Plan and Manage an Azure AI Solution · Topic 1 of 4

Choosing Foundry Services and Models

AI-103 service selection: choosing LLMs, small and multimodal models, Foundry Tools, retrieval and indexing methods, and agent memory and tools.

  • 4 min
In a nutshell
  • Pick the smallest model that meets the quality bar; confirm with evaluations.
  • Reasoning models suit multistep problems; SLMs suit simple, high-volume work.
  • Foundry Tools give prebuilt vision, language, speech, translation and document capabilities.

What it is

Microsoft Foundry is Azure's platform for building AI apps and agents. It brings together a catalog of models, prebuilt AI capabilities called Foundry Tools, the Foundry Agent Service for agents, and tools for evaluation, monitoring and safety.

The first skill AI-103 tests is choosing the right piece for a requirement: which kind of model, which Foundry service, which retrieval method, and which tools and memory an agent needs.

RequirementGenerate or reasonlanguage modelAnalyze images, speech, documentsFoundry ToolsGround on datasearch and retrievalActagent with tools

How it works

Choosing a model

Model typeStrengthsTypical use
Large language model (LLM)Broad knowledge, strong reasoning and writingComplex chat, summarization, agents that plan
Reasoning modelSpends extra effort thinking before answeringMultistep math, code, planning, hard analysis
Small language model (SLM)Lower cost and latency, can run at the edgeSimple classification, extraction, high-volume tasks
Multimodal modelAccepts text plus images or audioDescribing images, answering questions about screenshots
Embedding modelTurns text into vectorsVector search and RAG
Image and video generation modelsCreate media from promptsMarketing images, short video clips

Choose the smallest model that meets the quality bar. A bigger model costs more and responds more slowly; a model that is too small produces poor answers. Evaluations, not guesses, should settle the choice.

Choosing a Foundry service

RequirementGood fit
Generate text, chat, call toolsA model deployment from the Foundry model catalog
Ground answers on company documentsAzure AI Search, or Foundry agent tools such as file search
Build an agent that uses tools and keeps a conversationFoundry Agent Service
Extract fields and layout from documents, images, audio or videoAzure Content Understanding in Foundry Tools, or Document Intelligence
Detect sentiment, entities or PII in textAzure Language in Foundry Tools, or a language model with a prompt
Translate textAzure Translator in Foundry Tools, or an LLM translation flow
Speech to text or text to speechAzure Speech in Foundry Tools
Block harmful prompts and outputsGuardrails and content filters, Azure AI Content Safety

A prebuilt Foundry Tool is often cheaper and more predictable than prompting an LLM for the same narrow task. An LLM is more flexible when the task needs reasoning or a custom output format.

Choosing retrieval and indexing

MethodHow it finds contentBest for
Keyword (full text)Matches the words in the queryExact terms, codes, names
VectorCompares embeddings for meaningParaphrased or natural language questions
HybridCombines keyword and vector resultsMost RAG workloads; a good default
Semantic rankingReranks results with a language modelImproving the order of the top results

Agent memory, tools and knowledge

An agent needs three things besides a model:

  • Tools to act: function calling, OpenAPI tools, MCP servers, code interpreter, file search, Azure AI Search, web search or Grounding with Bing, computer use, browser automation.
  • Knowledge to ground answers: search indexes, uploaded files, SharePoint or Fabric data.
  • Memory to keep context: the conversation history and, where needed, longer-term stored facts.
Exam tip

When a question stresses low cost, low latency and a simple task, an SLM or a prebuilt Foundry Tool usually beats a large LLM.

How the exam asks about this

  • "Users ask questions in their own words about thousands of PDFs. Which retrieval method?" Hybrid search with vectors.
  • "An agent must call an internal REST API described by an OpenAPI spec. Which tool?" An OpenAPI tool.
  • "Detect PII in support tickets at high volume and low cost." Azure Language PII detection in Foundry Tools.

What to remember for the exam

  • Pick the smallest model that meets the quality bar; confirm with evaluations.
  • Reasoning models suit multistep problems; SLMs suit simple, high-volume work.
  • Foundry Tools give prebuilt vision, language, speech, translation and document capabilities.
  • Hybrid search is a strong default for RAG; semantic ranking improves ordering.
  • Agents need tools, knowledge and memory, not just a model.
Watch out

An embedding model does not generate answers. It produces vectors for search; a chat or reasoning model writes the answer.

Common mistakes

Always choosing the biggest model. It raises cost and latency without always improving results.

Using keyword search alone for natural language questions. Vector or hybrid search finds meaning, not just words.

Prompting an LLM for every narrow task. A prebuilt tool can be cheaper and more consistent.

Check yourself

  • When is a small language model a better choice than an LLM?

    When the task is simple and high volume and low cost or latency matters more than broad reasoning.

  • What does hybrid search combine?

    Keyword (full text) search and vector search.

  • Name two kinds of tools an agent can use in Foundry Agent Service.

    For example, function calling and Azure AI Search, or code interpreter and an OpenAPI tool.

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