and the WSL-g UI layer. Now it also is open-sourcing most of WSL itself for “reasons.” Maybe the community will do something with direct access to WSL APIs? Microsoft also announced plans to open source the GitHub Copilot Chat Extension for VSCode “in the coming weeks.” 

8. Microsoft is expanding Entra, Defender for Cloud and Purview by embedding them directly into Azure AI Foundry and Copilot Studio to help organizations secure AI apps and agents across the entire development lifecycle. Entra Agent ID, a capability meant to manage built using Microsoft tools, as well as across select third parties like ServiceNow and Workday, is now in preview. 

9. SQL Server 2025 is now in public preview. The coming release of SQL Server is now available to testers. Microsoft is touting the integration of AI directly into the database engine “enabling more intelligent search.” It also has built-in vector search capabilities. 

10. OpenAI CEO Sam Altman and Special Government Employee and xAI Founder Elon Musk both appeared in Nadella’s keynote — via video. Musk talked up Microsoft hosting Grok 3 and Grok 3 Mini in Azure Foundry (like it already does with thousands of third-party models, including DeepSeek). Altman talked about OpenAI’s announcement of its Codex programming assistant (while making sure to show continued excitement about the great Microsoft partnership OpenAI enjoys).

To read about all of the Microsoft Build 2025 announcements, check out the Book of News. Fun Fact: There are more than 300 mentions of “agent” in Microsoft’s Build news. And around 30 mentions of “Copilot.” It’s hard to keep up, especially when it comes to AI branding at Microsoft….

Microsoft has announced it will provide security updates for Microsoft 365 apps running on Windows 10 until Oct. 2028, rather than until Oct. 2025, as planned. 

The company published an article on Microsoft Learn announcing the change on May 8, 2025. (Thanks to Neowin for the original link.)

Microsoft 365 apps would have continued to work on Windows 10 after Microsoft support ends for the operating system on Oct. 14, 2025, the company acknowledged, but they would have run unsupported. To try to deter customers from running these apps on Windows 10 after support ends, Microsoft officials have said running these apps on an unsupported OS could potentially cause “performance and reliability issues.” 

Microsoft is now planning to provide security updates to the Microsoft 365 Apps on Windows 10 until Oct. 10, 2028 “to help maintain security while you transition to Windows 11,” the Learn article notes. The new security update also applies to the subscription versions of the Project and Visio desktop apps, official said. 

The new security update extension does little, if anything, regarding Microsoft-provided support for M365 apps running Windows 10 after Oct. 14, 2025, the Microsoft Learn article says.  

If a customer with a valid Microsoft 365 subscription has issues with their apps, they will continue to be able to open support cases, but Microsoft support will provide only troubleshooting assistance. “Technical workarounds might be limited or unavailable,” the article says. Whether or not customers on Windows 10 have ESUs, they do not have the option to log a Microsoft 365 apps bug or request other product updates. 

Will Windows 10 Get a Security Reprieve, Too? 

Directions on Microsoft has asked Microsoft if there will be a similar three-year pushback on the date when security updates will no longer be provided for Windows 10. No word back so far. 

Update (May 13): A Microsoft spokesperson declined to answer the question we posed and instead provided a link to an April 2024 Microsoft blog post on when to use Windows 10 ESUs.

We’d point out that Microsoft provided an additional three years of security updates for Microsoft 365 apps on Windows 7 when Windows 7 was approaching its end-of-support date.

Given that Microsoft has announced it will be selling Windows 10 Extended Security Updates (ESUs) for three years and to consumers for one year, we’re thinking a delay on the end of support for Windows 10 seems unlikely. Microsoft is charging commercial customers USD $61 per device for Windows 10 ESUs for the first year, with the price doubling Years 2 and 3.  

However, if there are a substantial number of Windows 10 business and personal PCs still running after Oct. 10 this year, the security risk caused by these systems will be substantial. Various market watchers have estimated that fewer than 50 percent of Windows PCs are running Windows 11. Microsoft is continuing to advise customers to move off Windows 10, either by upgrading to Windows 11 on eligible PCs, licensing Windows 365, or by buying new PCs that support Windows 11. 

Related Resources

Windows 10 end of support and Microsoft 365 Apps 

Meteor 2025: The Next Wave of Windows and Office Migrations (Directions members only) 

Directions Licensing Reference: Extended Security Updates for Windows 10 (Directions members only) 

Exchange Online will block Basic Authentication for SMTP client submission beginning in Sept. 2025, cutting off some devices and applications unless customers take action. At potential risk are devices such as mail-enabled document scanners and multifunction printers offering “scan to mail.” Applications that send e-mail alerts to groups of individuals, such as CRM applications notifying salespeople of a particular change, also could be impacted. 

But never fear: Microsoft is here to save you from your security insecurities – for extra fees, of course. 

Microsoft announced the Sept. 2025 Basic Authentication shutdown date last April, citing security risks as the cause. Microsoft gradually has been removing support for Basic Authentication and warning developers against it for years, saying the protocol is too vulnerable to brute force attacks.  

Time to Go ‘Modern’? 

Customers have several options to prevent mail cutoffs caused by the end of Basic Authentication. Generally, all users should be working to update e-mail senders to use “Modern Authentication,” while building interim solutions to deal with Basic Authentication senders still in use.  

Modern Authentication is Microsoft’s name for a set of more secure authentication protocols based on the OAuth 2.0 protocol. With an upgrade to Modern Authentication, a device or app can send mail through Exchange Online to internal and external recipients with minimal other changes.  

Many older devices and applications don’t work with Modern Authentication and cannot be upgraded. Conveniently, Microsoft does offer two e-mail services that accept SMTP client submission with Basic. However, both cost extra. (Got to keep those $20 billion USD-plus of Microsoft Security revenues coming in from somewhere) 

Other Options (for a Fee) 

The two ways Microsoft is offering to upsell you: 

High Volume Email for Microsoft 365 (HVE). This paid add-on to Exchange Online, in preview, accepts SMTP client submissions with Basic Authentication. But HVE, which Microsoft has said will be generally available in Sept. 2025, can only deliver to internal recipients in Exchange Online. As announced earlier this month, Microsoft plans to permit Basic Authentication with HVE until Sept. 2028. Customers get three more years of using a less-secure authentication mechanism, as long as they are willing to pay. Win-win?  

Azure Communication Services. This option offers video and voice calling over IP, SMS text, chat, and e-mail services that developers can build into applications. The e-mail services can accept SMTP client submission with Basic Authentication. Unlike HVE, Azure Communication Services can deliver to recipients inside and outside the customer organization, and the service already is generally available. But it doesn’t offer the same exact security, availability and privacy guarantees as Exchange Online. 

 Well-established third-party solutions such as Intuit Mailchimp and Twilio SendGrid are available, too, but they’ll also cost you extra.   

“Microsoft deserves credit for campaigning against Basic Authentication all those years,” says Rob Helm, a Directions analyst. “I hate to see it slowing down just short of the goal to sell tickets.” 

Related Resources

Microsoft to Block Basic Senders in Exchange Online in Sept. 2025 (Directions members only) 

Microsoft Introduces Control for Direct Send in Exchange Online 

While writing a report on Windows 365 Link earlier this year I realized my career has gone full circle. This realization struck me as a sign it was time to call it a day.

Everything Old is New Again

How is it my career has gone full circle? Well, it started when I graduated from university fifty years ago this year with an undergraduate degree in Biology. I couldn’t find work in biology. My first paying job out of college was working as a contractor in a community outside Edmonton, Alberta installing up-to four new RJ-11 jacks per house. Prior to that, most phones in residences were hardwired. I was paid by the jack, so I ensured each house got their four jacks, even if the fourth one was in the basement and totally unusable because it was in the first-floor joists next to the lightening arrestor where the phone line entered the house. From there I moved on to working for a company that took off-air signals from the CBS, NBC, and PBS stations in Spokane Washington from an antenna site on Mt. Kelly in British Columbia (Google Maps) and microwaved them across the Rockies so subscribers in Calgary and Edmonton could view them. For a fee. This was when CATV stood for Community Antenna, and it is also where my curiosity for networking began. Eventually I became responsible for making the billing system for the cable company work on a minicomputer running software from a company called CableData. Although I played around with early PCs including a Timex PC that hooked up to channel 3 on a TV working on the Control Data hardware and CableData software combined my curiosity about networking with a new curiosity about computers and software.

From there I moved onto working for Alberta Government Public Works, Supply and Services in the Terrace Data Center in Edmonton. There my job was to help keep IBM 327x terminals (Fig 1.), control units, and 370X front-end processors connected.

Fundamentally, these devices created a network where dumb terminals, which did minimal local processing, relied on the compute power in IBM mainframe computers. So, how did I get from here, working on mainframe networks to working on PC networking?

Well, it was about this time that IBM and IBM compatible computers started to enter businesses, mostly for spreadsheets. As was common on these early PCs, companies made add-in cards that could be inserted into the PC to provide specialized services, such as advanced memory management, local area network connections, and one in particular—called an IRMA card—that I was curious about because it claimed to allow the PC to emulate a 327X terminal by connecting to a controller (Fig 2). Actually, it was more than a claim, it really worked very well. We could now use PCs with IRMA cards in place of 327X terminals and the user could use PC apps and access the mainframe.

Although it runs a version of the Windows client OS, Windows 365 Link (Microsoft) completed the circle as it is dumbed down by software controls to be no smarter than a dumb 327X terminal.

It relies on the power of computers in a data center to do any heavy lifting compute wise. The circle is complete. My journey went from networking mainframes, mini-computers, and PCs and for all intents and purposes back to the mainframe again.

Be Curious

This struck me hard. It made me realize that I’d lost my curiosity for technology. And to be a good analyst you need to be curious. They say do something you like, something you’re passionate about. I think you’re better off doing something you’re curious about. And now I’m curious about the irises and wisterias in my garden. I’m curious about wood working. So that’s what I’m going to do now.

As I retire, I know I need to thank a lot of people for their support. This is a problem, because I know I will forget someone who was instrumental. If this is the case, I mean no slight, it is merely that I have always been bad with names.

Thanks Directions Subscribers

First, I want to thank Directions’ subscribers. I hope my analysis provided insights that saved you time and money. It was fascinating to learn about your businesses, and your technology requirements. And especially to learn how you exploit the potential of Microsoft’s products and services.

Thanks Directions’ Great People

I need to thank Paula and Marie, for editing my thoughts and ideas and making them understandable and readable. I’m sorry I never learned the rules for using em and en dashes and commas. I need to thank King Brian for taking my stick figures drawn in Visio and PowerPoint and converting them to charts and illustrations, so my reports were not just a wall of words.

Thanks Bev, Erika, Dean, Kim, Lauren, Marian, Mariia, Matt, Mona, Niki, Stephanie, and Will. You made sure I had everything I needed to do my job. But especially you ensured people could access my work and hopefully find some insights that were valuable.

Of course, I need to thank all the analysts at Directions—past and present—including Andrew, Anne Marie, Barry, Chris, Don, Greg, Jim, Josh, Mary Jo, Matt, Paul, Peter, Rob, Rob, Rob, Scott, Wes, et. al. I was humbled to work with such smart peers. And to Jeff and Rob for creating a company with few rules, a ton of intellectual freedom, time to research ideas, and where people could agree, discuss, debate, and even disagree (politely) about technology, strategy, and how to communicate meaningful information to people looking for real insights.

Just a Few More People That Really Helped

I know, they are starting to play the music to get me off stage, but there are just a few other people who work in the technology press, Microsoft, or other vendors who helped including Adrienne, Janell, Laura, Matt, Noury, Paul, Todd, and Woody. And to the managers at all the companies I worked at for realizing I had a modicum of talent and took a risk on me. I appreciate your confidence, and I thank you. I learned something I needed for the next stage of my career at each of the jobs along the way.

Figure 1 Attribution: Retro-Computing Society of Rhode Island, CC BY-SA 3.0, via Wikimedia Commons
Figure 2 Attribution: Konstantin Lanzet, GFDL, via Wikimedia Commons

Microsoft reported its Q3 FY25 earnings this week. Coming in at $70.1 billion USD in revenue for the quarter and earnings of $3.46 USD/share, the results exceeded expectations. Unsurprisingly, Microsoft execs gave most of the credit to the Microsoft Cloud and Azure, in particular. 

Microsoft Cloud – the Microsoft-defined bucket of commercial cloud properties including Azure, M365 commercial, Dynamics 365, etc. — delivered $42.4 billion USD in revenue, up 20% from the year-ago quarter. Azure and other cloud services revenue were up 33%, with 16 points of that coming from AI, they said. (Microsoft still doesn’t disclose Azure revenues in dollars.) And for Q4 FY25, Microsoft is projecting Azure and other services growth will be between 34% and 35%. 

Microsoft is still on track to spend $80 billion USD on building the datacenter/AI infrastructure during its fiscal 2025, which ends June 30. Microsoft opened datacenters in 10 countries across 4 continents this quarter alone. Last quarter, Microsoft officials had said they expected to be able to ease back on this spending starting in July, but because datacenter capacity demand is growing faster than it expected, “we now expect to have some AI capacity constraints beyond June,” CEO Satya Nadella said.  

Microsoft 365 Commercial Now at 430 Million Paid Seats 

In Jan. 2024, during its Q2 FY24 earnings call, Microsoft officials said the company had 400 million paid Microsoft 365/Office 365 seats. That figure is now 430 million paid commercial seats, up 7% year over year, as of this quarter, officials said. The growth is largely due to small/mid-size businesses and frontline workers. M365 consumer subscriptions are now at 87.7 million, in spite of Microsoft’s recent price increase. 

Microsoft still is not providing publicly a Microsoft 365 Copilot adoption number. Officials said Microsoft 365 Copilot is being used by “hundreds of thousands of customers” and is up three times year-over-year. (It’s not clear whether this count includes the “free” Microsoft 365 Copilot Chat, but as officials didn’t mention these are “paid” seats, I’m guessing Microsoft 365 Copilot Chat is part of these totals.) 

• A few other enterprise-focused datapoints Microsoft officials shared in the earnings call: 

• There are 21,000-plus paid Fabric customers now, up 80% year over year. Real-time intelligence is the fastest growing workload in Fabric. 

• The Microsoft Phi small language model has been downloaded 38 million times. 

• There are now more than 15 million GitHub Copilot users, up more than four times year-over-year. 

• There are now 56 million monthly active Power Platform users, up 27% year over year. 

• Windows 11 commercial deployments are up 11% year over year. (Note: Most PC-tracking firms say Windows 11 is still on fewer than 50% of work and personal-use PCs.) 

• Windows OEM and Devices revenue was up 3% year over year, which is ahead of expectations as tariffs imposed by the U.S. government led to uncertainty through the quarter. 

Datacenter Slow-Down: Nothing to See Here, Microsoft Says 

As expected, almost all of the Wall Street analyst questions at the end of the April 30 earnings call were focused on reports that Microsoft recently has been pulling back on planned AI/datacenter spending. Chief Financial Officer Amy Hood and Nadella claimed these reports are the result of analysts paying more attention than before to Microsoft’s CapEx spending patterns. (Hmm…) They maintained that Microsoft is making normal adjustments to datacenter build-out plans that were originally created years ago, based on current demand signals.  

Hood emphasized that Microsoft’s CapEx plans are not entirely about AI. She told analysts that non-AI spending was higher than expected in Q3. 

 “The real outperformance in Azure this quarter was in our non-AI business. The only real upside we saw on the AI side of the business was that we were able to deliver supply early to a number of customers,” Hood said. 

Watch for Microsoft’s Coming Sales Reorg 

Separate from earnings, Microsoft announced internally a sweeping sales reorg late last week that will take effect July 1. The company looks to be trying to flatten the sales org and is moving a lot of the vertical businesses around into new operating units.   

Microsoft’s current sales org is designed around six solutions areas: Modern work, Business Applications, Digital & App Innovation, Data & AI, Azure Infrastructure, and Security. The plan is to combine these into three areas: AI Business Solutions, Cloud & AI Platforms, and Security. 

Microsoft is making a big push to build up technical expertise in the field and is requiring sales to meet certain AI skilling criteria over the next couple of months as part of its effort to “accelerate AI transformation.” 

Microsoft Q3 FY25 Earnings Slides, Transcript 

Microsoft explains new datacenter ‘pause’

Calls for European countries and customers to reduce their reliance on the biggest U.S. cloud providers seem to have hit a nerve in Redmond. On April 30, Microsoft announced five new digital commitments meant to reassure European customers that Microsoft has their back, in spite of the chaos caused by the current U.S. government regime with tariffs, regulation, threats over data access and more. 

As enterprises know, it’s not a trivial matter to switch clouds or try to repatriate workloads and apps from the cloud back to on-premises. It’s one thing to talk about reducing dependencies on U.S. tech providers and build alternative European-owned/run “Eurostacks.” But it’s another to put these kinds of plans into action. Microsoft officials know how difficult and expensive it is for customers to untangle themselves from Microsoft’s cloud once they’ve bought in. 

Whether Microsoft’s new commitments are more theatre or reality, these promises come with a number of questions.  

Build out or scale back? Which is it? 

On April 30, Microsoft pledged to increase its European datacenter capacity by 40% over the next two years and promised to expand datacenter operations in 16 European countries. This means Microsoft will “more than double our European datacenter capacity between 2023 and 2027,” and enable Microsoft to offer cloud services in more than 200 datacenters in Europe, according to Microsoft president Brad Smith. 

Smith and other Microsoft officials didn’t provide a list of the countries or share details on the costs of the planned expansion. They also didn’t explain how this expansion will jibe with the company’s recent moves to slow its previously announced AI and datacenter buildouts worldwide. In spite of its pull backs, Microsoft has continued to promise it will spend $80 billion on its datacenter infrastructure in fiscal 2025 (which ends June 30, 2025) and somewhat less in fiscal 2026. 

Smith also touted its partnership with smaller European cloud providers, via which Microsoft is enabling smaller hosting providers to deliver Microsoft apps and services on their local infrastructure under “more favorable terms than we make available to Amazon and Google.” Smith did not mention that Microsoft’s planned build out of its own datacenters might negatively affect the businesses of its smaller local provider partners. 

Smith did note that Microsoft is working on building more sovereign cloud datacenters and partnerships, which enable foreign governments and customers to run Azure in Microsoft’s public cloud datacenters with extra levels of encryption, administration and residency provisions. He cited the Bleu joint venture involving Microsoft, Capgemini and Orange, which enables Bleu customers to operate under French control, as well as another sovereign partnership in Germany involving Microsoft, SAP subsidiary Delos Cloud GmBH, and Bertelsmann IT subsidiary Arvato Systems, as examples of what Microsoft envisions in this space. 

He added that Microsoft will store back-up copies of our code in a secure repository in Switzerland and provide its European partners with the legal rights needed to access and use this code if needed.  

Microsoft: ‘We’re prepared to go to court’ 

Smith also said if any government ordered the company to suspend or cease offering cloud services in Europe, Microsoft would “promptly and vigorously contest such a measure using all legal avenues available, including by pursuing litigation in court.” Smith cited Microsoft’s “strong legal track record” in upholding the rights of its customers. 

But this promise only holds so far as the U.S. judicial system continues to operate lawfully. There have been signs that the Trump administration believes it is not beholden to follow rulings of various courts on a variety of topics. Smith did not address what would happen if the Trump administration simply ignores court-ordered actions around datacenter operations in Europe. 

“This is a good statement for customers,” said Directions on Microsoft analyst Wes Miller, “but we’ll have to see what the company actually delivers before customers can truly know how strongly Microsoft stands behind their words.” 

Related Resources

Microsoft announces new European digital commitments 

Microsoft president says company respects European laws amid US criticism 

Cloud Repatriation: A Directions on Microsoft podcast 

Microsoft Licensing for non-Microsoft clouds: A Directions on Microsoft podcast

Microsoft is continuing to rebrand and redefine its AI strategy and products, with “agents” as the newest centerpiece. Going forward, even the Microsoft 365 Copilot app, in spite of its name, is going to be all about agents. 

In September 2024, Microsoft made a number of announcements around Microsoft 365, agents and Copilot Pages, describing the collection of features as “Copilot Wave 2.” On April 23, Microsoft announced a further set of coming Copilot and agent deliverables as “Copilot Wave 2 Spring” release. 

Microsoft’s biggest Spring Wave announcement is its plan to revamp the Microsoft 365 Copilot app sometime in May 2025. The Microsoft 365 Copilot app is what used to be known as the Microsoft 365 app or Office app. It is available on the web, on desktop (Windows and Mac), and on mobile (Android and iOS), and is the hub for commercial customers who want to interact with their Office apps and documents. Confusingly, the Microsoft 365 Copilot app does not require a Microsoft 365 Copilot subscription; it also is available to work and school customers with Entra accounts and consumers with personal accounts.

Microsoft 365 Copilot App To Become An Agent Showcase 

The updated Microsoft 365 Copilot app will bear a strong resemblance to Microsoft Teams. The centerpiece is the Chat module (previously known as the BizChat and, on mobile, the Copilot module), which will give users access to chat history, Copilot Pages, and agents through the left navigation pane on the desktop and web versions. (Currently in the Microsoft 365 Copilot app, the Microsoft Search box is the centerpiece of the site.)  

The updated Microsoft 365 Copilot app left navigation bar (or bottom bar on mobile) also will feature the “Create” button, as it does now, but with the revamp, Create will point to a new image generator based on OpenAI’s GPT-4o.  

The revamped Microsoft 365 Copilot app will add some features already included in – or at least in the works for – the consumer version, such as the aforementioned image generation, personalization/memory and Copilot Search integration. 

Copilot Search is based on Bing search but includes generative and large language model integration. Microsoft is touting that Microsoft 365 Copilot Search will work across both first- and third-party apps (like Google Drive, Slack, ServiceNow, Confluence, Jira, etc.). Microsoft Search already can do this via Microsoft Graph connectors. Update (April 29): According to the Microsoft 365 Roadmap, the Microsoft 365 Copilot search preview will begin in June, with general availability kicking off in August 2025.

The revamped Microsoft 365 Copilot app will include an Agent Store. This store will include agents from Microsoft and third-party developers. We have asked Microsoft whether the Agent Store is a rebrand of the App Store, but no word back so far.  

Update (April 29): Microsoft officials said the Agent Store is completely separate from the App Store. The Agent Store will be generally available in May within Microsoft 365 Copilot, Microsoft 365 Copilot Chat and M365Copilot.com, Microsoft officials said.

Microsoft’s previously announced Researcher and Analyst reasoning agents will be in this Store and marked as “Frontier,” which is the new way Microsoft will refer to agents in early-access/preview that are available to those with a Microsoft 365 Copilot license while still in development.  

Update (April 29): Many of the new features announced as part of the Wave 2 Spring release are not going to be available to Microsoft 365 Copilot Chat customers, Microsoft acknowledged. “Features like Copilot Notebooks, Create, and Skills agent are limited to customers with a M365 Copilot license,” a spokesperson said when we asked.

Copilot = The Browser for the AI World (?) 

With agents becoming the newest AI darlings, Microsoft has been experimenting with various ways to talk about the relationship between agents and Copilots. One Microsoft exec said this week that Copilot acts “as the browser for the AI world.” Another Microsoft official said “Copilot is now your window into the world of agents.” 

Jon Friedman, corporate vice president of design and research at Microsoft, made it clear Microsoft is still trying to position Copilot as a single entity, even though there are tens of different Microsoft Copilots which work and act very differently and draw from different data sources.  

In explaining how and why Microsoft is revamping the Microsoft 365 Copilot app, Friedman told The Verge: “In my mind Copilot can be one branded experience, and it goes from warm and personal to performant and professional, and that’s what we’ve been working on together.” 

I doubt I’m the only one who thinks this sounds a lot like the strategy Microsoft is continuing to try to land – not so successfully – with Free (consumer) Teams and commercial Teams. 

Microsoft’s Copilot Wave 2 Spring Announcements

Microsoft’s Copilot Wave 2 Fall Announcements

Microsoft Plans for Improving the Management of Agents

Microsoft announced Unified Support, the replacement for its long-standing Premier Support program, in 2017.  As of July 2022, Microsoft no longer offered Premier Support agreements for renewing commercial customers and as of July 2024, no longer for renewing public sector customers. (Some of these public sector customers still could be covered under Premier contracts through at least 2027, technically.) 

Microsoft moved to its new Unified Enterprise Support plan in 2020. Unified Enterprise plans allow customers to choose from a menu of options around assessments, 24X7 technical support, case-management, and mission-critical services.  But pricing for this menu of offerings isn’t per hour; instead, it is priced on a percentage-based model tied to customers’ overall Microsoft spending. The minimum contract price is $50,000 and rates start at 8% to 10% of customers’ annual Microsoft IT spend. 

Many customers have complained about the high cost of Microsoft’s Unified Support. They’ve also publicly questioned Microsoft’s support quality, timeliness and more since Unified Support’s introduction. 

What Can a Customer Do?

Many customers are confused about when and if they should seek out alternatives to Microsoft Unified Support. To that end, we’ve worked with one of the largest third-party Microsoft support vendors, US Cloud, * to assemble a list of some of the biggest myths around Microsoft support that we hear and see from enterprises. 

Myth No. 1: Microsoft is your only option. 

A surprising number of enterprises default to Microsoft when it comes to support – either because they don’t realize there are some excellent alternative qualified support vendors or because they are still in the “Nobody Gets Fired for Buying Microsoft” mode. Customers do have support options, and your support bill will likely be a lot less (as will your resolution times).  

Myth No. 2: Microsoft Unified support is the safest support option. 

Enterprises who are licensed for many Microsoft products often assume the most reliable and least risky option for support for those products would be Microsoft. But that assumption isn’t true. Good third-party support vendors employ Microsoft-certified product specialists and have channels for escalating issues directly to Microsoft if and when needed. The situation is not so different from how consumers often choose to buy extended support contracts from their preferred appliance store providers rather than the appliance manufacturers. Doing so can lead to faster, better, more customized support.  

Myth No. 3: Microsoft does all its own support, making Unified Support the superior choice. 

Unsurprisingly, Microsoft doesn’t go out of its way to acknowledge that it outsources a considerable share of Microsoft Unified Support to external vendors and contractors. As a result, there’s often little or no continuity for customers when it comes to working with the same support engineers across multiple engagements. Sometimes Microsoft’s contracted support people are located in different countries and time zones, which can make coordination and data residency requirements challenging. Don’t assume because it’s called “Microsoft Unified Support” that your support is coming directly from Microsoft or that it will be delivered in a unified way. 

Myth No. 4: Enterprise customers are best served by renewing their Enterprise Agreements (EAs) and support contracts together. 

Microsoft often encourages enterprises to renew their Enterprise Agreements and Unified Support contracts at the same time. Via this “coterminous contract” approach, Microsoft advocates for customers to bundle both agreements into their next renewal or risk losing a deal next time around. However, this practice of aligning termination dates actually results in customers having one less opportunity to negotiate terms in their favor.  What looks like a customer convenience actually is more like a way for Microsoft to lock you into a deal that favors Microsoft. 

*Directions on Microsoft has a business relationship with US Cloud via which we recommend our customers interested in third-party support engage with US Cloud during their Unified Support agreement negotiations. 

Related Resources

Podcast: Microsoft Support: You’ve Got More Options Than You Think

From 2022: Premier Support Completes Transition to Unified Support (Directions members only) 

As largely expected, Microsoft will be increasing prices of its on-premises servers by 10% beginning July 1 (the start of its fiscal 2026). Prices for on-premises SharePoint Server, Exchange Server, Skype for Business Server all will get the 10% hike. And prices for the Core Client Access License (CAL) Suite and Enterprise CAL Suite will go up 15 and 20 percent, respectively, as of July 1. Note: If you are a Microsoft Enterprise Agreement (EA) customer with exclusively E3/E5 users, you will not be affected by these changes, as all your use rights for the products in question already are included in your suites. 

Update (June 27): While the price increases for on-premises servers are still on for July 1, the price increases for the CAL Suite and Enterprise CAL Suite are delayed until August 1.

July is also when the new Exchange Server Subscription Edition (SE) and Skype for Business Server SE will be generally available, Microsoft confirmed in an April 3 blog post. (Microsoft officials previously had said to expect the new Exchange and Skype for Business Servers to arrive in early Q3 2025.) In order to deploy these new releases, customers must have either active Software Assurance (SA) or cloud subscription licenses for all users and devices that access them. 

Microsoft Exchange team officials said last year that Microsoft was planning to release the first Cumulative Update (CU) for Exchange Server SE in October 2025. That date now looks more like early 2026 at the earliest, based on information shared with Directions on Microsoft by Microsoft.  

CU1 is significant for a couple of reasons. Once customers deploy Exchange Server SE CU1, they no longer will be able to mix and match older and new Exchange Servers in the same installation. This means that companies moving to Exchange Server SE will have to get 100% of their servers there before they have to apply CU1, yet another turn of the Exchange Server SE squeezer. 

CU1 also is expected to be the vehicle for Microsoft to add support for Exchange Server SE for the new Outlook client for Windows. Currently, Microsoft doesn’t claim that the new Outlook works with on-premises Exchange (even though some customers seem to have found a way with a workaround and IMAP). 

“The licenses price hikes, the cutoff of old versions, the weak link with new Outlook, they all point to a single message: If you care about Exchange e-mail, get off Exchange Server,” said Directions analyst Rob Helm. 

A Separate Teams SKU Reprieve 

In other licensing-related news, Microsoft is backtracking on a previous policy that required customers moving from EAs to Cloud Solution Provider licenses from having to purchase Teams SKUs for a few dollars more per user separately from their Microsoft 365 subscriptions. 

“(P)artners who have customers with expiring Enterprise Agreements (EA) with Microsoft 365 E3 and E5 with Teams and Office 365 E1, E3, and E5 with Teams, which are end of sale (EOS), can renew into CSP and keep their Teams entitlement,” Microsoft said in an April 1, 2025, update to the Partner Center announcement site. Prior to this announcement, the standard policy for EA customers moving to CSP was that they were “net new” (to CSP) and thus could not purchase Microsoft 365 suites that contained Teams. 

To qualify, customers must have EA agreement subscriptions expiring in the coming six months or EA agreements in the “grace period” (having expired in the past 90 days). Directions has asked Microsoft if there will be any way for other customers who previously were considered net-new because of the change in license/channel to be grandfathered into the “With Teams” bundle under the new rule. No word back so far. 

Related Resources

Licensing and pricing updates for on-premises server products coming July 2025

Microsoft to add new monthly billing option, but at a 5% premium

Here’s another way to keep using classic Outlook (until at least 2029)

Exchange Server: Migrate Off Legacy Versions by Oct. 2025 (Directions members only)

What to know before you go Teams-less

The new ‘Net New’ rules for Teams

CALs Included with Online Services Suites (Directions members only)

Fifty years ago today, April 4, Microsoft got its start. A lot has transpired in that time. Microsoft has launched all kinds of products and services – from Azure to Zune. During that time, its three CEOs have weathered legal battles, executed many good (and not so good) acquisitions, and managed to change with the times better than just about any tech company still in existence. 

Directions on Microsoft has been covering Microsoft through all its phases for more than 30 of those years. Some of our analysts previously worked at Microsoft; others worked for Microsoft partners and Microsoft enterprise customers. So who better to take stock of Microsoft on this momentous occasion than the Directions analysts.  

Donning my journalist hat, I asked our analysts three questions: 

• What product, strategy, or event from Microsoft’s first 50 years do you still consider impressive (for its time or even to this day)
• What’s one (and only one!) product or strategy that you consider/considered ill-advise
• What’s one tip you’d give enterprise customers who will be sticking with Microsoft for at least part of its next 50 years

Their answers may (or may not) surprise you. 

David Berry 

The good: SharePoint, the product that has endured.  In 25 years, it’s grown, morphed and transformed from server product to cloud behemoth, birthed a global community of evangelists and events, and spawned an eco-system of vendors and products.  With the introduction of M365 Copilot, it transformed once again as a gold mine of organizational data for a new generation of productivity apps.    

The not-so-good: Windows Phone – When Microsoft introduced the Windows Mobile phone in about 2004, it failed to innovate and may have lacked vision as it rapidly lost share to Apple’s iPhone when launched in 2006 and later, Android.  Buying Nokia in 2011 was arguably Microsoft’s last significant effort to retake market share but it may not have been the best option.  While not a cure-all, RIM’s Blackberry may have been a better acquisition at the time with its secure email server, corporate clients and younger global consumer base for its Blackberry Messenger (BBM) service.  

Your tip: Stay flexible, my friends.  Technology is changing faster than ever, and quantum computing is on the horizon.  Maintain a flexible IT structure and organization for the adoption of new technologies Microsoft will introduce.  Invest in training to keep your workforce engaged and its skills current. 

Barry Briggs 

The good: Microsoft has an extraordinary, maybe even unique ability to cross chasms. The technology industry – indeed, all industries – are littered with the dead, decaying corpses of once-high-flying companies that couldn’t adapt: Digital Equipment, Wang, Lotus, Compaq, (maybe even) Intel. Microsoft, unlike any other company I can name, has demonstrated an unparalleled and frankly historic ability to confront, surmount, and thrive through paradigm shifts: GUIs, client-server, internet, cloud, AI. It’s really quite extraordinary. 

The not-so-good: Fighting the United States government. Microsoft’s long war with the Department of Justice over anti-trust consumed it for years, depressed the stock price, and hurt its reputation – when resources would have been better devoted to innovation. The good news is that they appear to have learned from it with a proactive CELA team working with, instead of at odds with, governments both in the US and globally. 

Your tip: Do what’s right for you. Microsoft positions itself, to the extent it can, as one-stop shopping. Know your requirements, do your homework, comparison-shop, negotiate, and bargain. Microsoft may well have the right products and services for you, but being an informed customer is better for you, your organization, and ultimately for Microsoft. 

Michael Cherry 

The good: Microsoft retaining the rights to sell DOS to other companies, besides IBM. Because the original IBM PC (code-named Acorn) was made mostly from off-the-shelf components, everything except the ROM-BIOS was available to and from other manufacturers. By reverse engineering the BIOS, IBM PC clones came to the market from a variety of vendors such as Compaq. This established the PC as a highly-configurable device that could run a wide variety of applications—creating the foundation for Microsoft to truly be a software company. 

The not-so-good: Not realizing that the antitrust case would be tried in a court of law, rather than the court of public opinion. In the former realm, Microsoft did not have the smartest people in the room, merely the most arrogant. 

Your tip: In the words of Ronald Reagan, trust but verify. Almost anything anyone at Microsoft tells you is accompanied by a significant amount of sales puffery. It is not that the product or service won’t work, but it won’t always work as advertised. The weird thing is, they believe what they are saying, and eventually it may all come to pass. 

Greg DeMichillie 

The good: Microsoft’s move to the enterprise datacenter.  If you told me, back in the days of Windows 3.x running on top of DOS, that nearly every Fortune 1000 company would have Microsoft software (let alone Windows!) in their data centers and powering their business, I’d have said you were nuts. But it happened.  A lot of the credit goes to Dave Cutler and the early Windows NT team – they built the foundation of the modern Microsoft. 

The not-so-good: Its obsession with consumer business. I don’t know why, but even as they make literal billions of dollars selling to businesses, the company has an inferiority complex around consumer business. So they keep trying to do things like Zune, or Xbox, or Bing. The only thing those efforts do is set money on fire and serve as internal distractions. 

Your tip: Keep Microsoft honest. The best way to control Microsoft costs has always been to have a credible alternative. Nothing makes the sales team sharpen their pencils more than a plausible plan to move to Linux. So keep them honest, invest in the due diligence needed to have an exit plan, even if you hope not to use it. 

Jim Gaynor 

The good: In terms of strategy, I’d say that the bundling of the Office suite back in the 1990s remains a masterstroke. Back then, all the business apps were standalone. Companies used WordPerfect, and Lotus 1-2-3, and dBase. What we take for granted as an office suite today was all individual programs. Microsoft’s products weren’t the strongest in their respective categories, but they were good enough in comparison and less expensive as a bundle than buying the individual best of breed programs. In the corporate world, where purchase decisions are usually made by finance rather than the actual users, that made buying Office the go-to choice (it’s good enough and saves us money!) and helped make it the corporate standard it has become. 

The not-so-good: Can I call out an entire category? Microsoft as a “consumer technology” company ended in the mid-late 1990s. With the exception of Xbox, Microsoft has had few wins of any measure there – and Xbox might have arguably flopped at launch if they hadn’t bought Bungie (the makers of Halo). So many of their attempts in that area have been utter misses either because they think of the technology first and the customer second, or because they’re more concerned about partners than the actual customers (such as the awful licensing terms for music purchased on Zune). 

Your tip: Microsoft’s an amazing technology company, but a lot of their financial success comes from bundling, licensing, and carefully choosing their direct customers – who are often OEMs, resellers, or even corporate procurement officers rather than the actual end-users of their products and services. It’s a strategy that’s worked well for decades and they’re very good at it. Keep that in mind as you continue to use their products in your enterprise; understand who their real customers are, and you’ll have a better handle on how to work with them in the future. 

Rob Helm 

The good: “Island driving”: As a business, Microsoft’s primary strategy over 50 years has been to expand from one monopoly (PC operating systems originally) into a new one with a few basic tactics such as bundling and volume discounting. The monopoly business always gave Microsoft something solid to go back to, lick its wounds, and try again — it never really had to “bet the company”.  

The not-so-good: Consumer brand envy. Competitors have been a great source of inspiration for its engineers, but the long rivalries with consumer brands like Apple, Google, Sony, and so on took billions out of investor’s pockets. Pursuing consumer Internet business did teach Microsoft how to run large data centers, however, which positioned it to enter cloud application and infrastructure services. And crashing in mobile and (initially) cloud infrastructure also cleared the way for Satya Nadella to become CEO. 

Your tip: Diversify. For every category where Microsoft is a big component of your IT spending, make sure there’s a credible competitor with at least a small foothold in your business. And as Microsoft continues to expand in the cloud, you can be one of those competitors, by retaining staff and vendors who can run at least part of your data center infrastructure. 

Wes Miller 

The good: Windows 95. An amazing product at the right time from an incredibly small team (by comparison to today) that changed the world. Outside of Xbox, the last time anyone stayed up until midnight to buy consumer computing technology from Microsoft at a store. 

The not-so-good: Windows Home Server. Sure, it had a small hobbyist market that it could appeal to – but the market for such a product was always extremely small. It was in many ways a product of Microsoft employees for Microsoft employees (or nerds of a feather.) 

Your tip: Be prepared to pay more than you want – prices rise and strategies change… you will need to iterate more rapidly on product versions than you ever had to in the past. 

Rob Sanfilippo 

The good: I keep coming back to Visual Basic on this one. It opened up GUI programming to a wide audience and influenced the way desktop apps would be designed for decades. It led to VBA, which still lives. And its tools performed surprisingly well on the hardware back in the day thanks to portions of it that were implemented in assembly. 

The not-so-good: Someone’s gotta say Microsoft Bob here, so Bob. Although, if generative AI were available back then… 

Your tip: There will always be a lot of noise coming out of Microsoft, but within that there is always a strong signal. Enjoy the noise, but stay alert, and keep fiddling with the tuning knob (using Directions, for example) to clear away the fuzz. 

Andrew Snodgrass 

The good: It’s got to be SQL Server. A beautiful product from the beginning to now. Met the needs for easy query and robust performance and security that others are still trying to emulate. 

The not-so-good: Windows ME. Two concerns: 1. Never let the interns influence product design. 2. You don’t always need to rewrite things. 

Your tip: Watch the pendulum swing. There’s a resurgence of moving back on-prem for a reason. Many are finding it too expensive to be in the cloud. But realize (tip 2) that on-prem will come with subscriptions now. You’re on the annuity train. 

Having covered Microsoft for more than 40 years myself, I can’t resist weighing in, too: 

Mary Jo Foley 

The good: I COULD say Notepad here and call it a day. But I’d also be remiss not to mention Microsoft’s development and launch of Azure. This was an impressive feat for a company with very little cloud experience to come together and pull this off fairly quickly and, largely, in secret. 

The not-so-good: Microsoft’s decision to go ahead and launch Windows 8 after all the negative feedback from enterprises who knew a touch-first experience would not work for businesses. I’m still befuddled that this happened, but glad Windows 8.1 and then, 10 didn’t take all that long to come to the rescue. 

Your tip: Remember that Microsoft’s ultimate goal is to make you dependent on its cloud and to upsell you to its priciest subscriptions (no matter what they say publicly about customer choice). Plan and negotiate with that in mind. 

A new Windows Roadmap from Microsoft documents some major and minor improvements that may become generally available in the near term, and provides information about some changes already in preview or generally available. However, it appears incomplete and downplays the reality that many Windows 11 users cannot access last year’s Windows 11 Annual Feature Update (24H2), which is still being throttled while Microsoft attempts to fix problems.

Filtering Required

One nice feature of the new roadmap is the ability to filter the entries based on a variety of criteria. For example, information can be filtered by Platform (Windows 11 PC versus Windows Copilot+ PC), Version (23H2 versus 24H2), Status (Preview versus Generally Available), and Channel (Retail versus Insider). For example, selecting “Windows 11 PC,” “23H2,” “Gradually Rolling Out,” and “All” shows five entries that started rolling out in Mar. 2025:

In addition to the information used to filter the entries, each entry also provides data such as the Rollout start, Expected availability, More (release) information, and Notes, with entries such as where customers can get the update.

Many Features Not Enterprise Focused

Many of the features in the roadmap are not likely to interest enterprises. For example, “Support gamepad navigation of software keyboard,” is more relevant to consumers, whereas “Improved CPU calculation” may interest consumers and Enterprises. But perhaps a bigger issue with the roadmap is that it has significant gaps. For example, searching for “Quick Machine Recovery” does not find a roadmap entry for work Microsoft is doing to automatically detect, diagnose, and resolve critical issues, which is now available in the Windows Insider Preview Beta Channel for Windows 11, version 24H2. This feature helps when a device gets stuck in the Windows Recovery Environment (Windows RE), which can require considerable time and expertise to resolve.

Getting a Complete Picture

If I were designing this kind of roadmap, I would merge what they’ve built with the known issues with Windows 24H2, so that customers might now when they would be able to get the latest Annual Update. After all, with Windows 11 24H2, it has been six months since general availability, and many users still are not able to get the update, while others are suffering from widespread problems and a general lack of stability after updating. These people will not get the value of the full term of the 24H2 support window through no fault of their own.