# AI and SharePoint.

URL: https://levystreet.com/integrations/sharepoint/
Updated: 2026-10-19

An AI SharePoint integration guide for NZ: Copilot licensing, Microsoft Graph, Sites.Selected, the Work IQ MCP server and permission-aware search design.

## Short answer

An AI SharePoint integration gives a model governed access to document libraries and lists, either through Microsoft Copilot, which searches what each user can already open, or through Microsoft Graph and MCP for custom agents. For New Zealand organisations the deciding issue is permissions: AI makes oversharing visible, so fix site access, scope app permissions to selected sites, and keep people approving every write.

- Copilot searches SharePoint only with a Copilot licence; free Copilot Chat is mainly web grounded.
- Sites.Selected and the newer Selected scopes limit an app to named sites, lists or files.
- Delegated access can never exceed the signed-in user's own SharePoint permissions.
- NZ is a Microsoft 365 data-at-rest geography, but Copilot inference may run offshore.
- Tracking sharing changes through delta queries needs the high-privilege Sites.FullControl.All permission.

## What Microsoft's AI already does with SharePoint

Microsoft Copilot (formerly Microsoft 365 Copilot; licences may still show the old name) answers from SharePoint, OneDrive, mail and Teams when a user holds a Copilot licence. Without one, [Copilot Chat](https://learn.microsoft.com/en-us/copilot/overview) is "primarily web grounded" and does not search your organisation's files. NZ list prices on 19 October 2026, excluding GST and paid yearly: the Copilot Business add-on is NZ$34.00 per user per month (NZ$29.14 for the first year on commitments made July to December 2026), Business Standard with Copilot is NZ$38.00, and the enterprise add-on is NZ$48.50.

Copilot Studio agents can also use SharePoint as a knowledge source. For staff without a Copilot licence, Microsoft's billing table makes a tenant-grounded generative answer 12 Copilot Credits (10 for Graph grounding plus 2), about US$0.12 at the US$0.01 pay-as-you-go rate. Our [Microsoft Copilot](/tools/microsoft-copilot/) guide covers licensing in more depth.

Copilot shows people what they can already open. If the HR site is shared with everyone, Copilot will find it. Permission clean-up belongs in the project plan.

## Integration routes and when to use each

| Route | What it gives you | Use it when |
|---|---|---|
| Microsoft Copilot and Copilot Studio | Native Q&A and agents over content each user can open | You want the least custom code and staff live in Microsoft 365 |
| Microsoft Graph REST API | Files, lists, columns, permissions and delta change tracking | You need a custom index, metadata extraction or your own approval flow |
| Work IQ MCP server | One MCP endpoint to read, create, update and delete Microsoft 365 entities, billed in Copilot Credits without needing a Copilot licence | An agent built outside Microsoft needs Microsoft 365 actions |
| Copilot connectors | External content such as Jira or Google Drive brought into Microsoft 365 search | Copilot should also answer from non-Microsoft systems |
| Power Automate | Triggers on library changes; Microsoft 365 licences include standard-connector flows up to 6k actions a day per user | Simple routing and approvals inside Microsoft 365 |

## Automation 1: permission-aware search over selected sites


- **Inputs**: Document libraries on three named sites (Policies, Projects, Templates), synced with Graph delta queries.
- **Permissions**: An app registration with Sites.Selected. An administrator grants a read role on those three sites; the rest of the tenant stays invisible to the app.
- **Model step**: Retrieve passages and answer with citations: file name, link and modified date.
- **Access check**: Before showing a result, confirm the asking user can open that item with a delegated call, and drop it if not. In delegated mode Graph intersects app and user permissions.
- **Human review**: Answers are read-only. Questions with no supporting source are logged for content owners.
- **Failure and recovery**: If delta returns 410 Gone, Microsoft's guidance is a full re-enumeration, then a comparison with your index.


The [delta API](https://learn.microsoft.com/en-us/graph/api/driveitem-delta) can mark sharing changes with `Prefer: deltashowsharingchanges`, but Microsoft says processing permissions correctly needs Sites.FullControl.All. For most NZ organisations a per-result access check is safer than giving a search app full control. Our [private AI search](/engineering/building-private-ai-search/) guide covers the index side.

## Automation 2: classify incoming documents with approval


1. **Trigger.** A file lands in an "Incoming" library (Power Automate trigger or delta poll).
2. **Propose metadata.** The model suggests Document Type (choice), Client (lookup), Expiry (date) and an AI Confidence number, and sets Review Status to "AI suggested".
3. **Validate.** Values must match existing choices and the client list; anything unknown goes to review.
4. **Approve.** A reviewer works from a view filtered to "AI suggested" and corrects or approves.
5. **Write back.** On approval, columns are set and the file moves to its target library. The app holds a write role on that one list through Lists.SelectedOperations.Selected.


[Selected permissions](https://learn.microsoft.com/en-us/graph/permissions-selected-overview) on lists, items or files break inheritance, so watch SharePoint's limits on unique permissions.

## Permissions and approval design

Prefer delegated access for anything user-facing, because the app can never exceed the person's own rights. For background jobs, use Selected scopes rather than Sites.Read.All or Files.Read.All. Each Selected grant needs three things (consent, a resource role, a token carrying the scope), and an administrator can remove one site's grant or revoke consent entirely. Keep approval for any move, rename or column change, as described in our [AI integration](/services/ai-integration/) approach.

On privacy, Microsoft says prompts, responses and Graph data under enterprise data protection are not used to train foundation models and that it acts as a processor. You remain responsible under the Privacy Act 2020. New Zealand is a Microsoft 365 local region for data at rest, but Copilot inference may run in other regions; see [data residency for AI systems](/engineering/data-residency-for-ai-systems/).

## Costs and limits

- **Graph throttling**: 130,000 requests per 10 seconds per app across tenants, with lower SharePoint-specific limits; throttled calls return 429 with `Retry-After`.
- **Custom search, worked example**: 2,000 questions a month at 6,000 input and 400 output tokens on Claude Sonnet 5.5 (US$2 and US$10 per million) is about 2,000 × US$0.016 = US$32 a month, before hosting.

## Where it goes wrong

- **Oversharing made visible.** AI finds files that were always technically open. Audit "everyone" permissions first.
- **Path assumptions.** Delta results omit paths, and renaming a folder does not return its children. Track items by ID.
- **Initial crawl throttling.** Large first syncs hit 429s; respect `Retry-After` and spread the load.
- **Scanned PDFs.** Image-only files return no text; see [OCR versus vision models](/engineering/ocr-versus-vision-models/).

For the wider Microsoft stack, read our [Microsoft 365](/integrations/microsoft-365/) and [Microsoft Teams](/integrations/microsoft-teams/) guides.

## Questions people ask

### Does Microsoft Copilot respect SharePoint permissions?

Yes, Copilot only uses content the signed-in user can already open. That is also the risk: if a site holding payroll or HR files is shared with everyone in the organisation, Copilot will surface it to anyone who asks the right question. Review broadly shared sites, sharing links and inherited permissions before switching Copilot on, not after.

### Do we need Copilot licences to build AI search over SharePoint?

No. A custom app can read SharePoint through Microsoft Graph with its own Entra ID registration and any model you choose. You pay for development, hosting and model usage instead of per-user licences. Copilot licences make sense when most staff will use Copilot across Outlook, Teams and Office daily, not only for document search.

### Is our SharePoint data processed in New Zealand when AI uses it?

Stored, yes, if your tenant is in the New Zealand geography, which Microsoft lists as a Microsoft 365 local region. Processed by the model, not necessarily. Microsoft says customers outside the EU may have Copilot queries processed in the US, EU or other regions, and New Zealand is not on its in-country Copilot processing roadmap as at October 2026.

### What is Sites.Selected and why does it matter?

Sites.Selected is a Microsoft Graph permission that gives an app no access until an administrator grants it a role on specific sites. Newer Selected scopes do the same for individual lists, items, folders and files. It lets an AI search app read three libraries without being able to read the rest of the tenant, which is the safest default for custom builds.


## Sources

- [Overview of Microsoft Graph](https://learn.microsoft.com/en-us/graph/overview)
- [Microsoft Graph service-specific throttling limits](https://learn.microsoft.com/en-us/graph/throttling-limits)
- [Overview of Selected Permissions in OneDrive and SharePoint](https://learn.microsoft.com/en-us/graph/permissions-selected-overview)
- [driveItem: delta](https://learn.microsoft.com/en-us/graph/api/driveitem-delta)
- [Work IQ MCP overview](https://learn.microsoft.com/en-us/microsoft-365-copilot/extensibility/work-iq/mcp/overview)
- [Microsoft Copilot business pricing (NZ)](https://www.microsoft.com/en-nz/copilot/pricing/business)
- [Microsoft Copilot Chat overview](https://learn.microsoft.com/en-us/copilot/overview)
- [Copilot Studio billing rates](https://learn.microsoft.com/en-us/microsoft-copilot-studio/requirements-messages-management)
- [Data, privacy and security for Microsoft Copilot](https://learn.microsoft.com/en-us/copilot/microsoft-365/microsoft-365-copilot-privacy)
- [Microsoft 365 data residency: services data location](https://learn.microsoft.com/en-us/microsoft-365/enterprise/m365-dr-services-data-location)
- [Power Automate licensing deep dive](https://learn.microsoft.com/en-us/power-platform/admin/power-automate-licensing/deep-dive-on-specific-license)
- [Working with third-party providers](https://www.privacy.org.nz/resources-and-learning/a-z-topics/working-with-third-party-providers/)
- [Pricing](https://platform.claude.com/docs/en/about-claude/pricing)

Published by Levy Street (https://levystreet.com), Wellington, New Zealand.