Microsoft will charge $30 per month to use generative AI features

Microsoft will charge $30 per month for its widely-used productivity software that includes generative artificial intelligence. This is a higher price than anticipated, but many industry experts hope this technology will boost revenues.

The new features will add a large amount to the monthly average cost for Microsoft 365, formerly Office 365, a software suite used by millions of people.

Satya Nadella Microsoft CEO defended the decision to raise the price as part of a technological shift that would give a new dimension for one of the company’s main products.

He said that he would consider this the third leg of Office after cloud services such as Teams and applications like Word and Excel. In an interview he said that the new AI functions “are of the same value”, automating routine tasks and increasing productivity.

Microsoft shares soared to a record high after the announcement.

Pricing news was announced as US software giant, Microsoft, held its annual partner conference. The event included the unveiling of products and services that are based on generative AI. This includes a version for business users of the Bing chatbot which it launched this year. The new chatbot was created for businesses that are concerned about their employees secretly sending sensitive corporate data to ChatGPT. This is run by Microsoft’s close ally OpenAI despite attempts by many employers not to allow its use.

Microsoft is the first company selected by Meta to offer a commercial version LLaMA, the open-source family of large language models developed by the social media company. Meta had only licensed the technology to be used for research purposes until now.

OpenAI and Google have been able to compete in a new way with a commercial release.

Microsoft’s pricing for generative AI was eagerly anticipated by the tech community, due to the widespread use of its productivity software. Microsoft said that more than 382mn users used Office 365 commercial software in the last quarter.

Jason Wong, Gartner analyst, said that the price was “at the high end” of what he had seen for other AI-generated services. OpenAI charges $20 a monthly subscription fee for ChatGPT’s premium version, while Microsoft’s generative AI coding assistance, GitHub Copilot is available for $19.

Nadella stated that evidence that the GitHub service had made coders more efficient is “what gives us real confidence” that a “more ‘horizontal co-pilot’ like [Microsoft 365] will have a major impact on “every type of work”, whether it be sales, finance or HR.

He denied the widespread adoption of AI in the workplace would result in a “content-explosion” where workers would be flooded with AI generated emails and documents that could make them less productive. He predicted that it would lead to a reduction in the amount of emails sent internally, as employees will seek answers directly from AI-powered software, rather than bombarding colleagues with questions.

Nadella explained that “every time you receive a spreadsheet, you are essentially getting a junior analyst to answer your questions.” It’s like having a consultant on call.

The industry’s rush to capitalize on generative AI occurs at a moment when the economic uncertainty of many customers has caused them to limit their tech spending. This is also before companies such as Microsoft have collected data that proves AI-enhanced technology makes workers more productive.

Wong said that the new features, called Copilot by Microsoft, would be “a challenge to enterprise buyers”. “They have to figure out [the] budget required for this additional product. Then they have to justify this extra cost.

He said that the high cost would likely contribute to a slow rollout. The system will be used initially by workers who “generate lots of content – sales, marketing, and customer service”, along with those who “have a great deal of communication and collaboration needs”.

Microsoft 365 Enterprise Editions cost companies $36 per month per user for the E3 version, and $57 for the E5 edition. The $30 extra per month will be charged when Copilot, currently being tested with customers, is made available to all users, according to the company.