Jul 19, 2023 - Technology

Microsoft puts a price tag on AI for business

A screenshot of Microsoft's Bing Chat Enterprise. image: Microsoft

Microsoft announced Tuesday it will charge $30 per user per month for businesses that want to use its AI-infused copilots to automate work in Office products such as Word, PowerPoint and Excel.

Why it matters: That will add up to a hefty chunk of change, representing the most significant new revenue opportunity for Microsoft's Office business since it switched to a subscription model.

Details: Microsoft announced the Microsoft 365 Copilot pricing at its Inspire partner conference on Tuesday, along with a business version of its GPT-4-powered Bing Chat, which will sell for $5 per user per month on its own, and also be included in some of the company's subscription bundles.

  • Bing Chat Enterpise adds protections designed to ensure that confidential business data doesn't get leaked out into the world.

Between the lines: That could add upwards of $5 billion to $16 billion in additional revenue for Microsoft next year, Ivana Delevska, chief investment officer at asset manager Spear Invest, told Axios. Her revenue estimate assumes 5% to 16% of Office 365 users sign up for Copilot.

  • The $30 monthly per-user price was higher than the $5 to $20 per user per month many analysts had expected, Delevska said.
  • On the flip side, Delevska noted it also costs Microsoft a lot to power its AI Copilots — on the order of $2 to $5 per hour for the compute capacity needed to provide the service.
  • "We do believe that this creates an opportunity for Microsoft, but it remains to be seen what value it will provide for its customers," Delevska said.

Yes, but: Generative AI services are pretty compute-heavy today, so there's considerable cost involved as well. Microsoft can draw on its existing Azure cloud computing infrastructure, which is already providing AI services for OpenAI and others.

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