Which Microsoft 365 license?
Microsoft 365 licensing is deliberately confusing, and most of the confusion is expensive. Buying too little means finding out at audit time. Buying too much means paying for governance nobody has switched on. Answer four questions and you'll get the license stack I'd actually put on a quote, roughly what it costs, what you give up by stopping there, and the specific event that means it's time to move up.
How many users will be licensed?
This is the single biggest fork. Business plans hard-cap at 300 seats.
Copilot Cowork — usage-based cost estimator
Cowork is a usage-based add-on, not a per-seat price. It needs a Microsoft 365 Copilot license as a prerequisite, then bills separately on Copilot Credits on pay-as-you-go, with volume discounts on pre-purchase. What follows is a rough planning range only — real spend moves with task complexity and how much people actually use it.
One caveat specific to this estimator: Microsoft meters credits in US$0.01 and publishes no Australian credit rate — usage bills through Azure and converts to your agreement currency at invoice time. The AUD figures below are converted at A$1.4287 per US$1 as at 27 July 2026. That is an exchange-rate assumption rather than a Microsoft list price, so it will drift — every other price in this tool is published Australian list.
- Per-task credit ranges (Microsoft's July 2026 planning estimates): light 100–300, medium 300–700, heavy 700+. Microsoft publishes no heavy-task ceiling, so treat any heavy figure as a floor rather than a cap.
- The ranges assume a frontier model. Microsoft's lighter model is designed to cost less, so read this as a planning ceiling on the light and medium bands, not a floor.
- Credits pool at the tenant level, so this is estimated tenant monthly spend, not a per-seat charge.
- Pay-as-you-go is US$0.01 per credit with no commitment. A one-year Pre-Purchase Plan offers volume discounts from 5% (300K credits) up to 20% (300M credits) for tenants that want to lock a rate in.
What are Copilot Credits?
Copilot Credits are the shared usage currency behind Cowork, the Work IQ APIs, Copilot Studio agents, and AI features in Dynamics 365 and Power Platform. You pay for work performed rather than a flat per-seat fee — think of the Copilot license as the fixed connection and the credits as metered usage. Admins can set spending limits and alerts, and usage stays off until it is switched on.
One important distinction: the native Microsoft 365 Copilot experiences — Copilot Chat, AI in Word, Excel, PowerPoint, Outlook and Teams, and the built-in Researcher, Analyst, and Facilitator agents — do not incur separate Work IQ charges. Credits only apply when Work IQ is called directly through its APIs inside a custom-built agent or solution.
Copilot Credits usage-based billing ↗A tool is not a quote
This models the common cases well, but it can't see your tenant. Mixed licensing across departments, an existing agreement, a renewal date worth timing around, on-premises servers still in play, data residency obligations — all of that changes the answer, and none of it fits in four questions. Prices are Australian list (AUD, excluding GST) on an annual commitment, taken from Microsoft's Australian pricing pages and last checked July 28, 2026.
If you want a second opinion on what you're paying, or you're sizing a move before a renewal, I'm happy to look at it properly. How I work covers the process, or you can get in touch directly.
Talk it throughShadow IT is independent and is not affiliated with, endorsed by, or acting on behalf of Microsoft. Product names and documentation links belong to Microsoft, which changes both pricing and packaging without notice — always confirm current figures before you budget or quote.