According to Tom Warren from The Verge, Microsoft’s Charles Lamanna shared an internal memo on August 6th to his Business & Industry Copilot (BIC) team. This was reported on The Notepad newsletter (subscription required):

That’s as much as we know about Agent 365 so far. What we can do, though, is combine this piece of news with our understanding of what MS has been doing with Copilot so far, as well as what we know about Lamanna’s BIC crew. Which was still called “Business Applications and Platforms” (BAP) only a year ago.

That 365 part in the new product’s name is crucial. Because originally, Microsoft Agent technology was released already back in 1997:

Even I am too much of a newbie in the Microsoft ecosystem to have ever seen books like this that the MS Press published for developers to extend and embed agentic technology into their apps:

Apart from Clippy, originally “Clippit” developed by the MS Office team, nothing much remains in the collective minds of IT folks about this particular era of agents. But now it’s 2025 and we have a bit more tech stack in the cloud to build on, hence the Microsoft Agent 365 initiative.

I have done my fair share of documenting the criticism around Microsoft’s attempt to force Copilot on every single one of their customers. What was originally quite a brilliant choice for a brand name has been suffering from how MS doesn’t make it an opt-in choice for paying customers. Or even opt-out, when you just want to go to your trusted Office apps instead of taking a detour through the Microsoft 365 Copilot UI. Yay, such a productivity boost…

In some ways, what Microsoft is doing with Copilot Studio is the smartest possible way they could combine the new innovations in LLMs with real-life business applications and processes that enterprise customers run in the MS cloud. Just like Power Platform was built on the foundation of Dynamics CRM when going beyond the canvas apps UI layer, Copilot Studio agents are laid on top of all the connectivity and management capabilities Power Platform has accrued over the past few years. This should be the key to winning in the market - if it was only about technology and not also the brand image.

Practically every individual using MS software has been exposed to what Copilot is without this platform, in its in-product form with no extensions. Therefore, their impression of the brand might not be an advantage. In fact, people seem to actively choose something other than Copilot when trying to use AI for their own needs. What started out as a meme revival of Clippy may end up being closer to truth than what Microsoft would like to admit.

Selling the $30 per user per month Microsoft 365 Copilot subscription as the premium experience of what AI can do to information work in the MS cloud could backfire in a big way. Because despite the many UI updates and tweaks in the product, on its own it still can’t do much of the assistant work you’d expect. It’s got the most convincing responses in its text form, yes, but is that what assistants were traditionally hired for? To talk to you about strategic alignment of corporate goals, or to do mundane things for you so that you could spend time on more important things?

Even Microsoft’s pitch of “one Copilot assistant, many agents” is acknowledging this. Agency, the ability of doing things instead of just talking about them, lives somewhere else than Copilot.

Let’s play along with this James Bond theme for a while and talk about the role of agents. We can think of Copilot as the regular police force that patrols the streets and is there to keep the everyday life of a city rolling. The important bit is that at a high level, every cop is the same. Thus everyone also gets to work with the regular in-product Copilots when living the MS Cloud City.

Agents are for special tasks. Most notably, they are engaged in work that isn’t meant to be as visible as what the common police force does. The presence of police cars on the streets is meant to remind people about the consequences if they would not play by the rules. Just like the presence of Copilot in every UI reminds users about AI being non-optional in MS Cloud City.

Agents work with more confidential and private information than the cops that walk the streets of the city. Their work must be protected from prying eyes. One reason being that the subjects the agents deal with are of high value to malicious actors that can also assume similar tactics and means to gain access to it. Just like business operations data within an organization, it can’t just live in regular emails and be passed around carelessly.

When it comes to purpose-built Copilot agents that are specific to one organization and connect with confidential data sources and LoB systems, the smiling face of Copilot Appearance feature doesn’t fit the image at all. Even if this is more targeted at consumer experiences, it’s still called “Copilot”.

In the end, regular people outside Redmond don’t understand the differences between consumer and business products that share the same brand name. Skype vs. Skype for Business. OneDrive vs. OneDrive for Business. Outlook.com vs. Outlook 365. Microsoft account vs. work and school account. “OH GOD, PLEASE MAKE IT STOP!!! WHY IS EVERYTHING FROM MICROSOFT SO COMPLICATED?!?”

Microsoft as a company was born into the Personal Computer boom, or rather their success enabled PCs to become as ubiquitous as they are today. And yet they’re becoming ever more distant to consumers as their share of revenue coming from business customers keeps growing. We can’t expect the confusing duality of personal and business solutions sold under the same umbrella brands to go away anytime soon. Yet I’m pretty sure that with AI agents, the primary push will be for the enterprise.

At some point, AI vendors need to start showing meaningful revenue from the new services. Eventually they should stop being a non-profit adventure. This is why something like Microsoft Agent 365 must be viewed through the lens of licensing revenue potential.

I had a very interesting discussion two weeks ago with Daryl Ulman and Alexander Golev from SAMexpert in our recent session titled “The Real Cost of Agentic AI — Microsoft Copilot Licensing Direction”. The event recording is naturally available to revisit on YouTube:

We talked about many aspects of licensing, of course. The one future direction that I wasn’t quite as certain as Daryl and Alexander is whether Microsoft would introduce a per-agent licensing model in the near future. Yet now, combining the recent news about a Microsoft Agent 365 product being in the works, I’m getting more convinced that this may be an avenue of revenue MS intends to pursue.

One could draw such conclusions also from what their CFO Amy Hood told in the FY25 Q4 earnings call. While Satya Nadella was passionately talking about the exciting new paradigms of agentic computing and the associated Azure resource consumption, Amy was quick to point out that this will not be the only monetization model:

Could that refer just to Microsoft 365 Copilot per-seat licenses? Technically, yes. I think that would be a too conservative take on it, though. Just because something is sold today as largely a consumption based model, such as the Copilot Studio messages, that doesn’t in any way mean that tech vendors wouldn’t actively be designing alternative licensing models.

In the end, the licensing model for software has never been about the unit cost of producing “a software”. The very reason Microsoft became one of the biggest companies of all time was because they gained the ability to sell physical discs containing bits to a global audience of consumers and businesses. It was a license to print money and thus licensing turned into the key competence area determining Microsoft’s commercial success.

2025 was already decided to be “the year of AI agents” before it started. This is why it’s all about designing the product offering around the agent concept. No one knows, or at least agrees on, what an “agent” really is supposed to be in this GenAI era. This makes it a critical moment for MS to leverage its expertise in licensing model design and grab the opportunity to define what an agent is. Like they’ve done with office software before.

What all this will likely mean is that the first versions of what Microsoft Agent 365 will be won’t reveal any major technical innovations. It will instead be all about repackaging the existing tools and services into something that addresses the gap between what Copilot is today and what the promise of agentic AI claims the future of work to be.

It could shake things up in the long run, though. Because if you are indeed able to introduce a new format to monetize the services and there isn’t any massive pushback from the enterprise customer audience, then Microsoft is onto something big. Satya’s own predictions about the SaaS model collapsing as a result of how AI could one day manage the same tasks in a more efficient way would in fact require a bold new commercial model to be introduced.

Why Agent 365 could be such a critical mission for Microsoft’s future is that they simply must find a way to be more than ChatGPT wrapped inside a M365 UI. Given how OpenAI has grabbed all the attention of the world when it comes to AI chat, and how they are simply setting money on fire without a clear way to profitability - Satya needs his own MI6 to protect MS from the possible burst of the AI valuation bubble.

The Microsoft empire must stand the test of time. There have been several threats to its existence throughout the past five decades. Many technologies that MS has participated in pushing to the masses have turned out to be false starts. Not too many of its “Vision 2000” style predictions about how we’ll use software and computers in the future have turned out to be accurate.

And yet here it is still. Like any corporation or empire, it’s not thanks to the infallible leaders who’ve known exactly what decisions to make and how the future will look like. Rather it’s because of the army of agents that have fought for the that future. Some ending up giving their lives in battle while others return back home victorious and become iconic characters.

Just like 007 has been played by many different actors in James Bond movies, 365 has not been any single product in the Microsoft cloud. The reason they both have massive commercial value is because of their amazing ability to embark on dangerous new missions when duty calls. Personally, I’m really looking forward to seeing what new villains Agent 365 will be fighting and what creative new gadgets Q has prepared for countering the modern AI threats.