Microsoft Copilot vs Copilot Studio: Differences, Licensing & Uses 

The word "Copilot" appears everywhere in Microsoft's ecosystem, creating confusion about what you actually get with each product.

Microsoft offers two distinct enterprise tools: Copilot for Microsoft 365, the AI assistant your employees use daily, and Copilot Studio, the platform for building advanced custom AI agents.

Here we will clarify what each product does, explain licensing requirements, and shows how organizations combine both to deliver measurable business value.

Copilot for Microsoft 365 is the AI assistant that employees use. Copilot Studio is the platform to create, customize, and extend AI agents.

Both products work together, but they solve different business needs. Copilot for M365 helps individuals work faster. Copilot Studio helps organizations automate processes and build specialized agents.

Copilot for Microsoft 365 is the AI assistant embedded in Word, Excel, Outlook, Teams, and other Microsoft apps. It uses Microsoft Graph to access your organization's emails, documents, meetings, and calendar data.

This assistant helps information workers communicate, analyze, and create content faster. Typical tasks include:

• Summarizing email threads and meeting transcripts
• Generating first drafts of documents and presentations
• Analyzing spreadsheet data and creating visualizations
• Drafting responses and synthesizing information across apps

Copilot Chat provides a standalone chat interface where users ask questions and receive answers grounded in organizational data.

Copilot for Microsoft 365 is not designed for building advanced custom AI agents. You can create lite agents with instructions and knowledge, but complex workflows require Copilot Studio.

Note: Microsoft also offers Copilot for individuals, a consumer product. This article focuses on business offerings only.

Copilot Studio is Microsoft's low-code platform for designing and managing advanced custom AI agents.

It connects to multiple data sources using connectors and APIs, enabling sophisticated workflows beyond what standard Copilot provides.

Organizations use Copilot Studio for enterprise-wide automation and specialized processes. The platform supports four agent types:

• Q&A agents: Answer questions using knowledge bases and documentation
• Workflow agents: Execute multi-step business processes with approvals
• Autonomous agents: Monitor events and take action without human prompting
• Cross-system agents: Integrate data from Dynamics 365, SAP, Salesforce, and custom systems

When you need Copilot Studio:

• Your agents must access data outside Microsoft Graph
• You require complex decision logic and branching workflows
• You need integration with external systems like ERP or CRM
• Your use case demands specialized automation beyond general productivity

Copilot for Microsoft 365 includes a so called "lite builder" experience inside the Copilot app. This allows users to create simple agents without purchasing a Copilot Credit pack subscription for studio.

What Lite Agents Can Do

Lite agents created in Copilot for Microsoft 365 support:

• Custom instructions to shape agent behavior
• Knowledge sources (upload files, add SharePoint sites, teams messages and emails)
• Basic conversational AI grounded in Microsoft Graph

What Requires Full Copilot Studio

Advanced capabilities require prepaid Copilot subscription Credit packs or Pay-as-you-go:

• Custom topics and complex dialogue flows
• Integration with external systems via API connectors
• Workflow automation with Power Automate
• Advanced analytics and agent performance monitoring
• Enterprise governance controls and environment management

Governance note: M365 admins control Copilot for Microsoft 365. Power Platform admins manage Copilot Studio environments, connectors, and data loss prevention policies.

You hit lite version limits when: Your agent needs data from systems outside Microsoft 365, requires approval workflows or multi step automation, needs detailed usage analytics beyond basic metrics, or your organization demands environment isolation for compliance.

Copilot for Microsoft 365 uses fixed per-user licensing. Copilot Studio uses consumption billing through Copilot Credits.

Copilot for Microsoft 365 Licensing

Organizations pay a monthly subscription per user. Prerequisites include Microsoft 365 E3, E5, Business Standard, or Business Premium.

Cost: $30 per user per month (as of November 2025)

Each license includes:

• AI assistant access in all Microsoft 365 apps
• Copilot Chat for standalone queries
• Lite agent builder inside the Copilot app
• Microsoft Graph grounding

For new customers include Microsoft 365 Business Basic and Microsoft 365 Copilot starting at $36.00 user/month, paid yearly.

Copilot Studio Licensing

Copilot Studio charges based on consumption measured in Copilot Credits. Authoring agents is free. Running agents consumes credits based on usage.

Cost: Organizations purchase capacity packs or pay-as-you-go.

• Capacity Packs: Start at $200/month for 25,000 credits
• Pay-as-you-go: This option allows organizations to link an Azure subscription and pay through metered, credit based billing with clear visibility into usage and cost.

Credits cover agent conversations, API calls, and data operations. Complex agents with extensive integrations consume more credits than simple Q&A bots.

When you need capacity packs: Organizations deploying agents at scale benefit from predictable monthly costs rather than variable consumption charges.

Most organizations start with Copilot for Microsoft 365 and add Copilot Studio when specific automation needs emerge.

Scenario 1: Productivity Improvement for Individuals and Teams

Use Copilot for Microsoft 365. Standard productivity gains (email summaries, document drafting, data analysis) do not require custom agents.

Scenario 2: Department-Level Q&A Agents

Start with lite agents in Copilot for Microsoft 365. If your agent only needs access to SharePoint documents and does not require workflow automation, lite agents handle this use case.

Upgrade to Copilot Studio when: You need integration with external knowledge bases, detailed analytics, or enterprise governance controls.

Scenario 3: Enterprise-Scale Agents with System Integration

Use Copilot Studio. Agents that connect to Dynamics 365, SAP, Salesforce, or custom APIs require full Copilot Studio capabilities.

Decision Framework

Choose Copilot for Microsoft 365 if:

• Your goal is individual productivity improvement
• You need basic Q&A agents using Microsoft 365 data
• You want to test AI assistant capabilities before larger investment

Choose Copilot Studio if:

• You require integration with non-Microsoft systems
• Your agents need complex workflows and approval processes
• You demand enterprise governance and environment controls
• You plan to deploy agents organization-wide

Choose both when: You want employees using AI assistants for daily work while specialized departments need custom automation.

These production agents demonstrate what organizations achieve with Copilot Studio beyond standard Copilot capabilities.

HSO Time Entry Agent

The Time Entry Agent eliminates timesheet friction by letting employees log hours through natural language commands all from within Microsoft Teams.

The agent integrates directly with Dynamics 365 Finance & Operations, ensuring accuracy and real-time synchronization. Employees type commands like "Add 6 hours Tuesday for Project Delta" instead of navigating complex forms.

Benefits:

• Higher accuracy: Real-time Dynamics 365 sync eliminates manual errors
• Reduced admin time: Smart automation copies from assignments and past weeks
• Faster submissions: Conversational interface reduces manual entry time
• Better adoption: Employees submit timesheets consistently without training

Other HSO Agents Built on Copilot Studio

These agents solve specific business problems across functions:

1. Order Entry Agent: Processes customer orders through conversational interface
2. Customer Service Agent: Handles support inquiries with knowledge base integration
3. Expense Agent: Automates expense report submission and approval workflows
4. Contract Checking Agent: Validates contract terms against policy requirements
5. Work Order Validation Agent: Ensures field service orders meet completion criteria

Across HSO we are developing additional agents that address real enterprise challenges we see across our customer base, expanding the value organizations can unlock with Copilot Studio.

Copilot governance requires coordination between M365 admins and Power Platform admins.

M365 admins control Copilot for Microsoft 365 access and basic agent creation. Power Platform admins manage Copilot Studio environments, connector permissions, and data loss prevention policies.

Essential governance controls:

• Data Loss Prevention (DLP) policies: Restrict which connectors agents can use
• Environment isolation: Separate development, test, and production agents
• Connector controls: Define which systems agents can access
• Sensitivity labels: Data classification follows agents across systems
• Audit logs: Track agent usage and data access patterns

What organizations must implement before scaling:
To scale AI agents responsibly, organizations should define a clear environment strategy that separates production, development, and testing. 

They also need an approval process for connectors, enforce data loss prevention policies to block high risk connectors, document an agent lifecycle management approach, and ensure developers follow secure design patterns.