In the early days of digital transformation, the biggest advantage of adopting technology was digitizing manual processes—automating tasks, improving reporting, and enabling complex calculations. It was an era of replacing paper with pixels, spreadsheets with dashboards, and manual approvals with workflows.
But today, we’ve entered a new paradigm. AI is no longer just supporting our work—it’s doing the work. We are now in the age of AI Agents, where intelligent software systems are reshaping how business applications like Dynamics 365 Finance & Operations (FO) and Business Central are built, deployed, and operated.
What Are AI Agents?
AI agents are smart, autonomous software services that combine three capabilities:
- Generative AI Models – The brain of the agent (e.g., GPT-4, GPT-4o) that understands natural language, reasons through instructions, and decides what action to take.
- Knowledge Base – The memory of the agent. It grounds the model in business-specificknowledge, like product manuals, SOPs, financial policies, or CRM data.
- Tools – The hands of the agent. These allow the agent to take actions—call APIs, update records, send emails, or trigger workflows.
Unlike a traditional bot that waits for prompts, agents take initiative. They analyse context, choose the right tools, and generate outcomes based on business goals.
Example: Customer Service Agent
Let’s see how these components work together:
- Model: Understands the customer’s query.
- Knowledge: Refers to product documentation and company policies.
- Tools: Summarizes the case, drafts a response, routes the ticket, and updates CRM records.
This isn’t just automation—it’s intelligent orchestration, where the agent thinks, decides, and acts like a digital coworker
Building AI Agents in the Microsoft Ecosystem
Microsoft provides multiple paths to create agents, tailored for different user types—from developers to business users.
Azure AI Agent Service – For Developers & Architects
The Azure AI Agent Service is Microsoft’s enterprise-grade solution for building and managing intelligent agents. Designed for developers and solution architects, this managed service provides a scalable and secure environment to create agents that integrate deeply with business systems. It is built on top of the OpenAI Assistants API, enhanced with Microsoft’s enterprise security, observability, and governance capabilities.
With Azure AI Agent Service, you can combine large language models (LLMs) with enterprise data through Retrieval-Augmented Generation (RAG), enabling agents to ground their responses in reliable, domain-specific knowledge. It also supports function calling, giving agents the ability to interact with APIs, update records, trigger workflows, or even orchestrate complex business processes in Dynamics 365. For organizations that need mission-critical agents with compliance and scalability, Azure AI Agent Service acts as a complete factory for intelligent agents—offering tools, orchestration, and monitoring all in one place.
Semantic Kernel – For Custom App Builders
For developers who prefer full control and flexibility, Semantic Kernel is Microsoft’s open-source development kit for building highly customizable agents. Unlike a managed service, Semantic Kernel gives you the freedom to design how an agent reasons, orchestrates, and integrates with your applications. It is especially useful for creating multi-agent systems, where several specialized agents collaborate to handle complex workflows.
Semantic Kernel supports a wide range of plugins and orchestration patterns, enabling developers to connect agents to external tools and services such as Azure AI Search, OpenAPI connectors, or Bing. This makes it an ideal choice when you want to embed intelligence directly into custom apps or enterprise solutions. Developers can decide exactly how the agent interprets inputs, what knowledge it uses, and how it interacts with different systems. In short, Semantic Kernel is the toolbox for builders who want to go beyond standard templates and design agents with precision and creativity.
Copilot Studio – For Low-Code Makers
Not every business has developers on hand to code advanced agents, and that’s where Copilot Studio comes in. Aimed at business analysts, consultants, and makers, this low-code platform allows users to create and deploy AI agents with minimal technical knowledge. Using a natural language interface, you can define how an agent should behave, configure its tasks, and connect it to your existing Microsoft 365 environment—including Teams, SharePoint, and Outlook.
Copilot Studio also integrates seamlessly with the Power Platform, making it possible to connect agents with Power Automate flows or external data sources without writing code. This democratizes agent development, giving business teams the power to create assistants for HR, sales, finance, or support functions on their own. Whether it’s a simple HR query bot or a sales assistant that drafts responses, Copilot Studio provides the fastest path to getting intelligent agents into production.
