The Day Microsoft Started Charging for AI Whether You Use It or Not

Photo by Simon Ray on Unsplash

Today, July 1, 2026, the price of Microsoft 365 went up. Not by a small amount, and not for a small number of people. Microsoft’s commercial Microsoft 365 pricing changes take effect July 1, covering several Enterprise, Business, Frontline, and Government-equivalent plans. Microsoft previously said the changes reflect added AI, security, and management capabilities across the suite.

The AI bundled into these price rises is called Copilot. If you use Microsoft 365 — Word, Excel, Outlook, Teams, SharePoint — you now have Copilot embedded throughout. Whether you have ever used it, whether you want it, whether your organisation’s data governance policies allow it, is largely irrelevant to the billing. The price has changed because Microsoft decided AI is now part of the core product, and the core product costs more.

This is how AI gets monetised at scale. Not through optional add-ons that users choose to purchase, but through bundling into software that hundreds of millions of people already depend on.

What the Price Rises Actually Cover

Microsoft has been careful not to frame these as straightforward price increases. The official language describes the changes as reflecting added AI, security, and management capabilities — the implication being that users are getting more, not simply paying more for the same thing.

The AI additions are real. Copilot in Microsoft 365 has expanded significantly since its initial launch. It can now draft emails in Outlook based on brief prompts, summarise Teams meeting recordings, generate first drafts of Word documents, create Excel formulas from plain-language descriptions, and produce PowerPoint presentations from outlines. These are genuinely useful capabilities for many users.

But there is a question embedded in that usefulness: useful for whom, and at what rate of adoption? Enterprise software pricing decisions rarely track closely to actual feature adoption rates. A capability that 30% of users engage with meaningfully and 70% never open still gets priced into the subscription as if it delivers value across the entire user base.

For Microsoft, the move turns AI into pricing leverage. For customers, it forces a harder conversation about which AI features are useful enough to justify higher recurring costs.

That harder conversation is playing out in IT procurement offices across every organisation that runs Microsoft 365. The question is not “should we buy Copilot?” — the decision has been made for them. The question is whether the price increase is justified by the value their employees actually extract.

The Historical Pattern: How Software Companies Bundle Their Way to Revenue

Microsoft’s AI bundling strategy follows a pattern the company has executed successfully before, and that the software industry has used for decades.

In the 1990s, Microsoft bundled Internet Explorer into Windows and used that bundling to displace Netscape Navigator. The browser wasn’t a separate product you chose to buy — it was simply part of the operating system you already had. The bundling was so effective it became the subject of a landmark antitrust case.

In the 2000s, Microsoft bundled Teams into Microsoft 365, displacing Slack and Zoom in many enterprise environments not because Teams was necessarily better but because it was already included. Organisations that were already paying for Microsoft 365 chose the bundled option rather than paying separately for a competing product. Slack eventually filed an antitrust complaint in Europe over the practice.

AI bundling follows the same playbook. Microsoft doesn’t need to convince your IT department to buy Copilot. It simply needs to raise the price of the software your IT department already bought years ago and cannot easily replace. The switching costs of migrating an entire organisation away from Microsoft 365 — retraining staff, migrating data, replacing workflows — are high enough that most organisations will accept the price increase rather than face the disruption of switching.

This is not a criticism. It is a description of how bundling works, and why it is an effective business strategy.

Photo by Carl Heyerdahl on Unsplash

What AI in Productivity Software Actually Does Well

Setting aside the pricing strategy, there is a genuine question about what Copilot in Microsoft 365 is actually good at — because “AI in your software” is abstract in a way that “AI wrote this meeting summary” is not.

The use cases where Copilot has demonstrated clear productivity gains in enterprise settings are specific and consistent across early deployments. Meeting summarisation is the clearest example — Teams meetings generate transcripts automatically, and Copilot can distil a one-hour meeting into a structured summary with action items in seconds. For organisations running dozens of meetings per day, this alone recovers meaningful time.

Email drafting is more mixed. Copilot can generate a serviceable first draft of an email from a brief description, but the quality varies enough that most users still edit significantly. For routine, formulaic correspondence the time saving is real. For nuanced or sensitive communications, the AI draft is often a starting point rather than a finished product.

Excel formula generation is the underrated capability — the ability to describe what you want a formula to do in plain language and have Copilot write it correctly handles a genuine pain point for the large majority of Excel users who never learned advanced formula syntax.

The Broader Question for Enterprise AI

Microsoft’s July 1 price rise is the most visible example of a trend playing out across enterprise software: the point at which AI transitions from an experimental feature to a line item that every customer pays for, regardless of adoption.

This transition is significant because it changes the financial model of enterprise software permanently. Previously, AI was an add-on — a separate SKU that IT departments evaluated independently and purchased only if they believed the ROI was there. Now, AI is being embedded into the base product and priced accordingly.

For software vendors, this is lucrative because it captures AI revenue from the large majority of users who would not have opted in voluntarily. For enterprise customers, it creates a different procurement dynamic — one where AI capability is assumed rather than chosen, and where the question shifts from “should we use AI?” to “how do we use the AI we’re already paying for?”

That question — how do we extract value from AI tools we’ve already bought — is now the primary AI challenge for most large organisations. Not adoption decisions but implementation quality.

Future Impact

Microsoft’s move will not be the last of its kind. Google Workspace, Salesforce, and Adobe Creative Cloud all have active plans to embed AI features into their core subscription tiers and adjust pricing to reflect that embedding. The era of AI as a premium optional add-on is ending.

For individual users, the implication is that the software you use every day is increasingly AI-assisted by default, whether or not you actively engage with that assistance. The question is not whether AI will be in your workflow. It is already there. The question is whether you will use it deliberately and well, or pay for it while continuing to work the way you always have.

The organisations that extract the most value from Microsoft’s price rise will be the ones that treat Copilot’s presence not as an imposition but as an opportunity to redesign how their teams actually work. The ones that see it purely as a cost increase will pay more for the same outcomes they had before.