There have been 3 amazing tools launched by Microsoft recently:
- Code Apps
- Cowork
- New Copilot Studio (aka GitHub Copilot Harness)
These tools had me incredibly excited, as they not only allowed me to do my job better and quicker, but also enabled me to do things that weren't possible.
But then things started to go a little wrong:
Vibe.powerapp.com (the user friendly version of Code Apps) which I was expecting to allow citizen dev's to use it is still half finished and in preview (launched almost a year ago 18th November 2025). Things like this either get traction and hit GA, or they die in preview (often never fully deprecated).
Cowork moved to an expensive pay as you go model.
New Copilot Studio moved to charging for development and removing free usage of M365 Copilot users (this was such a big impact that the older version of Copilot Studio looks to be staying now instead of being replaced).
Although these changes haven't killed them, they have massively changed the likely adoption of these amazing tools, as:
- Most developers wont want to use VS Code etc,
- The price of usage will drive a "Prove ROI before trying" philosophy, which kills innovation and citizen developers.
Strategies
So where did it go wrong, well I think it goes back to the original Copilot Strategy, if you look at 3 different approaches to the AI boom.
Microsoft / Copilot
Microsoft's approach was to leverage their existing user interaction layer and add Copilot everywhere. The expectation was similar to Teams/Internet Explorer, having it everywhere for free/discounted would drive adoption, enabling them to corner the market. Every employee would use Copilot and once the value was established they would be able to start charging more and generating a profit.
With the initial launch disjointed and fragmented, often what felt like independently by each team. This was not helped by the fact that the models were not good enough and the surrounding technology like MCP did not exist yet.
Copilot in Office is a good example. The architecture has pivoted repeatedly—from the original Graph-grounded Copilot experiences, through to an agentic application-specific experience named Agent Mode 2 years later, and then 6 months later moved to a tool and context architecture built around things like MCP and Work IQ.
There were also constant pivots, with Copilot in Office a great example, first started off as one LLM with specific training, this then pivoted to what they called Agent Mode 2 years later, which was more of a specific Agents per application, before finally changing again to a MCP approach 6 months later. The end result is a much improved experience, but the initial offering was not good (and that's being polite).
Open AI
Open AIs approach was to become the brand of AI, like Jacuzzi, Cello tape, Kleenex, and Google. They were happy to offer a free/discounted licenses and wanted Chat GPT to be used by everyone, from Coders to Doctors to Lawyers.
Along with a broad audience they tried many different AI tools and standards. The Sora app is a great example, focusing very little on their core AI business, trying to expand into social networks.
Their initial lead allowed them to gain incredible market share, but in a similar vain to Android, they were never able to get the market share in profit (with Anthropic making more profit/less losses). After seeing Google approach from the free side and Anthropic taking the higher value enterprise customers, they have pivoted, now investing heavily in the Coding approach Anthropic did, with the same tools and performance, but currently undercutting them. This can be seen with the recent defocusing on Codex, and the coding side rolled back into the main Chat GPT brand, making Coding key to the original brand.
Anthropic
After being generally focused like Open AI, they decided early on to focus on a niche, they targeted coding as there area. Not only that the started with just the model (with simple chat and API). They were happy to give up the user interaction layer (Cursor was arguably the main winner here, gaining traction with the developer and enterprises early on).
This allowed them to focus all of their resources, they created a quality product, and then were able to create a "brand", allowing them to charge considerably more then every other provider. They could also invest in expanding the models capabilities, with things like MCP and Skills, all enhancing their product and establishing them as a market trend setter (pains me to say it but a bit like Apple). This meant they could influence and drive the wider market, with others following their lead.
Once the model were established and they felt that they were good enough they then moved down the supply chain, launching Claude Code. Investing here allowed them to improve their models even more, build user lock in, and start the expansion.
After this came Claude Claude Code Desktop (their version of Orchestrator/Codex/T3 Code), Claude Cowork and Claude Design. All expanding the userbase, now not just coders, but everyone using computers.
You can see this path leading to something like Microsoft, with a suite of tools and capabilities, making a Claude Enterprise license a key tool for every employee.
What these Approaches mean
Well we can all agree, currently it looks like Anthropic's approach was the best. And although its still very early, and I wouldn't necessarily bet on them, it
I think Microsoft's approach has created 2 issues for them, first most obvious is they have burned through their budget for adoption. Giving away for free/discounted only works if you can get customers hooked on the product. That never quite happened for Copilot, add in the broader financial markets are getting more concerned with never ending AI investment, it feels like everyone is trying to get to profitability quickly.
This is why they are having to charge full price for Cowork, charge for development of agents, and no "all you can eat vibe coding", you have to pay per token in VS Code.
The second was they are now behind the competition, and its quite possible those competitors now have strong footholds into Microsoft customers.
Cowork is the perfect example, its what I (and I suspect most people) imagined Copilot would be when first announced by Microsoft. It can do complex work across my files, pull together business and external data, and can be scheduled into a workflow.
And yet this wasn't created by Microsoft, but built out of Anthropic's Claude Cowork, using the same underlying technology, but built within the Cloud and heavily integrated with Work IQ.
And because of Anthropic's involvement it means that not only is it designed to work better with Anthropic models, it has completion out of the box, and there may well be licensing costs to Anthropic. Meaning it is:
- More expensive to subsidise
- By paying it they are giving money to the competition, which defies the point of undercutting the competition
Can They Turn It Around
This is Microsoft, so the answer is obviously yes. They have the talent, resources, network effect, and unique tools like Work IQ (man I've been so impressed with the better results since it launched), to still win the AI race, but I think a few things need to happen.
Model
Microsoft needs its own frontier level model. They could even get a Open weight model and build off that (like Cursor did with Composer 2 being built on top of Kimi K2.5). Having these in house models allows them to be cheaper and more finally tuned to Microsoft customers. They have so much user data (both user and how the users use their apps). I know they have the MAI, but I've not seen much except the flash code (so less powerful and not comparable to something like Opus).
Pricing
They need to figure a way to get flat rate licenses. Every license covers an underlying cost, they just figure out the ratio from normal users and heavier users, and slap a healthy margin on it. Business would be happy to pay more to get the security of knowing exactly how much it will cost.
Figuring this out will take time, an I worry having at as PAYGO now will make the data inaccurate. So somehow they need to figure a way to get the price to a position people will act like its a license.
Lead Not Follow
Work IQ is the best example of this, something powerful, unique, and new. Microsoft can't just follow others (Copilot Chat, MCP, Cowork, Scout), it needs to be an innovator, then using its market share to drive the agenda of the wider market. If Microsoft created a new standard, and rolled it out to all of their products, I can't imagine a single other vendor not following (well maybe except for Anthropic and Apple 😏).
Perfect The Managed Host (aka Power Platform)
A big part of AI is not just the exciting stuff, its the infrastructure it runs on. Azure, and more importantly the Power Platform, is perfect. Its a walled garden then can mitigate a lot of the risks from AI generated code. But the Power Platform still has issues it needs to fix:
- Legacy unused Dynamics features
- Lacks POLP (Principle of Least Privilege)
- To focused on citizen dev's (a pipeline that requires dev edit permissions in prod 🤦♂️)
- Messy administration (Bleeds into M365 Admin Center, poor tenant visibility)
- Messy edge features (Too much roles into Azure, App Insights, Key vaults, VNet, just to name a few)
- The 95% Problem (most features are 95% finished, leaving them unusable)
Wrap Up
Integrating Copilot with Microsoft's products made sense, but unfortunately I think there was far too much haste, and too much speed, leading to wasted investment in poor ideas and ideas that the technology wasn't ready for.
Anthropic's approach on mastering code, and expanding when ready. At the heart of everything is code, going to that level was always the right approach. Its the most efficient, consistent, approach, and has the most training data so models could master it first.
Hopefully Microsoft has figured this out, and things like the MAI models and Work IQ show they maybe have. But then I hear a lot about the super app, and I worry maybe not. Expecting developers, citizen developers, and business users all to use the same app doesn't make sense to me, unified admin center, hell yeah, please do that, but one user app no.
I always think of a smart phone, you have an app for every task, that way they are easy to use, easy to find, and targeted to particular user groups. And then any settings that work cross apps go in the settings app, which controls everything.
We will have to wait and see, I have my fingers crossed they do figure it out (and I'm wrong about the super app).
