Microsoft Shifts Office Copilot Toward In-House AI to Trim Costs

Microsoft quietly began routing a slice of Copilot queries in Word and Excel to models it built itself, part of a cost-cutting move that reduces reliance on third-party systems from OpenAI and Anthropic, according to reports. The change means some user requests that once ran through outside platforms are now handled by Microsoft’s MAI family of models.

The adjustment affects core Office features that Microsoft earlier promoted as powered largely by external partners. Over the last year the company has been expanding its own model lineup — unveiling seven new MAI variants at its developer conference last month, including a code-writing agent and an image generator — and those systems are now being used in production for certain tasks. Microsoft provided no additional comment when asked about the shift.

Industry observers say the company’s pivot is part of a wider retrenchment across big tech after a recent period of heavy model usage. Firms from cloud providers to consultancies have been tightening AI budgets and rethinking how much of their workloads they send to outside vendors; reports name Amazon, Uber, Meta and Accenture among those trimming AI expenses. The trend reflects mounting sticker shock from large-scale generative AI deployments and a scramble to make running models more affordable.

Some companies are also looking beyond U.S. providers for lower-cost options, exploring models developed in China as a way to reduce operating bills. That search for cheaper tooling has prompted fresh debate about supply-chain and security risks, and prompted scrutiny from rivals and regulators over how model weights and knowledge are being shared or reproduced.

Analysts say the practical effects for users will vary. Routing more requests to Microsoft’s own models could lower fees for enterprise customers and give the company greater control over latency and integration. But there’s a trade-off: internal models must match or exceed the capabilities of competitors to avoid degrading the user experience, and shifting traffic can complicate existing partnerships with vendors that provide complementary services.

For customers and investors, the coming months should reveal whether Microsoft scales up MAI across more Office functions or rebalances again in response to cost, quality and regulatory pressure. How OpenAI and Anthropic respond, and whether enterprises accept mixes of internal and third-party models, will help decide whether this is a short-term belt-tightening or a longer strategic move.