Microsoft Moves to Subscription Model for It’s GenAI Tools

Microsoft will soon charge businesses $30 each month per a user for its generative AI features in its Office products such as Excel, PowerPoint and Word, the company announced yesterday.

The price tag on its generative AI features would add a significant revenue stream and present an upsell opportunity for the company’s Office subscription revenue.

In its Q1 earnings this year, the company saw an increase in revenue for Office consumer products by $105 million or 7% driven by Microsoft 365 subscription revenue. Meanwhile, Microsoft 365 subscribers grew by 13% to 61.3 million.

Top line

At its annual Inspire partner conference yesterday, Microsoft introduced several pricing avenues to its subscription bundle.

The $30 price tag comes to Copilot, a generative AI assistant that works with Microsoft 365 programs. The tool can rank incoming emails, summarize meetings, analyze spreadsheet data, offer writing prompts and design presentations, according to Microsoft.

However, “many tools in the generative AI in marketplace hover in the $20 per user per month range,” said Jason Wong, an analyst at Gartner. OpenAI’s premium version of ChatGPT is priced at $20 per user per month.

Microsoft also announced the launch of Bing Chat Enterprise, opening its GPT-4-powered Bing Chat to businesses, priced at $5 per user each month.

Between the lines

Microsoft’s pricing comes on the heels of the heated race to offer consumer-driven generative AI products by tech giants like Google and Meta. Although CEOs think generative AI is crucial, there’s a disconnect between them and their executive counterparts. 50% of CEOs said that generative AI is already integrated into their products and services, according to a recent survey by IBM. However, only 29% of their executive teams believe they have sufficient in-house expertise to handle it.

Microsoft’s Copilot tools are currently in the early testing stages with 600 customers, including companies like KPMG, Lumen and Emirates NBD.

“[The $30 pricing] is at a high cost,” said Wong. “Many organizations may not have the budget for the price increase and adoption of Copilot could be limited.”

Microsoft did not announce a timeline for its public rollout.

1 2Next page

Leave a Reply

Your email address will not be published. Required fields are marked *