Copilot rollout hits friction

Microsoft is adding more artificial intelligence to Microsoft 365 at the exact moment some customers are asking for less ambiguity, not more. In March, Microsoft rolled out Wave 3 updates that let Copilot act across Word, Excel, PowerPoint, Outlook, and Teams, and it also introduced Copilot Cowork, a long-running assistant built with Anthropic that can use more than one model instead of just one. (techcommunity.microsoft.com) That sounds useful in plain English: instead of asking a chatbot one question at a time, a worker can now hand off a chain of tasks like drafting, revising, scheduling, and follow-up inside the same Microsoft stack. Microsoft says users can also pick Claude models in Copilot Chat alongside next-generation OpenAI models, which means the product is becoming a traffic controller for several artificial intelligence systems at once. (techcommunity.microsoft.com) The friction starts when that assistant has to obey corporate rules, not just user prompts. Microsoft’s own documentation says Microsoft 365 Copilot stores interaction content and its related semantic index in the customer’s local region geography, which is the promise big companies use when they talk to compliance teams and regulators. (learn.microsoft.com) Then Microsoft added a new exception for Europe. A new “flex routing” setting for customers in the European Union and the European Free Trade Association lets large language model inferencing happen outside the European Union Data Boundary during peak demand, even though stored data stays in-region and the traffic is encrypted. (learn.microsoft.com) Inferencing is the moment the model actually does the thinking, like sending a file to a kitchen even if the pantry stays in your house. Microsoft says flex routing is on by default for eligible tenants created after March 25, 2026, and tenant administrators have to switch it off if they do not want that overflow behavior. (learn.microsoft.com) That default creates a paperwork problem before it creates a technical one. A multinational company that told employees, works councils, or regulators that Copilot processing would stay inside the European Union now has to check tenant settings, review contracts, and decide whether a smoother service during busy periods is worth a cross-border processing path. (learn.microsoft.com) The money side is messy too. Microsoft reported $81.3 billion in quarterly revenue on January 28, 2026, but outside reporting on that same quarter put capital expenditures and finance leases at $37.5 billion, a sign of how expensive the company’s artificial intelligence build-out has become. (microsoft.com) (cnbc.com) Adoption has not kept pace with that spending. Microsoft’s pricing page now advertises Microsoft 365 Copilot Business from $18 per user per month on an annual plan, while reporting in February said only 3.3 percent of Microsoft 365 and Office 365 users who touched Copilot Chat were paying for it. (microsoft.com) (theregister.com) So the product is moving in two directions at once. Microsoft is making Copilot more powerful by turning it into a multi-model coworker with deeper access to work apps, while procurement teams are being forced to ask older, slower questions about residency, default settings, and whether the return justifies another paid layer on top of Microsoft 365. (techcommunity.microsoft.com) (learn.microsoft.com) (microsoft.com) That is why this rollout feels rougher than the demos. The new features are arriving on schedule, but the real buyers are not just comparing outputs in Word or Outlook; they are comparing legal exposure in Europe, infrastructure costs in Redmond, and license costs on every employee seat. (techcommunity.microsoft.com) (learn.microsoft.com) (cnbc.com)