Microsoft launches Copilot Cowork, weighs DeepSeek V4 as cheaper engine

Microsoft Explores DeepSeek V4 as Lower-Cost Engine for Copilot Cowork

Microsoft is considering a fine-tuned version of DeepSeek V4 to power a cheaper tier of its Copilot Cowork enterprise agent, according to a report published Tuesday by Axios. The move comes as the company shifts Copilot Cowork to usage-based pricing on the same day it made the tool generally available worldwide.axios

Soaring Token Costs Drive the Search

Charles Lamanna, Microsoft’s executive vice president for Copilot, Agents, and Platform, told Axios that some enterprise users run hundreds of tasks per week through Cowork, pushing costs “very high”. Unlike a standard chatbot interaction, Cowork plans multi-step workflows, retrieves context, calls tools, and iterates until a task is complete — each loop consuming model tokens and compute.windowsforum

At general availability, Cowork runs primarily on Anthropic models including Opus 4.8 and Sonnet 4.6, with OpenAI’s GPT 5.5 available in the product’s Frontier preview tier. Microsoft has not formally committed to DeepSeek V4 as the cheaper alternative but said a lower-cost model option would be confirmed and available within weeks. The company’s own “Cowork 1” branded model, described as a secure option for everyday tasks at substantially lower cost, is also forthcoming.axios

Azure Hosting Meant to Address Security Concerns

The optional DeepSeek-based model would be fully hosted on Microsoft’s Azure infrastructure, with customer data remaining inside the tenant boundary and covered by existing enterprise security, compliance, and data-residency controls. Microsoft said it has fine-tuned the model and added safeguards, including adjustments aimed at reducing bias.windowsforum

The approach mirrors the playbook Microsoft has used through Azure AI Foundry to offer third-party models under its own operational and contractual umbrella. Still, the prospect of a Chinese-developed model inside an enterprise productivity tool is likely to draw scrutiny from regulated industries and government customers.windowsforum

Usage-Based Pricing Reshapes the Enterprise AI Deal

Copilot Cowork’s shift away from flat-rate licensing represents a broader reckoning for agentic AI products. Microsoft is charging in “Copilot Credits,” with costs driven by model use, context retrieval, tool calls, and runtime. The tool is off by default, and administrators can set spending limits at the tenant, group, and user levels.microsoft

Microsoft claimed internally that Cowork is 30 to 40 percent cheaper than Anthropic’s Claude Cowork paired with a Microsoft 365 connector, though the company acknowledged costs vary by configuration. The addition of an even cheaper model tier signals that the economics of always-on AI agents remain a barrier to broad enterprise adoption — and that Microsoft views model diversity as its path to making the math work.windowsforum