Microsoft will charge $30 per month for generative AI features

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Microsoft is to charge $30 a month for generative artificial intelligence features in its widely used productivity software, putting a bigger premium than expected on a technology that many in the industry hope will provide a big boost to revenues.

For customers who sign up, the new features are set to add a steep 53-83 percent increase to the average monthly cost of business versions of the Microsoft 365 service, a software suite formerly known as Office 365 used by hundreds of millions of workers .

Satya Nadella, Microsoft̵[ads1]7;s CEO, defended the pricing decision as part of a generational shift in technology that would add a new dimension to one of the software company’s core products.

“I would think of this as the third leg” of Office, he said, after applications like Word and Excel and cloud services like Teams. In an interview with the Financial Times, he claimed that the new AI features “are of equal value”, automating routine work and increasing productivity.

Microsoft shares rose after the announcement to hit a new record high.

The price news came as the US software giant used its annual partner conference to unveil products and services based on generative AI, including a business version of the chatbot it added to the Bing search engine this year. The new chatbot is aimed at businesses concerned that their workers are secretly feeding sensitive company data into ChatGPT, which is operated by close Microsoft ally OpenAI, despite an attempt by many employers to ban its use.

Microsoft has become the first technology company selected by Meta to make available a commercial version of the social media company’s family of large open-source language models, known as LLaMA. Meta has licensed the technology for research use only, until now.

A commercial launch of the well-received software has been seen as an important moment, bringing a new form of competition for OpenAI and Google.

Microsoft’s pricing of generative AI has been hotly anticipated in the tech world, given the wide adoption of the company’s productivity software. More than 382 million people used commercial versions of Office 365 software in the last quarter, the company said.

The price is “at the higher end of what we see for other generative AI services,” said Jason Wong, an analyst at Gartner. OpenAI charges $20 a month for the premium version of ChatGPT, while the monthly fee for a business version of Microsoft’s generative AI coding assistant, GitHub Copilot, is $19.

Evidence that the GitHub service has made coders more productive is “what gives us real confidence that a more ‘horizontal’ co-pilot like [Microsoft 365]” will have a major impact on “each [type of] sales, finance, HR or general knowledge work”, said Nadella.

He denied that the widespread use of the technology in business would lead to a “content explosion” that would see workers inundated with AI-generated emails and documents, potentially making them less productive. Instead, he predicted it would reduce the number of internal emails produced, as workers seek direct answers from their AI-powered software rather than bombard colleagues with questions.

“Every time you get a spreadsheet you basically get a junior analyst with it, you can ask questions,” Nadella said. “It’s like having an analyst on demand.”

However, the industry’s race to monetize generative AI comes at a time when economic uncertainty has led many customers to cap their technology spending, and before companies like Microsoft have been able to collect data proving that AI- improved software makes workers more productive.

The new features, which Microsoft calls Copilot, will be “a challenge for enterprise buyers,” Wong said. “They must find [the] budget for this additional product. And then they have to justify the surcharge.”

The high costs would likely contribute to a “slow” rollout, he added, with use limited initially to workers who “generate a lot of content — sales, marketing, customer service” as well as those with “a lot of need.” to communicate and collaborate’.

Businesses using enterprise-grade versions of Microsoft 365 currently pay $36 a month for each user of the E3 version and $57 a month for the E5 version. The extra $30 a month will apply when the Copilot feature, currently in trial with customers, becomes generally available, the company said.

Additional reporting by Hannah Murphy