What it does

Copilot Chat is the conversational surface, reachable from Teams, Outlook, the Microsoft 365 app and copilot.microsoft.com. It has two modes: web-grounded chat, and work-grounded chat that reaches your Microsoft Graph data.

Key facts

• Free Copilot Chat (web grounding) comes with most M365 subscriptions and signs in with an Entra account. It gets enterprise data protection but no access to your work content.
• A Microsoft 365 Copilot licence unlocks work grounding — email, files, chats, meetings — plus Copilot in the Office apps.
• The work/web toggle sits in the chat interface, so users switch context themselves.
• Agents can be pinned into Chat, so it doubles as the front door for Researcher, Analyst and custom agents.

When to use / skip

Give free Chat to the whole tenant as a protected alternative to consumer AI tools. Reserve licensed work-grounded Chat for people who need it to reason over their actual documents and mail.

Configuration decisions

• Whether web grounding is on, and whether users can point Chat at specific sites or files.
• Which agents you pin and who can install their own.
• Data protection and DLP policy that applies to Chat prompts.

Gotchas

• Users don't clock the work/web distinction. They'll ask work questions in web mode and wonder why the answer's thin.
• "Free" Chat still needs the right licensing and Entra sign-in to get enterprise data protection — a personal login gives you none of that.

Consultant notes

• The free tier is a genuinely good adoption on-ramp and a shadow-AI countermeasure. Position it deliberately.
• Make the work/web toggle part of your training, or you'll field the same confused ticket weekly.
• Watch which agents land in Chat over time — the surface changes faster than your documentation will.

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Worth revisiting after the next release wave.