The verdict in three sentences
For a mid-sized company of 1,200 employees whose procedures, quality documentation and HR policies sit in SharePoint, a RAG assistant (retrieval-augmented generation) costs USD 30,000 to 85,000 to build in 2026. Usage then runs USD 250 to 1,800 a month depending on question volume and model choice. The project pays off if the assistant enforces document permissions and saves 20 to 40 minutes per employee per week, which can be measured during the pilot.
What a RAG is, and why budgets vary so much
A RAG does not retrain an AI model. It splits your documents, indexes them in a vector database, retrieves the relevant passages for each question and asks the model to answer while citing its sources. With 15,000 documents (procedures, ISO 9001 quality sheets, policies, HR notes), cost depends mainly on three factors: the quality of source documents (scanned PDFs, duplicates, outdated versions), syncing SharePoint permissions, and how strict answer traceability must be.
| Item | Content | Indicative cost 2026 (USD) | Timeline |
|---|---|---|---|
| Scoping and document audit | Source map, duplicates, outdated files | 3,500 to 8,500 | 2 to 3 weeks |
| SharePoint connector and ingestion | Extraction, OCR of scans, chunking, incremental updates | 6,000 to 17,000 | 3 to 5 weeks |
| Permission enforcement | Entra ID group sync, query-time filtering | 5,000 to 14,500 | 2 to 4 weeks |
| Retrieval and answer engine | Vector database, hybrid search, source citations | 6,000 to 17,000 | 3 to 5 weeks |
| Interface (Teams, intranet, web) | Chat, history, user feedback on each answer | 3,500 to 12,000 | 2 to 4 weeks |
| Evaluation and guardrails | 200 to 500 test questions, accuracy tracking, off-topic refusal | 3,500 to 9,500 | 2 to 3 weeks |
| Change management | Champion training, internal communication | 2,500 to 6,000 | 2 weeks |
Usage costs and hosting
Recurring costs combine model calls, vector database hosting and maintenance. For 1,200 employees with 30 to 50 % active users, plan roughly 15,000 to 60,000 questions a month.
| Option | Hosting | Monthly usage cost (USD) | Watch point |
|---|---|---|---|
| Model via API, US region | Major cloud provider | 250 to 1,100 | Check no-training data clauses |
| Model via API, alternative provider | Independent AI vendor | 300 to 1,200 | Quality varies by task |
| Self-hosted open-source model | GPU server in a US data centre | 1,100 to 3,000 | Full control, heavier operations |
| Managed vector database | US region | 100 to 500 | Index size and refresh frequency |
| Maintenance and reindexing | Vendor or internal team | 600 to 1,800 | Tracking new document versions |
| Assistant bundled with the office suite | Suite vendor | about 30 per user | USD 36,000 a month for 1,200 seats |
The comparison with a per-seat bundled assistant is often decisive: at about USD 30 per user per month, equipping 1,200 people costs around USD 432,000 a year, against USD 36,000 to 110,000 a year in usage and maintenance for a dedicated RAG. On compliance, HR documents involve employee data under state privacy and security rules such as the New York SHIELD Act, and EU subsidiaries or users bring the GDPR and the EU AI Act transparency duties into scope.
Mini case study
Sarah, CIO of a 1,200-employee manufacturer in New York, runs a pilot with 150 people. Users save on average 25 minutes a week searching for documents. If 500 employees adopt the tool, that is 208 hours a week, about 9,400 hours a year over 45 weeks. At USD 55 fully loaded hourly cost, the value reaches USD 517,000 a year. With a USD 60,000 build and USD 14,000 of annual usage, year one costs USD 74,000, paid back in about 2 months of production, even if the estimated gain is divided by three.
FAQ
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How much does an internal knowledge AI chatbot cost in 2026?
USD 30,000 to 85,000 for a company of 1,000 to 2,000 employees, then USD 250 to 1,800 a month in usage. A pilot limited to one department starts around USD 14,000 to 22,000.
Can the assistant show an HR document to someone without access?
Not if permissions are filtered on every query from SharePoint and Entra ID groups. This line costs USD 5,000 to 14,500 and should never be cut from the budget.
Where does the data go?
It can stay in a chosen region: major providers offer regional hosting, and open-source models can run on a dedicated server for USD 1,100 to 3,000 a month. The contract must exclude any reuse of data for training.
How do we avoid made-up answers?
By requiring source citations, an explicit refusal when no relevant passage is found, and a set of 200 to 500 test questions. Well-evaluated projects commonly reach 85 to 95 % answers rated correct on that set.
How long does a full rollout take?
Plan 8 to 14 weeks: 2 to 3 weeks of scoping, 5 to 8 weeks of build, then a 3 to 4 week pilot before company-wide rollout.
Let's scope your project. Share your document sources, target user count and hosting constraints, and we will price a pilot then a full rollout with detailed monthly usage costs. Detailed quote within 48 h. WhatsApp +221 77 596 93 33.
Mohamed Bah
Fondateur, Kolonell
Passionate about digital and entrepreneurship in Africa, Mohamed has been helping Sénégalese businesses with their digital transformation since 2020. Founder of Kolonell, he believes every SME deserves a professional and accessible online présence.
