Artificial intelligence is no longer just a tool—it has become a workforce. At its recent Ignite 2025 conference, Microsoft unveiled Agent Factory, the new engine designed to power enterprise-grade AI agents. This marks a significant shift for organisations moving toward becoming Frontier Firms: businesses that are human-led but agent-operated. The ability to build, deploy, and govern intelligent agents at scale is now a critical competitive advantage.
This guide explains what Microsoft’s Agent Factory is, its core capabilities announced at Ignite, practical use cases, and the essential steps IT leaders must take to prepare for this agentic future.
What Is Microsoft’s Agent Factory?
Agent Factory is Microsoft’s end-to-end production system for building, testing, deploying, and scaling AI agents across an organisation. It provides a structured framework that helps businesses move from isolated AI experiments to widespread, enterprise-grade adoption.
Introduced at Ignite 2025, Agent Factory gives companies a scalable way to create specialised agents for every department. It is built on a foundation of powerful Microsoft services, including Microsoft Foundry, Copilot Studio, and intelligence layers like Work IQ, Fabric IQ, and Foundry IQ.
Key Agent Factory Announcements from Ignite 2025
Microsoft’s Ignite 2025 event was filled with updates confirming the move toward an agent-powered workplace. Here are the highlights you need to know.
Agents as First-Class Business Workers
The central message from the Ignite keynote was clear: AI agents will be integral members of every team in the next-generation workplace. IDC predictions highlighted at the event forecast 1.3 billion agents running globally by 2028, embedded across apps, operating systems, and the cloud. Agent Factory is Microsoft’s definitive answer to this surge in enterprise demand.
Agent 365: The Governance Layer for All Agents
Microsoft announced Agent 365, a new control plane for regulating all enterprise agents. While Agent Factory builds the agents, Agent 365 governs them. Its features include a unified agent registry, access management controls, and behaviour monitoring. This ensures agents operate safely and align with organisational policies across Microsoft Teams, M365, Dynamics, and Azure.
Work IQ: The Intelligence Behind Agent Behaviour
Also announced was Work IQ, the intelligence layer that helps agents understand your job, context, workflows, and company knowledge. This capability allows Agent Factory-built agents to be context-aware, role-aware, and organisation-aware, moving beyond generic instructions to perform tasks with genuine understanding.
How Agent Factory Works
Agent Factory is more than just a single tool; it is a comprehensive framework combining development tools, engineering support, and a unified licensing model.
The core components include:
- Copilot Studio: Used to build the agent’s logic and orchestration flows.
- Microsoft Foundry: Provides tools for agent design, evaluation, and testing.
- Work IQ, Fabric IQ, and Foundry IQ: These intelligence layers provide the necessary context, semantics, and knowledge for agents to function effectively.
- Azure AI Foundry: Manages deployment, monitoring, and analytics for agents in production.
This architecture supports the creation of autonomous agents, task-specific agents, and even complex multi-agent orchestrations where different agents collaborate to achieve a common goal.
Getting Your Organisation Ready for Agentic AI
For IT and automation leaders, the emergence of Agent Factory is a call to action. The focus must shift from simply using AI to strategically building and managing an ecosystem of intelligent agents. Here is how to prepare:
- Define High-Impact Use Cases: Identify key business processes in sales, support, or operations where agentic automation can deliver the most value.
- Train Your Teams: Upskill your teams on foundational tools like Copilot Studio and Microsoft Foundry.
- Establish Governance Early: Use Agent 365 to create a governance framework before scaling your agent deployments.
- Connect Your Data Sources: Ensure your agents have access to the right information by integrating data through Work IQ and Fabric IQ.
- Run a Pilot Program: Launch a 60-day Agent Factory pilot to test specific use cases and measure the impact on efficiency and productivity.
The Future is the Frontier Firm
Agent Factory marks the beginning of enterprise-scale “AI agentisation.” It standardises how businesses create, deploy, and manage intelligent agents, reducing deployment times and bridging the skills gap between technical and business users.
The future belongs to Frontier Firms, and that future is emerging now. This is the moment for IT leaders to architect their agent ecosystems, moving from a reactive stance to a proactive strategy. By embracing frameworks like Agent Factory, organisations can build a resilient, efficient, and intelligent future.
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