Module 6 of StartCloud's Copilot Essentials learning pathway, in five short units with a knowledge check: what the included Microsoft 365 Copilot Chat already gives you, what the paid Microsoft 365 Copilot licence adds through Microsoft Graph grounding and in-app Copilot, how to decide who in a small business genuinely needs a paid seat, and how enterprise data protection covers both when people sign in with a work account.
Copilot Chat or the Paid Licence: Who Needs Which
What you already have, for free
Here is a conversation we have most weeks. A business asks us to price Copilot for the whole team, and the first thing we tell them is that a good chunk of Copilot is already switched on and paid for. Microsoft 365 Copilot Chat comes with eligible Microsoft 365 subscriptions at no extra cost, including the Business Basic, Business Standard and Business Premium plans most Perth small businesses run on.
People just need to sign in with their work account rather than a personal one. That single detail is what separates a properly protected business tool from someone pasting a client contract into a random chatbot on their phone.
- AI chat grounded in the web, powered by current large language models
- File upload, so you can hand it a document and ask questions about it
- Image generation and Copilot Pages for saving and sharing what it produces
- Enterprise data protection when people sign in with their work account
- Admin controls, so IT can manage it rather than pretend it does not exist
Where people find it
The Microsoft 365 Copilot app in a browser, or the installed app on Windows.
Where Copilot Chat can work with the content someone already has open in front of them.
Signed in with a work account, with the shield showing that enterprise data protection applies.
Copilot Chat is grounded in the web, not in your business. It cannot go and read your mailbox, your Teams chats or your SharePoint on its own. Ask it "what did I miss this week?" and you will get a polite nothing. That gap is exactly what the paid licence fills, and it is the whole decision in one sentence.
If Copilot Chat is a very capable assistant who has read the entire internet but has never set foot in your office, the paid Microsoft 365 Copilot licence is the same assistant after their induction. Same underlying cleverness. Completely different usefulness, because now they know who your clients are and where the proposal template lives.
Four things come with the paid seat. The first one does most of the work.
Chat grounded in your own work data
With a licence, Copilot can reason over your files, meetings, emails and chats through Microsoft Graph, and only the content that person could already open themselves.
- "What did I miss while I was on leave?" gets a real answer
- "Summarise everything we have agreed with this client" pulls from actual threads
- Licensed users can flip between work-grounded and web-only answers
Copilot in Word, Excel, PowerPoint, Outlook and Teams
Not a separate chat window you have to remember to visit, but Copilot sitting in the app you are already working in, able to edit what is in front of you.
- Drafting and rewriting in the document, not in a browser tab
- Meeting recaps in Teams for the meeting you just sat through
- Working through the actual spreadsheet you have open
Fuller access to agents, including Researcher and Analyst
Copilot Chat can use and create agents too, but the licence opens up Microsoft's advanced reasoning agents and custom agents grounded in your own data. Module 8 covers agents properly.
- Researcher and Analyst for longer, multi-step work
- Prebuilt Microsoft agents and custom ones built on your content
- Agents you build in Agent Builder are included with the licence
Copilot Analytics and the wider control system
The reporting that tells you whether the spend is working, plus the admin tooling for governing it. Handy for one person wearing the IT hat, and the reason Module 7 exists.
- Readiness, usage and adoption reports in the admin centre
- The Copilot Dashboard in Viva Insights
- SharePoint Advanced Management for tidying up oversharing
Copilot Chat users can still bring work content into a chat by hand: upload a file with the plus button, drag and drop it, type a forward slash to pick a file, or just paste the text in. Used in Teams or Outlook, it can also work with the content someone already has open. It is more clicks than the licensed version, and for plenty of roles more clicks is completely fine.
Licences are per user, and they can be reassigned. That is the most useful fact in this whole module, because it means the question is never "do we buy Copilot?" It is "which four people get a seat first?"
The honest test is a boring one. A paid seat is worth it when someone spends real hours every week on work that Copilot can start for them, inside Microsoft 365, using information that already lives in your tenant. If any part of that sentence does not describe the person, the free chat is the better starting point.
- Lives in Outlook and Teams, and drowns in both
- Sits in meetings all day and owes people notes afterwards
- Writes the same kind of document over and over: proposals, reports, tenders, client updates
- Regularly needs to find something across old email threads and files
- Heavy spreadsheet and reporting roles, where the value depends on how tidy the data is
- Technical or specialist roles with lots of writing but very particular language
- Anyone whose work is mostly in systems outside Microsoft 365
- Managers who are interested but whose week is mostly other people's meetings
- Occasional writing, the odd summary, general research
- Field and site staff who use email lightly and Word rarely
- Shared accounts and shared machines, where a per-user licence makes no sense anyway
- Anyone curious about AI who has not yet found a task to point it at
The Copilot readiness report in the Microsoft 365 admin centre flags a "suggested candidate for Copilot" column: each week it picks out the top quarter of your unlicensed people based on how heavily they use the apps Copilot plugs into, like Outlook, Teams and Word. It is a decent shortlist to argue with. Microsoft is clear that it is not a performance measure, and it should never be used as one.
The Copilot licence sits on top of an eligible Microsoft 365 plan, so the base subscription has to be right first. And people need to be on a supported Office update channel, either Current Channel or Monthly Enterprise Channel, before a licence can be assigned. The readiness report checks both for you, which saves a very confusing Monday morning.
This is the part that surprises people, so it is worth being plain about it. The free Copilot Chat is not the risky one. When someone signs in with their work account, both Copilot Chat and the paid Microsoft 365 Copilot are covered by enterprise data protection, which is Microsoft's name for the set of commitments in the Data Protection Addendum and Product Terms that already cover the rest of your Microsoft 365 data.
If you remember the older name, commercial data protection, that is the same idea grown up. Enterprise data protection replaced it and extended the security, privacy and compliance commitments across both Copilot experiences. In the chat window you will see a small green shield confirming it is on.
- Prompts and responses are covered by the same contractual terms as your Exchange email and SharePoint files
- Nothing you type is used to train the foundation models
- Interactions are logged and can be audited or searched by your admins
- Copilot only ever surfaces content the person could already open themselves
- A personal Microsoft account is a different product with different terms
- Free public AI tools have no relationship with your tenant at all
- Nothing typed there is auditable, discoverable, or covered by your agreements
- The client data is out of your hands the second someone hits enter
Which flips the usual argument on its head. Not buying licences does not keep AI out of your business, it just means your staff use whatever they can find on their own phones. Turning on Copilot Chat properly, telling everyone to sign in with their work account, and pinning it where they will see it is a security decision as much as a productivity one. It costs nothing and it gives people a sanctioned place to go.
One caveat worth carrying into the next module. A paid licence means Copilot can reach anything that person can already open, which is brilliant when your permissions are tidy and alarming when they are not. If you skipped Module 4 on getting your data ready, do that before the first paid seat lands.
- Microsoft Learn: Overview of Microsoft 365 Copilot Chat
- Microsoft Learn: Which Copilot is right for me or my organization?
- Microsoft Learn: License options for Microsoft 365 Copilot
- Microsoft Learn: Manage Microsoft 365 Copilot Chat (eligibility)
- Microsoft Learn: Enterprise data protection in Microsoft 365 Copilot and Copilot Chat
- Microsoft Learn: Privacy and protections in Microsoft 365 Copilot Chat
- Microsoft Learn: Microsoft 365 Copilot readiness report
Details were current at the time of writing (August 2026). Microsoft changes Copilot naming, eligibility and licensing fairly regularly, so check the links above before you buy anything.
Knowledge check
5 quick questions. Get 4 right and the module is yours.
1. What is the main thing Microsoft 365 Copilot Chat cannot do that the paid licence can?
2. Your team is on Microsoft 365 Business Standard with no Copilot add-on. What AI do they already have?
3. Which of these people is the strongest candidate for a paid Copilot seat?
4. Does enterprise data protection apply to the free Copilot Chat?
5. What is the security argument for turning Copilot Chat on properly, even with no paid licences?