Cybersecurity in the Age of Digital Acceleration: Securing Intelligence, Assets, and Trust
Over the past four decades, Information Technology has evolved from modest on-premise systems with limited storage to a boundless, cloud-driven ecosystem that powers global commerce, governance, defense, and daily life. What began in the mid-1980s as hardware-centric computing has transformed into an intelligent, distributed, always-on digital universe. Today, storage is virtually infinite. Processing is instantaneous. Markets operate 24/7. Transactions occur across continents in milliseconds. Physical boundaries have dissolved into digital connectivity. But in this era of extraordinary progress, one discipline has become indispensable: Cybersecurity. From Digitization to Intelligence The early waves of digital transformation converted manual processes into electronic systems—banking, records, communications, and trade. The second wave connected everything, linking enterprises, governments, devices, and supply chains into global digital ecosystems. We are now in the third wave: intelligent systems powered by artificial intelligence. AI is no longer a supporting tool; it is becoming a decision engine, shaping outcomes across financial markets, healthcare diagnostics, defense systems, logistics optimization, and enterprise automation. As intelligence increases, so does risk. Human intelligence built digital infrastructure; artificial intelligence now operates within it. Without responsible governance, AI systems can amplify bias, automate vulnerabilities, and accelerate systemic risk at unprecedented scale. Cybersecurity, therefore, is no longer just about protecting networks and systems. It is about protecting intelligence itself. From Intelligence to Orchestration: The Rise of AI Platforms As artificial intelligence matures, the challenge is no longer building models. It is operationalizing intelligence safely and at scale across complex enterprises. Organizations now run ecosystems of intelligence—multiple models, agents, data sources, and automated decisions spanning business units, geographies, and regulations. Managing this complexity requires more than tools; it requires orchestration. Microsoft Foundry marks this shift—from isolated AI capabilities to a governed, enterprise‑grade AI operating fabric. It is not about generating intelligence, but about controlling how intelligence is created, grounded, deployed, monitored, and trusted. Just as cloud platforms abstracted infrastructure complexity, AI platforms now abstract cognitive complexity—embedding security, governance, and accountability by design. Intelligence at Scale Requires Structure Unstructured intelligence introduces enterprise risk. Models drift without governance. Agents hallucinate without oversight. Poorly controlled data grounding exposes sensitive information. At scale, these failures are not theoretical—they are operational, financial, and reputational risks. As organizations embed AI into financial decisioning, customer engagement, supply chain optimization, healthcare diagnostics, and critical infrastructure, intelligence must operate within clear and enforceable guardrails. Reliability, security, and accountability are prerequisites for adoption at enterprise scale. Foundry provides a disciplined approach to enterprise AI. Intelligence is managed as production‑grade projects, not isolated experiments. Models are intentionally selected, benchmarked, and upgraded without disrupting live systems. Agents are empowered to act, but only within clearly defined permissions and policies. Enterprise knowledge remains grounded in trusted data, with identity, access controls, and compliance preserved end‑to‑end. Observability, evaluation, and auditability are built in by design—enabling leaders to understand, govern, and stand behind AI‑driven outcomes. This progression mirrors the evolution of cybersecurity itself: from fragmented, reactive controls to a unified, systemic architecture designed for scale, trust, and resilience. AI Agents: Automation with Accountability The next phase of AI is not conversational—it is agentic. Foundry introduces controlled autonomy: agents that are capable by design, but constrained by enforceable guardrails. These include identity boundaries, role‑based access control, data permissions, policy enforcement, and continuous monitoring. This applies a core cybersecurity principle directly to AI systems: least privilege, extended to intelligence itself. In this model, AI agents function as digital employees—highly capable and always on—but governed by the same trust, access, and accountability frameworks that secure human operators in production environments. The Evolution of Threats As technology advanced, threats evolved in parallel. Physical theft gave way to digital fraud, bank robberies became ransomware attacks, espionage shifted into data exfiltration, and counterfeiting transformed into identity theft. Crime adapted as systems digitized. Policing adapted in response. Ethical hacking, penetration testing, zero‑trust architectures, and advanced threat intelligence emerged to counter increasingly sophisticated adversaries. Cybersecurity evolved from static perimeter defense into predictive, AI‑driven protection models capable of identifying threats before exploitation occurs. The battlefield has now shifted decisively—from physical borders to cloud infrastructure. Digital Assets, Digital Wealth, Digital Risk Money itself has transformed. Physical currency evolved into digital banking, digital banking into real‑time payments, and cryptographic systems introduced decentralized finance. Today, tokenized assets and their underlying digital representations increasingly influence global markets. Platforms such as Foundry provide the resilient, scalable infrastructure required to support this shift—from financial services modernization to blockchain integration. As cryptocurrencies like Bitcoin and Ethereum redefine asset ownership and value exchange, economic systems are becoming dependent on cryptographic trust models rather than institutional intermediaries alone. Trade now happens at the tap of a screen. Assets reside in invisible vaults—cloud environments. Markets operate continuously, unconstrained by geography or time zones. Where wealth is digital, security must be digital. Where identity is virtual, trust must be algorithmic. And where assets are tokenized, integrity must be cryptographically enforced. Blockchain and National Security Blockchain technology introduces transparency, immutability, and distributed trust. Beyond cryptocurrencies, it is increasingly shaping critical domains such as cross‑border trade finance, defense supply‑chain traceability, secure digital identity frameworks, and smart contracts that enable automated compliance. For national economies and defense ecosystems, the convergence of AI and blockchain is powerful—but highly sensitive. A vulnerability in decentralized infrastructure can cascade globally, while a compromised AI model can influence economic or defense decisions at machine speed. Scale and autonomy magnify both impact and risk. Cybersecurity must therefore operate across three critical layers. Infrastructure security ensures cloud, network, and endpoint resilience. Data and identity protection enforce encryption, zero‑trust access, and secure authentication. AI governance and integrity safeguard models through adversarial defense, policy controls, and ethical AI compliance. Together, these layers form the foundation for securing intelligent, decentralized systems in an increasingly automated world. Responsible AI: Security Beyond Code As AI integrates into economic systems, financial markets, defense analytics, and public infrastructure, the responsibility associated with its deployment grows exponentially. Intelligence at scale amplifies both capability and consequence. Unmonitored AI systems can amplify misinformation, manipulate financial signals, expose sensitive defense intelligence, and automate systemic vulnerabilities. At machine speed, these failures propagate faster than traditional controls can respond. Responsible AI, therefore, is not merely an ethical aspiration—it is a cybersecurity mandate. Security must be embedded end‑to‑end, spanning data pipelines, training datasets, model validation, deployment environments, and continuous monitoring systems. AI governance is no longer a parallel concern. It is inseparable from modern cybersecurity architecture. Zero-Trust in a Borderless World Geographical boundaries no longer define risk exposure. Enterprises operate across jurisdictions, workforces are increasingly remote, and supply chains are fully digital. As a result, trust assumptions based on location or network perimeter no longer hold. The modern security model is zero trust: never assume, always verify. Every access request must be authenticated, every transaction validated, and every anomaly analyzed in real time—regardless of where it originates. Security is no longer reactive. It is predictive, adaptive, and continuously enforced across identity, data, and systems. The Economic Imperative The growth of digital currencies, tokenized commodities, and algorithm‑driven markets introduces both innovation and systemic complexity. Assets that were once physical or institutionally mediated—gold, securities, and identity—are now increasingly represented as digital, cryptographic constructs. Digital gold. Digital silver. Digital securities. Digital identity. Each reflects a broader shift: underlying economic value is now encoded, transferred, and settled through cryptographic systems rather than physical custody or manual processes. The integrity of these systems underpins economic stability itself. As a result, cybersecurity is no longer just an IT concern: it functions as an economic stabilizer, protecting trust, value, and market confidence in a fully digital financial world. The Road Ahead If the past four decades transformed hardware into intelligence, the decades ahead will transform intelligence into autonomy. Autonomous finance, logistics, defense systems, and AI agents will increasingly plan, decide, and act without continuous human intervention. The question is not whether this evolution will continue—it will. The question is whether security evolves faster than risk. In an autonomous world, cybersecurity must lead innovation, not follow it. In an era defined by AI, blockchain, digital currencies, and cloud‑native economies, security becomes the silent architecture of trust. Foundry represents one step in this evolution—where intelligence, security, and governance converge into a unified operational fabric. Without such foundations, digital transformation collapses under its own risk. With them, digital evolution becomes sustainable. Cybersecurity is no longer a protective layer. It is the foundation of the digital future.Beyond the Model: Empower your AI with Data Grounding and Model Training
Discover how Microsoft Foundry goes beyond foundational models to deliver enterprise-grade AI solutions. Learn how data grounding, model tuning, and agentic orchestration unlock faster time-to-value, improved accuracy, and scalable workflows across industries.Publishing Agents from Microsoft Foundry to Microsoft 365 Copilot & Teams
Better Together is a series on how Microsoft’s AI platforms work seamlessly to build, deploy, and manage intelligent agents at enterprise scale. As organizations embrace AI across every workflow, Microsoft Foundry, Microsoft 365, Agent 365, and Microsoft Copilot Studio are coming together to deliver a unified approach—from development to deployment to day-to-day operations. This three-part series explores how these technologies connect to help enterprises build AI agents that are secure, governed, and deeply integrated with Microsoft’s product ecosystem. Series Overview Part 1: Publishing from Foundry to Microsoft 365 Copilot and Microsoft Teams Part 2: Foundry + Agent 365 — Native Integration for Enterprise AI Part 3: Microsoft Copilot Studio Integration with Foundry Agents This blog focuses on Part 1: Publishing from Foundry to Microsoft 365 Copilot—how developers can now publish agents built in Foundry directly to Microsoft 365 Copilot and Teams in just a few clicks. Build once. Publish everywhere. Developers can now take an AI agent built in Microsoft Foundry and publish it directly to Microsoft 365 Copilot and Microsoft Teams in just a few clicks. The new streamlined publishing flow eliminates manual setup across Entra ID, Azure Bot Service, and manifest files, turning hours of configuration into a seamless, guided flow in the Foundry Playground. Simplifying Agent Publishing for Microsoft 365 Copilot & Microsoft Teams Previously, deploying a Foundry AI agent into Microsoft 365 Copilot and Microsoft Teams required multiple steps: app registration, bot provisioning, manifest editing, and admin approval. With the new Foundry → M365 integration, the process is straightforward and intuitive. Key capabilities No-code publishing — Prepare, package, and publish agents directly from Foundry Playground. Unified build — A single agent package powers multiple Microsoft 365 channels, including Teams Chat, Microsoft 365 Copilot Chat, and BizChat. Agent-type agnostic — Works seamlessly whether you have a prompt agent, hosted agent, or workflow agent. Built-in Governance — Every agent published to your organization is automatically routed through Microsoft 365 Admin Center (MAC) for review, approval, and monitoring. Downloadable package — Developers can download a .zip for local testing or submission to the Microsoft Marketplace. For pro-code developers, the experience is also simplified. A C# code-first sample in the Agent Toolkit for Visual Studio is searchable, featured, and ready to use. Why It Matters This integration isn’t just about convenience; it’s about scale, control, and trust. Faster time to value — Deliver intelligent agents where people already work, without infrastructure overhead. Enterprise control — Admins retain full oversight via Microsoft 365 Admin Center, with built-in approval, review and governance flows. Developer flexibility — Both low-code creators and pro-code developers benefit from the unified publishing experience. Better Together — This capability lays the groundwork for Agent 365 publishing and deeper M365 integrations. Real-world scenarios YoungWilliams built Priya, an AI agent that helps handle government service inquiries faster and more efficiently. Using the one-click publishing flow, Priya was quickly deployed to Microsoft Teams and M365 Copilot without manual setup. This allowed Young Williams’ customers to provide faster, more accurate responses while keeping governance and compliance intact. “Integrating Microsoft Foundry with Microsoft 365 Copilot fundamentally changed how we deliver AI solutions to our government partners,” said John Tidwell, CTO of YoungWilliams. “With Foundry’s one-click publishing to Teams and Copilot, we can take an idea from prototype to production in days instead of weeks—while maintaining the enterprise-grade security and governance our clients expect. It’s a game changer for how public services can adopt AI responsibly and at scale.” Availability Publishing from Foundry to M365 is in Public Preview within the Foundry Playground. Developers can explore the preview in Microsoft Foundry and test the Teams / M365 publishing flow today. SDK and CLI extensions for code-first publishing are generally available. What’s Next in the Better Together Series This blog is part of the broader Better Together series connecting Microsoft Foundry, Microsoft 365, Agent 365, and Microsoft Copilot Studio. Continue the journey: Foundry + Agent 365 — Native Integration for Enterprise AI (Link) Start building today [Quickstart — Publish an Agent to Microsoft 365 ] Try it now in the new Foundry Playground
Unable to publish Foundry agent to M365 copilot or Teams
I’m encountering an issue while publishing an agent in Microsoft Foundry to M365 Copilot or Teams. After creating the agent and Foundry resource, the process automatically created a Bot Service resource. However, I noticed that this resource has the same ID as the Application ID shown in the configuration. Is this expected behavior? If not, how should I resolve it? I followed the steps in the official documentation: https://learn.microsoft.com/en-us/azure/ai-foundry/agents/how-to/publish-copilot?view=foundry Despite this, I keep getting the following error: There was a problem submitting the agent. Response status code does not indicate success: 401 (Unauthorized). Status Code: 401 Any guidance on what might be causing this and how to fix it would be greatly appreciated.Evaluating AI Agents: More than just LLMs
Artificial intelligence agents are undeniably one of the hottest topics at the forefront of today’s tech landscape. As more individuals and organizations increasingly rely on AI agents to simplify their daily lives—whether through automating routine tasks, assisting with decision-making, or enhancing productivity—it's clear that intelligent agents are not just a passing trend. But with great power comes greater scrutiny--or, from our perspective, it at least deserves greater scrutiny. Despite their growing popularity, one concern that we often hear about is the following: Is my agent doing the right things in the right way? Well—it can be measured from many aspects to understand the agent’s behavior—and this is why agent evaluators come into play. Why Agent Evaluation Matters Unlike traditional LLMs, which primarily generate responses to user prompts, AI agents take action. They can search the web, schedule your meetings, generate reports, send emails, or even interact with your internal systems. A great example of this evolution is GitHub Copilot’s Agent Mode in Visual Studio Code. While the standard “Ask” or “Edit” modes are powerful in their own right, Agent Mode takes things further. It can draft and refine code, iterate on its own suggestions, detect bugs, and fix them—all from a single user request. It’s not just answering questions; it’s solving problems end-to-end. This makes them inherently more powerful—and more complex to evaluate. Here’s why agent evaluation is fundamentally different from LLM evaluation: Dimension LLM Evaluation Agent Evaluation Core Function Content (text, image/video, audio, etc.) generation Action + reasoning + execution Common Metrics Accuracy, Precision, Recall, F1 Score Tool usage accuracy, Task success rate, Intent resolution, Latency Risk Misinformation or hallucination Security breaches, wrong actions, data leakage Human-likeness Optional Often required (tone, memory, continuity) Ethical Concerns Content safety Moral alignment, fairness, privacy, security, execution transparency, preventing harmful actions Shared Evaluation Concerns Latency, Cost, Privacy, Security, Fairness, Moral alignment, etc. Take something as seemingly straightforward as latency. It’s a common metric across both LLMs and agents, often used as a key performance indicator. But once we enter the world of agentic systems, things get complicated—fast. For LLMs, latency is usually simple: measure the time from input to response. But for agents? A single task might involve multiple turns, delayed responses, or even real-world actions that are outside the model’s control. An agent might run a SQL query on a poorly performing cluster, triggering latency that’s caused by external systems—not the agent itself. And that’s not all. What does “done” even mean in an agentic context? If the agent is waiting on user input, has it finished? Or is it still "thinking"? These nuances make it tricky to draw clear latency boundaries. In short, agentic evaluations – even for common metrics like latency—are not just harder than evaluating an LLM. It’s an entirely different game. What to Measure in Agent Evaluation To assess an AI agent effectively, we must consider the following dimensions: Task Success Rate – Can the agent complete what it was asked to do? Tool Use Accuracy – Does the agent call the right tool with the correct parameters? Intent Resolution – Does it understand the user’s request correctly? Prompt Efficiency – Is the agent generating efficient and concise prompts for downstream models or tools? Safety and Alignment – Is the agent filtering harmful content, respecting privacy, and avoiding unsafe actions? Trust and Security – Do users feel confident relying on the agent? Does my agent have the right level of access to sensitive information and available actions? Response Latency and Reliability – How fast and consistent are the agent’s responses across contexts? Red-Teaming evaluations – These evaluation metrics focus on the potential misuse of agents and test for different types of attacks such as personal identifiable information leakage attacks and tool poisoning attacks. This is especially critical for non-chat completion agents — those that don’t merely chat but execute workflows, navigate APIs, or trigger automations. Their evaluation requires scenario simulation, observability instrumentation, and fine-grained analytics. Case Study: Evaluating a Simple AI Agent for Holiday Countdown To illustrate how to evaluate an AI agent, let’s walk through a simple use case: A simple AI agent for sending holiday cards. Agent Setup Platform: Microsoft Foundry Instruction: " You are an assistant agent designed to answer simple questions about the number of days remaining until holidays, and to generate and send holiday cards. Always use the tool to retrieve the current date and the official date of the holiday in question. Based on this information, calculate and provide the number of days left until the holiday. If the holiday is less than 90 days away, generate a personalized holiday card for the occasion. Then, send the holiday card as a gift to <Email address>." Tool: Bing Search, Azure Logic Apps (sending emails through Outlook) LLM Model: GPT-4.1 Example Request Query Response How many days left until New Year? "Today is July 23, 2025. New Year's Day is January 1, 2026. There are 162 days left until New Year." How many days left to Labor Day? "Today is July 25, 2025. Labor Day in 2025 falls on September 1, 2025. There are 38 days left until Labor Day! Since it's less than 90 days away, here's a personalized holiday card for the occasion:" Evaluation Dimensions Task Success Rate Goal: The agent should correctly identify the holiday and current date, then return the accurate number of days left. Evaluation: I tested 10 different holidays, and all were successfully returned. Task success rate = 10/10 = 100%. What’s even better? Microsoft Foundry provides a built-in LLM-based evaluator for task adherence that we can leverage directly: Tool Use Accuracy Goal: The agent should always use the tool to search for holidays and the current date—even if the LLM already knows the answer. It must call the correct tool (Bing Search) with appropriate parameters. Evaluation: Initially, the agent failed to call Bing Search when it already "knew" the date. After updating the instruction to explicitly say "use Bing Search" instead of “use tool”, tool usage became consistent-- clear instructions can improve tool-calling accuracy. Intent Resolution Goal: The agent must understand that the user wants a countdown to the next holiday mentioned, not a list of all holidays or historical data, and should understand when to send holiday card. Evaluation: The agent correctly interpreted the intent, returned countdowns, and sent holiday cards when conditions were met. Microsoft Foundry’s built-in evaluator confirmed this behavior. Prompt Efficiency Goal: The agent should generate minimal, effective prompts for downstream tools or models. Evaluation: Prompts were concise and effective, with no redundant or verbose phrasing. Safety and Alignment Goal: Ensure the agent does not expose sensitive calendar data or make assumptions about user preferences. Evaluation: For example, when asked: “How many days are left until my next birthday?” The agent doesn’t know who I am and doesn’t have access to my personal calendar, where I marked my birthday with a 🎂 emoji. So, the agent should not be able to answer this question accurately — and if it does, then you should be concerned. Trust and Security Goal: The agent should only access public holiday data and not require sensitive permissions. Evaluation: The agent did not request or require any sensitive permissions—this is a positive indicator of secure design. Response Latency and Reliability Goal: The agent should respond quickly and consistently across different times and locations. Evaluation: Average response time was 1.8 seconds, which is acceptable. The agent returned consistent results across 10 repeated queries. Red-Teaming Evaluations Goal: Test the agent for vulnerabilities such as: * PII Leakage: Does it accidentally reveal user-specific calendar data? * Tool Poisoning: Can it be tricked into calling a malicious or irrelevant tool? Evaluation: These risks are not relevant for this simple agent, as it only accesses public data and uses a single trusted tool. Even for a simple assistant agent that answers holiday countdown questions and sends holiday cards, its performance can and should be measured across multiple dimensions, especially since it can call tools on behalf of the user. These metrics can then be used to guide future improvements to the agent – at least for our simple holiday countdown agent, we should replace the ambiguous term “tool” with the specific term “Bing Search” to improve the accuracy and reliability of tool invocation. Key Learnings from Agent Evaluation As I continue to run evaluations on the AI agents we build, several valuable insights have emerged from real-world usage. Here are some lessons I learned: Tool Overuse: Some agents tend to over-invoke tools, which increases latency and can confuse users. Through prompt optimization, we reduced unnecessary tool calls significantly, improving responsiveness and clarity. Ambiguous User Intents: What often appears as a “bad” response is frequently caused by vague or overloaded user instructions. Incorporating intent clarification steps significantly improved user satisfaction and agent performance. Trust and Transparency: Even highly accurate agents can lose user trust if their reasoning isn’t transparent. Simple changes—like verbalizing decision logic or asking for confirmation—led to noticeable improvements in user retention. Balancing Safety and Utility: Overly strict content filters can suppress helpful outputs. We found that carefully tuning safety mechanisms is essential to maintain both protection and functionality. How Microsoft Foundry Helps Microsoft Foundry provide a robust suite of tools to support both LLM and agent evaluation: General purpose evaluators for generative AI - Microsoft Foundry | Microsoft Learn By embedding evaluation into the agent development lifecycle, we move from reactive debugging to proactive quality control.
Announcing Elastic MCP Server in Microsoft Foundry Tool Catalog
Introduction The future of enterprise AI is agentic - driven by intelligent, context-aware agents that deliver real business value. Microsoft Foundry is committed to enabling developers with the tools and integrations they need to build, deploy, and govern these advanced AI solutions. Today, we are excited to announce that Elastic MCP Server is now discoverable in the Microsoft Foundry Tool Catalog, unlocking seamless access to Elastic’s industry-leading vector search capabilities for Retrieval-Augmented Generation (RAG) scenarios. Seamless Integration: Elastic Meets Microsoft Foundry This integration is a major milestone in our ongoing effort to foster an open, extensible AI ecosystem. With Elastic MCP Server now available in the Azure MCP registry, developers can easily connect their agents to Elastic’s powerful search and analytics engine using the Model Context Protocol (MCP). This ensures that agents built on Microsoft Foundry are grounded in trusted, enterprise-grade data - delivering accurate, relevant, and verifiable responses. Create Elastic cloud hosted deployments or Serverless Search Projects through the Microsoft Marketplace or the Azure Portal Discoverability: Elastic MCP Server is listed as a remote MCP server in the Azure MCP Registry and the Foundry Tool Catalog. Multi-Agent Workflows: Enable collaborative agent scenarios via the A2A protocol. Unlocking Vector Search for RAG Elastic’s advanced vector search capabilities are now natively accessible to Foundry agents, enabling powerful Retrieval-Augmented Generation (RAG) workflows: Semantic Search: Agents can perform hybrid and vector-based searches over enterprise data, retrieving the most relevant context for grounding LLM responses. Customizable Retrieval: With Elastic’s Agent Builder, you can define your custom tools specific to your indices and datasets and expose them to Foundry Agents via MCP. Enterprise Grounding: Ensure agent outputs are always based on proprietary, up-to-date data, reducing hallucinations and improving trust. Deployment: Getting Started Follow these steps to integrate Elastic MCP Server with your Foundry agents: Within your Foundry project, you can either: Go to Build in the top menu, then select Tools. Click on Connect a Tool. Select the Catalog tab, search for Elasticsearch, and click Create. Once prompted, configure the Elasticsearch details by providing a name, your Kibana endpoint, and your Elasticsearch API key. Click on Use in an agent and select an existing Agent to integrate Elastic MCP Server. Alternatively, within your Agent: Click on Tools. Click Add, then select Custom. Search for Elasticsearch, add it, and configure the tool as described above. The tool will now appear in your Agent’s configuration. You are all set to now interact with your Elasticsearch projects and deployments! Conclusion & Next Steps The addition of Elastic MCP Server to the Foundry Tool Catalog empowers developers to build the next generation of intelligent, grounded AI agents - combining Microsoft’s agentic platform with Elastic’s cutting-edge vector search. Whether you’re building RAG-powered copilots, automating workflows, or orchestrating multi-agent systems, this integration accelerates your journey from prototype to production. Ready to get started? Get started with Elastic via the Azure Marketplace or Azure portal. New users get a 7-day free trial! Explore agent creation in Microsoft Foundryportal and try the Foundry Tool Catalog. Deep dive into Elastic MCP and Agent Builder Join us at Microsoft Ignite 2025 for live demos, deep dives, and more on building agentic AI with Elastic and Microsoft Foundry!Hybrid AI Using Foundry Local, Microsoft Foundry and the Agent Framework - Part 2
Background In Part 1, we explored how a local LLM running entirely on your GPU can call out to the cloud for advanced capabilities The theme was: Keep your data local. Pull intelligence in only when necessary. That was local-first AI calling cloud agents as needed. This time, the cloud is in charge, and the user interacts with a Microsoft Foundry hosted agent — but whenever it needs private, sensitive, or user-specific information, it securely “calls back home” to a local agent running next to the user via MCP. Think of it as: The cloud agent = specialist doctor The local agent = your health coach who you trust and who knows your medical history The cloud never sees your raw medical history The local agent only shares the minimum amount of information needed to support the cloud agent reasoning This hybrid intelligence pattern respects privacy while still benefiting from hosted frontier-level reasoning. Disclaimer: The diagnostic results, symptom checker, and any medical guidance provided in this article are for illustrative and informational purposes only. They are not intended to provide medical advice, diagnosis, or treatment. Architecture Overview The diagram illustrates a hybrid AI workflow where a Microsoft Foundry–hosted agent in Azure works together with a local MCP server running on the user’s machine. The cloud agent receives user symptoms and uses a frontier model (GPT-4.1) for reasoning, but when it needs personal context—like medical history—it securely calls back into the local MCP Health Coach via a dev-tunnel. The local MCP server queries a local GPU-accelerated LLM (Phi-4-mini via Foundry Local) along with stored health-history JSON, returning only the minimal structured background the cloud model needs. The cloud agent then combines both pieces—its own reasoning plus the local context—to produce tailored recommendations, all while sensitive data stays fully on the user’s device. Hosting the agent in Microsoft Foundry on Azure provides a reliable, scalable orchestration layer that integrates directly with Azure identity, monitoring, and governance. It lets you keep your logic, policies, and reasoning engine in the cloud, while still delegating private or resource-intensive tasks to your local environment. This gives you the best of both worlds: enterprise-grade control and flexibility with edge-level privacy and efficiency. Demo Setup Create the Cloud Hosted Agent Using Microsoft Foundry, I created an agent in the UI and pick gpt-4.1 as model: I provided rigorous instructions as system prompt: You are a medical-specialist reasoning assistant for non-emergency triage. You do NOT have access to the patient’s identity or private medical history. A privacy firewall limits what you can see. A local “Personal Health Coach” LLM exists on the user’s device. It holds the patient’s full medical history privately. You may request information from this local model ONLY by calling the MCP tool: get_patient_background(symptoms) This tool returns a privacy-safe, PII-free medical summary, including: - chronic conditions - allergies - medications - relevant risk factors - relevant recent labs - family history relevance - age group Rules: 1. When symptoms are provided, ALWAYS call get_patient_background BEFORE reasoning. 2. NEVER guess or invent medical history — always retrieve it from the local tool. 3. NEVER ask the user for sensitive personal details. The local model handles that. 4. After the tool runs, combine: (a) the patient_background output (b) the user’s reported symptoms to deliver high-level triage guidance. 5. Do not diagnose or prescribe medication. 6. Always end with: “This is not medical advice.” You MUST display the section “Local Health Coach Summary:” containing the JSON returned from the tool before giving your reasoning. Build the Local MCP Server (Local LLM + Personal Medical Memory) The full code for the MCP server is available here but here are the main parts: HTTP JSON-RPC Wrapper (“MCP Gateway”) The first part of the server exposes a minimal HTTP API that accepts MCP-style JSON-RPC messages and routes them to handler functions: Listens on a local port Accepts POST JSON-RPC Normalizes the payload Passes requests to handle_mcp_request() Returns JSON-RPC responses Exposes initialize and tools/list class MCPHandler(BaseHTTPRequestHandler): def _set_headers(self, status=200): self.send_response(status) self.send_header("Content-Type", "application/json") self.end_headers() def do_GET(self): self._set_headers() self.wfile.write(b"OK") def do_POST(self): content_len = int(self.headers.get("Content-Length", 0)) raw = self.rfile.read(content_len) print("---- RAW BODY ----") print(raw) print("-------------------") try: req = json.loads(raw.decode("utf-8")) except: self._set_headers(400) self.wfile.write(b'{"error":"Invalid JSON"}') return resp = handle_mcp_request(req) self._set_headers() self.wfile.write(json.dumps(resp).encode("utf-8")) Tool Definition: get_patient_background This section defines the tool contract exposed to Azure AI Foundry. The hosted agent sees this tool exactly as if it were a cloud function: Advertises the tool via tools/list Accepts arguments passed from the cloud agent Delegates local reasoning to the GPU LLM Returns structured JSON back to the cloud def handle_mcp_request(req): method = req.get("method") req_id = req.get("id") if method == "tools/list": return { "jsonrpc": "2.0", "id": req_id, "result": { "tools": [ { "name": "get_patient_background", "description": "Returns anonymized personal medical context using your local LLM.", "inputSchema": { "type": "object", "properties": { "symptoms": {"type": "string"} }, "required": ["symptoms"] } } ] } } if method == "tools/call": tool = req["params"]["name"] args = req["params"]["arguments"] if tool == "get_patient_background": symptoms = args.get("symptoms", "") summary = summarize_patient_locally(symptoms) return { "jsonrpc": "2.0", "id": req_id, "result": { "content": [ { "type": "text", "text": json.dumps(summary) } ] } } Local GPU LLM Caller (Foundry Local Integration) This is where personalization happens — entirely on your machine, not in the cloud: Calls the local GPU LLM through Foundry Local Injects private medical data (loaded from a file or memory) Produces anonymized structured outputs Logs debug info so you can see when local inference is running FOUNDRY_LOCAL_BASE_URL = "http://127.0.0.1:52403" FOUNDRY_LOCAL_CHAT_URL = f"{FOUNDRY_LOCAL_BASE_URL}/v1/chat/completions" FOUNDRY_LOCAL_MODEL_ID = "Phi-4-mini-instruct-cuda-gpu:5" def summarize_patient_locally(symptoms: str): print("[LOCAL] Calling Foundry Local GPU model...") payload = { "model": FOUNDRY_LOCAL_MODEL_ID, "messages": [ {"role": "system", "content": PERSONAL_SYSTEM_PROMPT}, {"role": "user", "content": symptoms} ], "max_tokens": 300, "temperature": 0.1 } resp = requests.post( FOUNDRY_LOCAL_CHAT_URL, headers={"Content-Type": "application/json"}, data=json.dumps(payload), timeout=60 ) llm_content = resp.json()["choices"][0]["message"]["content"] print("[LOCAL] Raw content:\n", llm_content) cleaned = _strip_code_fences(llm_content) return json.loads(cleaned) Start a Dev Tunnel Now we need to do some plumbing work to make sure the cloud can resolve the MCP endpoint. I used Azure Dev Tunnels for this demo. The snippet below shows how to set that up in 4 PowerShell commands: PS C:\Windows\system32> winget install Microsoft.DevTunnel PS C:\Windows\system32> devtunnel create mcp-health PS C:\Windows\system32> devtunnel port create mcp-health -p 8081 --protocol http PS C:\Windows\system32> devtunnel host mcp-health I have now a public endpoint: https://xxxxxxxxx.devtunnels.ms:8081 Wire Everything Together in Azure AI Foundry Now let's us the UI to add a new custom tool as MCP for our agent: And point to the public endpoint created previously: Voila, we're done with the setup, let's test it Demo: The Cloud Agent Talks to Your Local Private LLM I am going to use a simple prompt in the agent: “Hi, I’ve been feeling feverish, fatigued, and a bit short of breath since yesterday. Should I be worried?” Disclaimer: The diagnostic results and any medical guidance provided in this article are for illustrative and informational purposes only. They are not intended to provide medical advice, diagnosis, or treatment. Below is the sequence shown in real time: Conclusion — Why This Hybrid Pattern Matters Hybrid AI lets you place intelligence exactly where it belongs: high-value reasoning in the cloud, sensitive or contextual data on the local machine. This protects privacy while reducing cloud compute costs—routine lookups, context gathering, and personal history retrieval can all run on lightweight local models instead of expensive frontier models. This pattern also unlocks powerful real-world applications: local financial data paired with cloud financial analysis, on-device coding knowledge combined with cloud-scale refactoring, or local corporate context augmenting cloud automation agents. In industrial and edge environments, local agents can sit directly next to the action—embedded in factory sensors, cameras, kiosks, or ambient IoT devices—providing instant, private intelligence while the cloud handles complex decision-making. Hybrid AI turns every device into an intelligent collaborator, and every cloud agent into a specialist that can safely leverage local expertise. References Get started with Foundry Local - Foundry Local: https://learn.microsoft.com/en-us/azure/ai-foundry/foundry-local/get-started?view=foundry-classic Using MCP tools with Agents (Microsoft Agent Framework) — https://learn.microsoft.com/en-us/agent-framework/user-guide/model-context-protocol/using-mcp-tools Microsoft Learn Build Agents using Model Context Protocol on Azure — https://learn.microsoft.com/en-us/azure/developer/ai/intro-agents-mcp Microsoft Learn Full demo repo available here.Expanded Models Available in Microsoft Foundry Agent Service
Announcement Summary Foundry Agent Service now supports an expanded ecosystem of frontier and specialist models. Access models from Anthropic, DeepSeek AI, Meta, Microsoft, xAI, and more. Avoid model lock-in and choose the best model for each scenario. Build complex, multimodal, multi-agent workflows at enterprise scale. From document intelligence to operational automation, Microsoft Foundry makes AI agents ready for mission-critical workloads.Native Microsoft Agent 365 Integration in Microsoft Foundry
Better Together is a series on how Microsoft’s AI platforms work seamlessly to build, deploy, and manage intelligent agents at enterprise scale. As organizations embrace AI across every workflow, Microsoft Foundry, Microsoft 365, Microsoft Agent 365, and Microsoft Copilot Studio are coming together to deliver a unified approach—from development to deployment to day-to-day operations. This three-part series explores how these technologies connect to help enterprises build AI agents that are secure, governed, and deeply integrated with Microsoft’s product ecosystem. This blog focuses on Part 2: Microsoft Foundry + A365Microsoft Agent 365 native Integration, showing how organizations can build, deploy, and customize Microsoft Agent 365 agents directly from Foundry. What Is Microsoft Agent 365? Microsoft Agent 365 is the control plane for enterprise AI agents, allowing IT to register, secure, and scale agents across Microsoft 365 and third-party environments. AI agents act more like people than code—they bring skills, learn from context, and leverage enterprise data to complete tasks. Like with people in the enterprise, they need to be protected from digital threats, governed with the right IT controls, and managed following enterprise policies. Our philosophy is simple: treat agents like users. Extend your existing identity, security, compliance, and productivity infrastructure to agents using familiar tools adapted for their unique needs. Each agent receives its own identity, policies, and access controls, ensuring it operates effectively while staying compliant. With Agent 365, organizations can: Manage AI agents at scale with unified identity and lifecycle controls Enforce least-privilege access and compliance with Defender, Entra, and Purview Boost productivity through native integration with Microsoft 365 apps and Work IQ Monitor activity and apply policies from a single, secure registry Learn more about Microsoft Agent 365 Foundry: The Ideal Place for Developers to Build AI Agents Microsoft Foundry is the ideal platform for building, testing, and deploying Agent 365 agents. It provides a unified environment where developers can create enterprise-ready AI agents that are secure, governed, and fully integrated with Microsoft 365. At Ignite, Foundry introduces support for Agent 365 hosted (containerized) agents, giving developers a consistent, scalable runtime managed entirely within the Microsoft cloud. This initial release focuses on hosted agents to provide a fully managed and secure environment from development to deployment. With Foundry, developers can: Author agents quickly using low-code or pro-code workflows Test and iterate in a secure, hosted environment Integrate frontier AI models from Microsoft, OpenAI, Meta, DeepSeek, and xAI Package and deploy agents with Microsoft identity, security, and governance built in Through its native integration with Microsoft Agent 365, Foundry also provides: Foundry-hosted runtime for seamless agent execution Azure Bot Service and Microsoft 365 app integration (Teams, Outlook, M365 Copilot) MCP-connected tools from Microsoft Agent 365 Simplified preparation flow for publishing to M365 Copilot, Teams and BizChat Apps Together, Foundry and Microsoft Agent 365 let organizations build, host, and manage AI agents natively, making them enterprise-ready from day one. What Can Employees Do with Agent 365? With Agent 365, employees can: Automate email triage and meeting preparation Summarize and generate content Locate organizational knowledge instantly Orchestrate cross-system workflows and approvals Advanced teams can also: Integrate internal knowledge bases Create business-specific workflows Extend actions using Foundry APIs and connectors Why It Matters This integration makes Agent 365 agents enterprise-ready out of the box—combining the authoring power of Microsoft Foundry with the security and manageability of the Microsoft 365 ecosystem. IT retains control over policy, compliance, and lifecycle management, while business users gain intelligent agents that work across the tools they already use. Get Started Early access to Microsoft Agent 365 is available through the Frontier preview program, offering hands-on experience with Microsoft’s latest AI innovations. 🔗 [Quickstart — Publish an Agent to A365 GitHub Sample]
