What does Microsoft Copilot do with your SharePoint files?
Microsoft Copilot connects a language model to content in Microsoft Graph, such as documents, emails, chats and meetings, and to the Microsoft 365 apps people already use. Microsoft states that Copilot only surfaces organisational data that the individual user has at least view permission for, and that prompts, responses and data accessed through Microsoft Graph are not used to train foundation models. In practice it answers across everything a person can open. That suits drafting and summarising. For policy lookups it is less predictable, because a draft in someone's OneDrive is as visible to that person as the approved procedure.
How is Copilot licensed for a small or mid-sized business?
Microsoft lists Copilot as included in Microsoft 365 E7 or as an add-on to eligible plans. For smaller organisations, Microsoft Copilot Business is an add-on for up to 300 users on eligible Microsoft 365 Business plans, with an annual commitment. Microsoft also offers pay-as-you-go billing for Copilot Chat and SharePoint agents, charged through an Azure subscription and disabled by default, which can suit occasional users. Microsoft notes that licensing availability and terms can change, so confirm the current eligibility and price with your reseller before you model costs.
Where does a custom knowledge search differ?
A custom build indexes a defined set of documents, such as the current policy library and approved manuals, and answers only from that set. You decide how documents are split into passages, whether keyword and vector search are combined, how many passages reach the model and when the system should say it cannot find an answer. You can test it against an agreed list of real questions before anyone relies on it. The price of that control is a build, an internal owner and ongoing maintenance that a Microsoft licence does not require.
- Answer scope: only approved, current documents, instead of everything a user can open.
- Refusal rules: a relevance threshold below which the system says the documents do not cover the question.
- Model and region: a choice of model provider and hosting region, which matters for some client contracts.
- Access: staff who do not need a full Microsoft Copilot licence can still be given an approved sign-in.
What about documents outside Microsoft 365?
Microsoft offers Copilot connectors that bring outside content into Copilot and Microsoft Search. Its documentation lists over 100 prebuilt connectors, including Google Drive, Box, Dropbox, Confluence, ServiceNow and network file shares, and says synced connectors respect source permissions, so users only see items they can access in the source system. If your knowledge sits in one of those systems, a connector may close the gap without a custom build. If it sits in a job management system with no connector, or in scanned files that need careful preparation, a custom pipeline gives you more control over what is read and how.
Where is the data processed?
Microsoft says Copilot calls to the language model are routed to the closest data centres in the region but can use other regions where capacity is available during busy periods, and that customers outside the EU may have queries processed in the US, the EU or other regions. Its data residency commitments for Copilot are set out in the Microsoft Product Terms. If a contract or client requires processing in Australia, ask Microsoft or your reseller in writing which commitments apply to your tenant. A custom build lets you choose a model and region, though an onshore-only rule can narrow the model choice.
How do you compare them fairly?
Run both against the same test. Collect at least 50 real staff questions with known answers and the document each answer should come from, then ask each option the same questions from an ordinary staff account. Record whether the answer was right, whether the citation pointed at the current document and whether it declined questions the documents do not cover. Include a few questions whose answers sit in restricted HR or finance folders to confirm nothing leaks. Choose the option that performs better on your own questions, whichever one that turns out to be.