Microsoft AI Licensing and The Software Inflation.

In a busy construction setting, an architect carefully examines blueprints, armed with vital tools for accuracy and safety.

There’s something odd about Microsoft’s AI licensing. It gives you choices — but only if you know exactly what you’re buying.

If you don’t, it’s easy to drown in a soup of “packs,” “credits,” and “embedded rights.”

I'm sharing what I learnt through practising Power Automate with AI Builder and Copilot Agents.

Yet, this doesn't guarantee I captured all 50 shades of Microsoft AI licensing correctly.

Not All Copilots Are Created Equal

Saying “Copilot” could mean five different things in Microsoft’s ecosystem. There’s:

• Microsoft 365 Copilot (Chat + Office integration) for daily productivity.

• Copilot Studio to build your own internal/external bots and automations.

• Power Platform Copilots embedded into Power Automate/Apps.

• Sales/Service Copilots tied to Dynamics.

• GitHub Copilot for software development on the Azure platform.

Each has its license logic. Bundle them all into one budget, and you’re most likely to either overspend or overlook something.

Pay-Per-Bot vs. Per-User: Know Your Demand Patterns

Here’s the classic mistake: giving everyone a Copilot license and hoping they’ll “use it more.”

That’s generous — and expensive. And most colleagues won't use it beyond occasional Q&A and web searches.

You'd better mix it:

• Knowledge workers (HR, Strategy, Finance)? Give them Copilot Plus ($30/user/month) — it’s rich and tightly integrated with Outlook, Word, etc.

• Bot builders or automation pros? Give them Copilot Studio message bundles (e.g., $200/month for 25,000 messages) and Power Apps with AI Builder.

• Occasional users of chats or pilots? Assign a PAYG billing policy. Pay only for what they use, and monitor it in Azure.

Monitor actual consumption and adjust individual quotas accordingly.

Bots Aren’t Free (Even If Nobody Sees Them)

Your AI agents — those comfy bots answering HR queries or supplier FAQs — are quietly burning dollars in the background.

Let’s say you are in Procurement, having:

• One internal agent handling 50 messages per day on your intranet (e.g., end-user queries on buying policies)

• One supplier-facing bot for 700 vendors, each asking ~ 3 questions/month regarding onboarding and prequalification.

That’s 3,600 messages per month, or $36 per month on a pay-as-you-go (PAYG) plan. Seems fine.

But scale it to 20 bots across multiple departments and forget to cap usage? Suddenly, you’re explaining a five-figure bill to your CFO.

AI Builder: Not Just “Included”

Power Automate’s AI Builder is a licensing topic in its own right.

• The $500/month capacity pack provides 1 million credits.

• Each prediction, form scan, OCR, and GPT prompt costs credits.

• Don’t forget: training AI models also consumes credits. Advanced GPT versions cost more credits.

So, AI Builder isn’t just a “free AI feature.” It’s a quota you must manage.

Generic Microsoft License Cost Model

I assumed the following all-inclusive Microsoft licensing model for my company (prices used are from open sources or ChatGPT, so yours may be cheaper due to Enterprise Agreement discounts).

Cost Element	Users/Units	Unit Cost (USD/month)	Annual Cost (USD)
Microsoft 365 E3 Licenses	2000	33,75	810 000
Power Automate Premium (10% of headcount)	200	15	36 000
AI Builder (5 heavy users @ $150)	5	150	9 000
AI Builder (45 light users @ $50)	45	50	27 000
Copilot Plus Licenses	200	30	72 000
Copilot Pro Licenses	20	200	48 000
Power BI Pro Licenses	20	10	2 400
Power Pages (Tier 3, est. 5 packs)	5	50	3 000
Copilot Agent Bots (PAYG - 20,000 msgs/month)	20000	0,01	2 400
Unattended RPA Bots (10 @ $150)	10	150	18 000
TOTAL			1 027 800. (+27% over core M365 licenses)

AI Features Driving the Software Inflation

The estimate of "software inflation" in Q1 2025 was 11.4%, while US inflation overall remained at 2.7%.

There’s a new kind of inflation hitting corporate budgets — not driven by raw materials or energy costs, but by “intelligent features” embedded into everyday software.

A few years ago, Microsoft’s $36/month for an M365 E3 license felt like a full-package deal: Outlook, Excel, Teams, SharePoint — done. Today, it’s just the beginning.

To get the actual AI-enhanced experience (the one they demo on stage), you’re layering:

• $30 for Copilot Plus (chat assistants in Office),

• $15–$200 for Power Platform Premium connectors or Pro-grade Copilot tools,

• $50–$150 per user for AI Builder credits,

• A few hundred bucks for bots to answer some FAQs.

None of this replaces your core licensing — it adds to it. And since AI services scale per user, per message, or prediction, costs are no longer flat. They’re alive. Growing.

If you don’t have consumption caps, admin guardrails, and actual usage analytics, you’re not budgeting — you’re guessing.

And that’s the paradox: you’re buying intelligence, but unless you govern it smartly, it makes your cost model dumber.