Copilot Chat vs Microsoft 365 Copilot: what’s the difference?

Copilot Chat is the AI chat included at no extra cost with Microsoft 365 business plans: it’s secure, but it works mainly from the web and whatever you give it. Microsoft 365 Copilot is the paid per-user licence that works with your own emails, files, meetings and chats, inside Word, Excel, PowerPoint, Outlook and Teams. For most small firms, the sensible approach is Copilot Chat for everyone and the paid licence for the people who will use it most.

A note on names: Microsoft has started calling these Microsoft Copilot Chat and Microsoft Copilot. You’ll see both sets of names for a while. If you’re still deciding between Copilot and ChatGPT, start with our comparison.

What the free Copilot Chat does

• Secure chat for work. When people sign in with their work account, Copilot Chat has Microsoft’s enterprise data protection. Microsoft says prompts and responses aren’t used to train its foundation models. Look for the green shield at the top of the chat.
• Answers from the web. It searches the web to answer questions, draft text and explain things.
• Your content, when you provide it. People can paste text, upload a file or pick one of their files, and Copilot Chat will summarise it, answer questions about it or redraft it.
• Copilot in Outlook. Microsoft says all subscribers have access to Copilot in Outlook, where Copilot Chat can draw on your own emails, calendar and meetings.
• Simple agents. Agents built from instructions and public websites are included.

What it doesn’t do

• It doesn’t search your organisation’s content for you. Outside Outlook, it only sees what you give it. Ask “what did we agree with this client last month?” and it can’t look across your Teams chats, SharePoint files and emails to answer.
• Copilot in Word, Excel and PowerPoint varies. Microsoft shows a label under your name on the Microsoft 365 home page. “Copilot Chat (Basic)” means no Copilot in Word, Excel, PowerPoint or OneNote. “M365 Copilot (Basic)” means standard access in those apps, which can be slower or limited at busy times. “M365 Copilot (Premium)” is the paid licence.
• No advanced agents. Microsoft’s Researcher and Analyst agents need the paid licence, and agents that use your organisation’s data are pay-as-you-go.

What the paid licence adds

The paid licence, explained in our glossary entry, is a per-user add-on to your Microsoft 365 plan. The main differences:

The work-data part is what most people are paying for. A licensed user can ask Copilot to prepare them for a client meeting and it will pull from recent emails, Teams chats and documents. Copilot only sees what that person can already see, so if a folder has been shared too widely, its contents can turn up in answers. Get permissions tidied before you license anyone.

One thing the paid licence won’t do on its own is produce formal minutes in your template and file them every time. Copilot can recap a meeting for the people who were there, but proper meeting minutes are a different job.

Agents, in plain English

An agent is a version of Copilot set up for one job, with its own instructions and sources. Examples: an agent that answers staff questions from your HR handbook, one that checks a proposal against your standard terms, or Microsoft’s Researcher, which works through a question in depth and writes up what it finds.

The licensing matters here. With Copilot Chat, agents that only use instructions and public websites are included, but agents that read your organisation’s data are charged by usage. With the paid licence, agents that use work data are included. Either way, treat an agent like any other tool: give it a named owner, test it on real questions and review it when your documents change.

Who in a typical firm benefits from the paid licence

The paid licence earns its keep for people who spend most of the day in email, documents and meetings:

• partners, directors and senior managers juggling long email threads
• fee earners and project managers drafting letters, reports and proposals
• practice managers and PAs preparing for meetings and chasing actions

It earns less for people who work mainly in one specialist system, such as an accounts package, CAD or a practice management system, or who rarely use email. Take a 20-person firm as an example: it might start with five or six licences for the heaviest email and meeting users, and leave everyone else on Copilot Chat.

How to trial it with a few people first

1. Give everyone Copilot Chat first, with a short policy on what can and can’t go into AI tools.
2. Pick three to five people across different roles, all heavy users of email, documents and meetings.
3. Check permissions on SharePoint, Teams and OneDrive before licences go on.
4. Agree five specific uses each, such as summarising client threads or drafting a standard letter, and note roughly how long those tasks take now.
5. Run it for a month. At the time of writing, Microsoft offers a one-month free trial of Microsoft 365 Copilot Business, which needs a card and turns into a paid subscription unless you cancel. Check the commitment terms too: Microsoft’s headline prices are for annual subscriptions that renew automatically.
6. Review honestly. Keep the licences that are saving time, move unused ones to someone else, and drop the rest.

Our post on getting real work out of Copilot has a fuller 30-day plan.

The IT provider’s role

Licensing and set-up sit with your IT provider: checking you’re on a qualifying Microsoft 365 plan, buying and assigning licences, sorting out permissions, and setting the admin controls for web search, agents and retention. For businesses whose IT is looked after by Alphabyte IT, Alphabyte IT does exactly this, switching Copilot and the Microsoft 365 AI features on safely. AlphaOps then focuses on getting real work out of Copilot and other AI tools: the uses, the prompts, the training and the automations that go further than Copilot can alone.

If you’re weighing up the paid licence, our free automation audit will show where Copilot would save time in your firm and where something else would do better. On Monthly AI Support, we keep track of new Copilot features as they arrive and set up the ones worth having, with your OK.