How Microsoft’s New Office Chief Fixed Copilot and Won Over Nadella

In the summer of 2025, Microsoft was fielding customer complaints that its AI assistant, Copilot, was buggy and not good enough at automating work in Excel or PowerPoint. In response, Charles Lamanna, then a Microsoft president and rising star within the giant firm, went to CEO Satya Nadella with a bold proposal: Microsoft needed to consider paying for AI models from Anthropic to make Copilot work better.

“At the time, that was heresy,” Lamanna said in an interview.

The idea was met with skepticism from other Microsoft executives, like Judson Althoff, Microsoft’s commercial chief, according to another Microsoft employee with knowledge of the situation. Althoff pointed out that Anthropic models would be far pricier than OpenAI’s, which Microsoft can use at no additional cost thanks to its close partnership with OpenAI. But Lamanna won over Nadella with demos showing that Anthropic’s models were then better at mathematical tasks needed in Excel and creating aesthetically pleasing PowerPoints.

“We pushed back because if you have a belief or a thesis, you just have to go all the way with it,” said Lamanna, 38.

Months later, Nadella gave Lamanna oversight of thousands of developers working on Copilot, streamlining what was a messy collection of separate engineering teams. Now, just over a year later, Lamanna’s bet on revamping Copilot’s innards appears to have paid off. Customers such as AT&T say they have noticed improvements in Copilot over the past year. While Microsoft remains in an existential battle to win over enterprise customers as AI reorders the power dynamics of the industry, Copilot’s corporate users have more than doubled since the start of the year to over 30 million now.

Meanwhile, Lamanna’s profile has continued to expand within Microsoft. In March, Nadella appointed Lamanna to a new role as executive vice president overseeing Copilot engineering, reporting directly to him. (Lamanna shares oversight of Copilot with executive vice president Jacob Andreou). And earlier this month, Nadella put him in charge of Office, making Lamanna responsible for Microsoft’s flagship software. That move follows the July retirement of Rajesh Jha, an executive vice president who’d been responsible for Office and Windows, among other things.

Lamanna also oversees Microsoft’s Teams business, and altogether, his organization consists of around 25,000 people, more than triple the number of employees he oversaw a year ago. (Microsoft has over 220,000 employees; its largest divisions are its sales and Azure cloud units, each of which has more than 60,000 full-time employees).

Multiple senior Microsoft executives say they now see Lamanna as a potential successor to Nadella as Microsoft’s next CEO. Like Nadella, Lamanna is seen as a wonk and as someone who likes to sink into technical engineering details. While he isn’t thought of as a charismatic salesman type, insiders say his ability to unify growing teams has impressed Nadella. The two meet weekly.

Over the past year, Nadella has brought Lamanna to Microsoft’s quarterly board meetings—along with a few other executives like Andreou, Xbox CEO Asha Sharma, security chief Hayete Gallot and executive vice president Arun Ulag, who oversees Azure’s database products. Some senior Microsoft execs see Nadella’s decision to include these executives as a concerted effort to introduce the board to a range of possible successors.

The pressure on Lamanna is substantial. He has to develop products that can convince corporate customers to spend more on Microsoft’s AI and productivity software even as companies are increasingly scrutinizing every dollar of their AI budgets.

A year after adding Anthropic models to Copilot, Lamanna is now focused on optimizing Copilot and ensuring it can choose the right mix of models for the right tasks in a way that minimizes cost without sacrificing quality. Doing so is crucial for Microsoft to stay competitive in how much it charges for Office and other products amid a sea of alternatives, including products from Anthropic and OpenAI. Lamanna finds himself navigating a complicated landscape in which Anthropic and OpenAI are both key Microsoft business partners—and also fierce rivals.

Lamanna has told staff that Microsoft should be “the Costco of AI,” the place everyone—from broke college students to millionaires—goes for AI products because it offers the best value at the best price.

“We’re not going to be some boutique that only the top coders and the top R&D folks in the world get to access at a huge price,” Lamanna said. “We’re going to drive all these prices down, so everyone can enjoy it.”

From Intern to Top Brass

Lamanna has spent his entire career in Microsoft’s orbit. His first job at the company came nearly two decades ago when, as a University of Notre Dame undergrad, he landed a software engineering internship working on OneCare, a now-defunct antivirus program for Windows PCs.

After graduating in 2009, he continued as a software engineer in Microsoft’s then-nascent cloud unit before leaving in 2012 to co-found MetricsHub, an enterprise software startup, which Microsoft acquired for an undisclosed sum a year later. That deal brought Lamanna back to the company.

In the decade that followed, Lamanna steadily moved up in the cloud unit led by Scott Guthrie, eventually taking over Microsoft’s business applications group, which includes its Dynamics 365 customer relationship management software and low-code app builder Power Apps.

While leading those teams, Lamanna said he tried to break from the company’s notoriously cutthroat culture by implementing a “no jerks” policy within his unit, a change that was “very much needed” 10 years ago, a point in time when Microsoft was known for a brutal ranking system that pitted employees against each other and led to company infighting.

Lamanna also tried to cut out some of Microsoft’s management bureaucracy by working directly with engineering teams, writing his own code and moving quickly to turn junior staff’s good ideas into products Microsoft could market to customers.

After several years leading Microsoft’s business apps group, Lamanna last June was moved into a new role reporting to Jha. At the time, Lamanna’s official purview was still business applications, but by last summer he began taking more ownership of Copilot within Jha’s org.

At the time, disparate groups across Windows and Office were building separate Copilot features that would appear in different Microsoft applications. Jha would reward the groups whose Copilot features were quickly adopted by customers by adding those features to every version of Copilot. It was a tangled mess, employees said, and some executives across the company grumbled that the setup led to infighting and divisions claiming credit for other engineers’ work.

Then came Lamanna’s pitch to Nadella to add Anthropic models, a change that affected Copilot across all of its applications. The shift was critical, Lamanna said, because Copilot’s design had previously assumed it would only rely on one model maker—OpenAI—rather than being able to work well with a range of models.

“It would be dangerous if we built Copilot for too long assuming model monogamy, because you basically would, like, bake in too much dependence on that model’s behaviors—it would become very hard in the future to ever add new models,” Lamanna said.

By March, Jha announced his plans to step down from the company, and Nadella unified all of the disparate engineering groups working under Lamanna on the systems behind Copilot. The new structure was a relief to some engineers, according to current and former employees, who say Lamanna’s leadership has felt more like a single unit moving towards cohesive goals. His staff have also praised his willingness to move quickly and elevate good ideas by his reports regardless of their seniority.

“If we just stuck with the way we were doing things, we would have fallen behind,” said Soufiane Loukili, a vice president of engineering in Lamanna’s unit. “[Lamanna] wouldn’t wait for a formal review or a large process to go through. He would push us to try new things with a calculated tolerance for risk, and it worked.”

Getting Customers Bang for their Buck

In his current role, Lamanna is now focused on convincing enterprise customers to spend more on Microsoft’s AI software every quarter while continuing to make Copilot less expensive.

After Microsoft began adding Anthropic models last fall, a group of engineers in the Office division developed “agent mode,” a feature that steers AI models from both OpenAI and Anthropic to spend more time reasoning when automating tasks in Office that Microsoft started previewing last fall.

While customers previously had to manually turn on agent mode, Lamanna found that agent mode worked better for nearly every task. By this spring, he had overhauled Copilot to make agent mode the default. Soon after, Microsoft saw a sharp increase in internal customer satisfaction data, according to someone familiar with the situation.

Customers say they have noticed an uptick in Copilot’s quality. Since Microsoft rolled out agent mode, AT&T employees have been relying on Copilot for the “lion’s share” of their automation of personal productivity work, said AT&T VP Mark Austin. The company increased its number of Copilot licenses over the past year and now has around 18,000 seats, AT&T said.

The recent improvement may not be enough to win over every customer. Nimesh Mehta, chief information officer at National Life Group, said his employees started testing Copilot back in 2023 and found it to be essentially “useless.” But when his team tested it again this spring, they found it had improved markedly, Mehta said. Still, Mehta said most of the company’s employees use ChatGPT. He hasn’t been convinced to switch back to Copilot.

“The interface still isn’t perfect, but it’s much better overall,” Mehta said. “Still, since it left such a sour taste in our users’ perspectives, they are not willing to give it another shot.”

More recently, improving Copilot’s gross margins while keeping customers happy has been a top priority for Lamanna, according to someone with knowledge of the situation. Over the past six months, as the capabilities of OpenAI models have caught back up to Anthropic’s, Lamanna has directed staff to program Copilot to rely more on OpenAI models for “agent mode,” which has improved the product’s margins because Microsoft can run OpenAI models for free, this person said.

Lamanna has also pushed teams in recent months to improve Copilot’s efficiency in other ways. Engineers in his unit developed a model router—software that picks between models—using a homegrown LLM that chooses the cheapest model to complete a task without sacrificing quality.

The vast majority of people using Copilot in Office use its “auto” mode that lets the router select models automatically, which has also improved margins, this person said. While Microsoft’s payments to Anthropic to power Copilot for its customers have grown this year—it is on track to pay Anthropic more than $2 billion a year—swapping in OpenAI models for “agent mode” and other advanced features has helped temper that growth even as more people use Copilot, this person said.

Lamanna has also spearheaded products like Microsoft’s Copilot Cowork features in Office, which resembles Anthropic’s Claude Cowork, an AI tool that can handle complex tasks on a computer like managing files. Another Lamanna effort was Autopilot AI agent, which was based on the viral success of OpenClaw.

With AutoPilot, Microsoft is aiming to make Copilot a more useful “always-on” agent that can also use tools from other vendors like Workday, so that Microsoft’s software becomes the default place for people to do the majority of their work.

Lamanna and Omar Shahine, a Microsoft vice president who leads the team developing AutoPilot, talk daily about new tools that they’re experimenting with, like Meta’s Muse and Instinct’s AI agents, Shahine said. Using outside tools is unorthodox at Microsoft, which has historically encouraged employees to solely use the company’s own products. Shahine looks at it as a necessity.

“I think that’s really important because the industry is going through a huge change right now,” he said.

Lamanna’s test now is to continue to accelerate Copilot’s growth while convincing corporate customers to spend more money on Microsoft’s existing bundle of Office, Windows and security software.

A key step in that vision launched last week when Microsoft launched its revamped Copilot super-app that rolled together 365 Copilot with additional features like Autopilot and Copilot Cowork, which will cost customers extra based on how much they use the features.

If Lamanna realizes that vision, it would be a career win that could burnish his credentials as a successor to Nadella, should the CEO decide he’s ready to move on. Lamanna, who hasn’t served as a CEO since founding his startup more than a decade ago, hasn’t ruled out the possibility of helming a company once again.

“I mean, I’d say in the abstract, yes,” he said when asked whether he’d ever like to be a CEO again. “But right now, I’m having quite a bit of fun making Copilot be the best product for the best price for all of our customers.”