Which Microsoft Copilot Do You Have?

Across our AI-Native Foundations classes, the same frustrations repeatedly come up among people using Microsoft Copilot. "It loses the thread." "It sounds convincing, but it gets things wrong." Trust is a big issue, particularly for people who don't have enough expertise to know when it is making things up. I have a theory about what is going on. It almost always turns out to be the same thing.

Here's what Microsoft doesn't make obvious: there are two different products. The first is Microsoft 365 Copilot Chat (Copilot Chat), which is included with most Microsoft 365 business subscriptions. The second is Microsoft 365 Copilot (M365 Copilot), which is a paid add-on. Both are called Copilot in the interface, which is where the confusion starts. As of early 2026, only around 3% of Microsoft 365 customers were paying for the full version. The other 97% have Copilot Chat.

There is a material difference between the two products, and it starts with the context window: the amount of information Copilot can hold in working memory at any one time. 

What is a context window?

Think of the context window as the AI's working memory for a conversation. It covers everything currently in play: your question, the AI's response, anything you've pasted in or attached to a prompt, and the history of the exchange so far. When a conversation exceeds that limit, the AI doesn't stop. It quietly drops the oldest parts of the conversation to make room for new input. You won't be told this has happened. The responses just start to get less detailed and sometimes shorter, more generic, and less useful, which is exactly what frustrates people.

I ran into this a while back on a client site. I was using their Copilot Chat because that was the GenAI tool I had access to in their ecosystem, and the document I was working on was their IP, so keeping it inside their environment was the responsible thing to do. I was trying to summarise a PowerPoint deck of around 30 slides, and it kept giving me partial responses, skipping slides, and dropping content. The harder I pushed, new chats, more attempts, the worse it got. I think I was being throttled. 

I later learned that the free tier shares capacity across everyone using it, and at busy times, Microsoft quietly pulls back on the heavier features without telling you. In hindsight, I was trying to do something that was beyond what Copilot Chat is built for.

In my experience, the free tier has less working memory than the paid version. Microsoft does not publish the figures for either product, so I can't quantify the difference. But if you have used tools with larger context windows, you notice it quickly. The practical effect is that Copilot Chat struggles with longer documents, complex multi-step tasks, and extended conversations in ways the paid version does not.

The second difference is what the paid version can see. Copilot Chat has no meaningful access to your organisation's data. It cannot search your inbox, find a file on SharePoint, check your calendar, or pull up what was discussed in yesterday's Teams meeting. There are limited exceptions depending on your organisation's setup, but as a general rule, if you want Copilot to work with your data, you have to bring the data to it manually. The paid version removes that constraint. It can search across your email, SharePoint, local files, meetings, and conversations to answer questions in context. Both know the world. Only one knows your work. If you are going to use Microsoft Copilot as your GenAI tool, access to your organisation's data is the thing worth paying for.

To check which version you have, look at the bottom left, under your name. The free tier says Copilot Chat (Basic) and gives you an Upgrade button. The paid one says M365 Copilot (Premium).

There are other limitations worth knowing about. The Researcher agent, Copilot's equivalent of a deep research mode, is only available on the paid version. If you are using Copilot Chat and cannot find it, that is why. Copilot Chat also cannot summarise your Teams meetings natively. You would need to manually obtain a transcript and upload it. Copilot Chat is no longer available inside Word, Excel, PowerPoint, and OneNote. It remains accessible through the standalone Copilot app and in Outlook.

None of this means Copilot Chat is useless. It does useful work within its constraints, and there is a reasonable amount you can do to get more out of it.

Before you start: Make sure you are signed in with your work account, not a personal Microsoft account. When you are, a green shield appears in the interface indicating Enterprise Data Protection is active. Your prompts and responses stay within the Microsoft 365 service boundary and are not used to train Microsoft's models. If you are signed in with a personal account, that protection does not apply. Free is relative. ;-)

The single most useful thing you can do is bring your data to it. Copilot Chat cannot access your files, but you can bring them to it. Upload a document, paste in the content you want to work with, or copy in an email thread. It is a manual step, but it works.

For long documents, what I've found works is asking about specific sections rather than expecting a full summary in one pass. Copilot Chat tends to prioritise the beginning and end of whatever you give it, so content buried in the middle is where things get unreliable. If the document is long, break it into parts and work through it in chunks.

Keep your conversations shorter than you might expect. If a thread runs long, ask Copilot to summarise the discussion before you continue, then use that summary to start a new chat. This resets the working memory and gives you a clean run at the next part of the problem.

Copilot Chat is well-suited to drafting and rewriting: emails, reports, decision papers, and proposals. It is also good for web research (with citations) and brainstorming. These are the use cases where I've found the free tier holds up.

Use it inside Outlook if you have it available. Copilot Chat retains some awareness of the email you have open, so you can ask it to help you respond without having to paste the thread manually. It is one of the few places where the free tier has some native context without extra effort.

For anything more demanding, it is a different story. If you want to use AI as a genuine thought partner, working through complex problems, synthesising across multiple documents, and building on a long conversation, the context window limitation will get in your way repeatedly. If you want AI that knows your work without you having to manually feed it everything, the free tier cannot do that. These are not workarounds you can prompt your way out of. They are product limitations.

The upgrade conversation is not complicated. In most organisations, it is an IT service request, not a technical project. What I typically see is that the conversation stalls not because of cost or complexity, but because no one has made the case for who specifically needs it and why.

Most of the frustration I hear about Copilot in Australian and New Zealand organisations comes down to this: people are using a tool they don't fully understand and blaming the technology when it falls short. Knowing what you actually have is the starting point for everything else.

From there, the next step is turning access into capability: see our Microsoft Copilot training.