How SharePoint Embedded works and how to build AI apps on it

Key insights

• SharePoint Embedded is a cloud-based, API-only document management system that allows developers to build custom web or mobile apps integrating directly with Microsoft 365 content. Files stay securely within each customer’s Microsoft 365 tenant, making it ideal for multi-tenant solutions.


• Developers can create AI-powered applications using built-in retrieval augmented generation (RAG) or bring their own AI models. This enables intelligent reasoning over business documents without moving or duplicating files outside the secure environment.


• Microsoft 365 Copilot, agent capabilities, and connected Office experiences like Word are fully supported, allowing users to access advanced AI features and real-time co-authoring directly within their familiar workflow.


• The platform provides strong security and compliance through integration with Microsoft Purview, ensuring data protection, sensitivity labeling, and enterprise governance controls remain enforced at all times.


• The development process involves connecting to the SharePoint Embedded API, leveraging AI services such as Copilot retrieval API, building user-friendly interfaces, and deploying on a fully managed backend for scalability and reliability.


• This approach accelerates deployment of collaborative AI solutions while maintaining control over permissions and storage. It eliminates the need for complex migrations or external storage systems, supporting rapid innovation in secure environments.

How SharePoint Embedded Works and How to Build AI Apps on It: The Latest Insights for 2025

Microsoft’s SharePoint platform is rapidly evolving beyond its traditional role as a document repository. The newly introduced SharePoint Embedded, highlighted in a recent YouTube video by Microsoft, brings a transformative approach to building AI-powered applications. As an API-first, cloud-based solution, it is designed specifically for developers and Independent Software Vendors (ISVs) who want to create secure, AI-driven apps that integrate seamlessly with Microsoft 365 content—without moving files or compromising data security. This article summarizes the key takeaways from Microsoft’s presentation and explores the tradeoffs and challenges in building on this new platform.

What Is SharePoint Embedded?

SharePoint Embedded is a fully managed, API-only document management system hosted in the cloud. It allows developers to connect custom web or mobile apps directly to Microsoft 365 file storage. Importantly, all content remains within each customer’s Microsoft 365 tenant, which is particularly advantageous for ISVs building multi-tenant solutions. This setup eliminates the risks and complexities associated with migrating or duplicating sensitive data across third-party platforms.

By leveraging SharePoint Embedded, developers can integrate advanced Microsoft 365 capabilities—such as Word, Microsoft Purview for compliance, and Copilot—for a cohesive and secure user experience. With its focus on seamless integration, the platform supports both built-in and custom AI models, enabling intelligent solutions that reason over business content without data ever leaving the organization’s secure perimeter.

Key Advantages for AI App Development

One of the most significant benefits of using SharePoint Embedded is data security. Since files remain inside the Microsoft 365 environment, organizations can maintain strict compliance and governance standards. This approach directly addresses concerns about external data exposure, which is especially important for industries with rigorous regulatory requirements.

Another notable advantage is the speed and simplicity of deploying AI-powered workflows. Microsoft’s demonstration shows that integrations, such as with legal AI tools, can be set up in minutes. This ease of implementation enables organizations to rapidly adopt new AI features while minimizing disruption to existing workflows. Moreover, developers can create collaborative, AI-native applications that interact with live documents and metadata, avoiding fragmented data silos and enhancing the relevance of AI-powered insights.

Building AI Apps on SharePoint Embedded: The Basics

To build AI applications on SharePoint Embedded, developers start by connecting to its API, which provides secure access to Microsoft 365 storage. From there, they can embed AI services like Microsoft 365 Copilot and custom agents, leveraging retrieval-augmented generation (RAG) techniques to generate insights directly from enterprise documents. This process supports real-time co-authoring and ensures that AI models use up-to-date and accurate content.

In addition, Microsoft Purview compliance features can be integrated to enforce sensitivity labeling and data protection policies. Developers are encouraged to design user-friendly interfaces, whether web or mobile, so employees can easily interact with AI-powered document tools. The fully managed backend of SharePoint Embedded then ensures scalability and reliability, reducing operational overhead for IT teams.

Security and Compliance Considerations

Maintaining strong security and compliance is a central theme in SharePoint Embedded’s design. Since all content stays within the Microsoft 365 tenant, organizations benefit from built-in data protection, audit trails, and granular permissions. However, this also means developers must be diligent in configuring access controls and monitoring usage to avoid inadvertent data exposure.

Balancing the need for broad AI access with strict compliance can be challenging. For instance, while AI models require substantial data to generate meaningful results, organizations must ensure sensitive information is not inadvertently surfaced or misused. Using Microsoft Purview’s controls helps manage these risks, but ongoing vigilance is necessary as AI adoption expands.

What’s New and What to Expect in 2025

The 2025 update of SharePoint Embedded brings deeper integration with Microsoft 365 Copilot, allowing developers to build apps that offer AI-assisted authoring, knowledge extraction, and workflow automation. These capabilities are designed to work within the familiar Microsoft 365 environment, providing users with enhanced productivity while keeping content secure and compliant.

Looking ahead, organizations and developers will need to continue balancing innovation with responsibility. As AI models become more powerful and embedded into daily business processes, the challenge will be to leverage these tools effectively without compromising privacy or security. SharePoint Embedded offers a promising foundation, but success will depend on careful implementation and ongoing collaboration between IT, developers, and compliance teams.

Keywords

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