AI teams will reshape work with “Frontier Firms,” Microsoft report predicts

Microsoft‘s research reveals how AI is transforming organizations into “Frontier Firms” where hybrid teams of humans and AI agents collaborate to manage intelligence requirements. The company’s 2025 Work Trend Index Annual Report outlines a three-phase evolution that fundamentally changes workplace structures and introduces new roles specifically designed to manage AI systems, highlighting a significant shift in how businesses operate and organize their workforces.

The big picture: Microsoft has identified a new organizational model called the “Frontier Firm” that represents the future of work in the AI era, where intelligent agents and humans form hybrid teams to handle business processes.

• Nearly half (46%) of business leaders report their companies are already using AI agents to automate workflows or processes.
• Despite the trend, only 844 out of 31,000 surveyed employees worked at companies that fully demonstrate Frontier Firm characteristics.

Key details: The transformation into a Frontier Firm follows three distinct phases that progressively integrate AI into core business operations.

• Phase 1 involves employees using AI assistants to enhance productivity and efficiency.
• Phase 2 elevates AI to “digital colleague” status, with agents carrying out specific tasks under human supervision.
• Phase 3 represents the most advanced stage, where humans manage teams of AI agents capable of running entire business processes and workflows independently.

Where investments are flowing: Business leaders are strategically deploying AI across specific high-value departments within their organizations.

• Customer service, marketing, and product development rank as the top areas where companies are investing in AI capabilities.
• 45% of business leaders prioritize expanding team capacity through digital labor provided by AI systems.

Workforce implications: The rise of AI agents is creating new job categories and changing traditional management responsibilities.

• A new role of “agent boss” is emerging specifically to oversee teams of AI systems.
• 47% of business leaders are focusing on upskilling their existing workforce in AI technologies.
• Over half (51%) of managers anticipate AI training will become a key responsibility within the next five years.

What they’re saying: Microsoft researchers emphasize that AI augmentation rather than replacement remains the primary goal.

• “We really see this new type of intelligence as additional, not substitutions… new jobs will be created, and current jobs will evolve,” stated Alexia Cambon, Future of Work Researcher at Microsoft.

Looking ahead: The transformation toward Frontier Firms is driving demand for specialized AI talent across industries.

• Between 78-95% of business leaders are actively considering hiring for AI-specific roles.
• Organizations that successfully implement the Frontier Firm model will likely gain competitive advantages through enhanced operational capabilities and workforce productivity.