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Microsoft will charge $30 a month for generative artificial intelligence capabilities in its widely used productivity software, a higher-than-expected premium for a technology that many in the industry are hoping will drive a hefty revenue boost.
For customers who sign up, the new features will increase the average monthly cost of business versions of the Microsoft 365 service, a software suite formerly known as Office 365 and used by hundreds, by a whopping 53-83 percent million workers.
Microsoft CEO Satya Nadella 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 envision that as the third pillar of Office,” he said, after applications like Word and Excel and cloud services like Teams. In an interview with the Financial Times, he claimed the new AI capabilities are “of the same value” as they automate routine work and increase productivity.
Microsoft shares surged after the announcement, hitting a new all-time high.
The pricing news came as the US software giant used its annual partners conference to unveil products and services powered by generative AI, including a business version of the chatbot it added to its Bing search engine earlier this year. The new chatbot is aimed at companies concerned that their employees are secretly feeding confidential company data into ChatGPT, which is operated by close Microsoft ally OpenAI, although many employers have tried to ban its use.
Microsoft is the first technology company selected by Meta to make available a commercial version of the social media company’s open-source family of large language models, known as LLaMA. So far, Meta has only licensed the technology for research purposes.
A commercial launch of the well-received software was seen as an important moment, bringing a new form of competition for OpenAI and Google.
Microsoft’s pricing for generative AI has been highly anticipated in the tech world given the widespread adoption of the company’s productivity software. According to the company, more than 382 million people used commercial versions of Office 365 software last quarter.
The price is “on the high end of what we’re seeing for other generative AI services,” said Jason Wong, an analyst at Gartner. OpenAI charges $20 per 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.
Proof that the GitHub service has made programmers more productive “gives us real confidence that pleases a more ‘horizontal’ co-pilot.” [Microsoft 365]”will have a major impact on ‘everyone’ [type of] Sales, finance, human resources, or general knowledge work,” Nadella said.
He denied that the widespread use of the technology in companies would lead to a “content explosion” that would result in employees being inundated with AI-generated emails and documents, potentially making them less productive. Instead, he predicted that this would reduce the number of internal emails produced as employees seek direct answers in their AI-powered software, rather than bombarding their colleagues with questions.
“Every time you get a spreadsheet, you basically get a junior analyst to ask questions with,” Nadella said. “It’s like having an analyst on call.”
However, the industry race to leverage generative AI comes at a time when economic uncertainty has prompted many customers to limit their technology spending, and before companies like Microsoft were able to collect data proving that AI -based software increases worker productivity.
The new features, which Microsoft calls Copilot, will be “a challenge for enterprise buyers,” Wong said. “You must find [the] Budget for this additional product. And then they have to justify the surcharge.”
The high cost would likely contribute to a “slow” rollout, he added, with usage initially limited to employees who “generate a lot of content — sales, marketing, customer service,” as well as those who have “great need” to communicate and work together”.
Businesses using enterprise versions of Microsoft 365 currently pay $36 per month for each user of the E3 version and $57 per month for the E5 version. The additional $30 per month will come when the Copilot feature, which is currently being tested with customers, becomes generally available, the company said.
Additional reporting by Hannah Murphy