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Inside Microsoft's struggles with Copilot
- Microsoft's flagship AI product, Copilot, is struggling to live up to the hype a year after its launch. Many customers are dissatisfied with the AI tool, complaining that it is ineffective, costly, and not secure. The company's employees and executives are privately concerned about the tool's rollout, and some harbor doubts about what it will ultimately achieve. Copilot's struggles have created an opening for Microsoft's rivals, some of whom have seized on the opportunity to promote their own agendas. Even Wall Street has begun to sour on the huge AI swings that some companies have begun to take.
- Customers also complain that Copilot — which at $30 a month per user can effectively double the licensing fee for Microsoft 365 — is far too costly. Perhaps the biggest concern customers have raised about Copilot involves its security. It can enable employees to read an executive's inbox or access sensitive HR documents. To free up more capital for AI, the company has made significant cuts — including to its main businesses. And over the summer, the company considered a sweeping plan to repackage AI features into existing licenses.
- According to employees with direct knowledge of the company's strategy, Microsoft intends to make its massive bet on AI pay off in two primary ways: by boosting sales and by repackaging prices. The company has also cut the number of employees working on its Teams chat app. Last month, a year after his sweeping claims that Copilot would uplift all of humanity, Nadella delivered a far more modest keynote address. Competitors also scoffed at the presentation as show over substance. Despite the internal concerns, those at the top of the company express no doubt about going all in on artificial intelligence.
- Microsoft considers AI as important as the invention of the internet and PCs and would stay the course, despite the massive investments it will require. But critics believe the tech industry is headed toward an "AI winter," in which Microsoft and other tech giants will pay a steep price for their extravagant investment.
- The spending spree on AI delayed budgets for several teams for the current fiscal year. Copilot-specific sales goals have been set for the first time, turning up the pressure to wring revenue out of its massive investment in AI. Employees say that the company tends to slap the Copilot brand on everything in sight. Microsoft has also been paying significantly more for AI employees than for other roles. The message is clear: If you're applying to Microsoft, it pays to find a role in AI.
- Microsoft defended its new product — and its larger strategy of going all in on AI. The company told BI that its investments in Copilot are already paying off, and that many customers are coming back to purchase additional access to the tool. According to company insiders, Copilot has also been hampered by a program Microsoft introduced this year called the Secure Future Initiative. The move — which makes security their top priority — follows years of security issues at Microsoft.
- Internally, Microsoft employees are still bullish on the company's future in AI. Spataro said Microsoft considered AI as important as the invention of the internet and PCs — and would stay the course, despite the massive investments it will require. "You have to have that strategic patience — no matter what's happening — to just focus and execute," Spataro said. "That's what we're trying to do as a company."
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