Microsoft licences are one of the largest recurring IT costs in many organisations. They are also one of the least reviewed. The problem is rarely that Microsoft 365 is poor value. The problem is that licence portfolios are often created during a migration, reseller change or urgent project, then renewed year after year without asking whether the setup still matches the business.
People leave. Roles change. Security needs mature. New products arrive. Add-ons are tested and forgotten. The licence bill keeps moving.
This guide helps you assess whether your organisation is overpaying and what a practical Microsoft licence review should include.
Five questions that reveal over-licensing
Start with these questions. If you answer yes to several of them, a licence review will probably find waste.
1. Does everyone have the same licence type?
“One licence for everyone” is simple to administer, but it rarely fits the organisation. A warehouse worker, finance employee, sales manager and global administrator do not have the same needs.
For many organisations, the cheapest savings come from segmenting users properly. Some need Business Premium or E5. Others may only need Business Basic, Exchange Online or a frontline plan.
2. Has nobody reviewed licences in the last year?
If the licence portfolio has not been reviewed for 12 months, it is probably wrong. Staff turnover alone creates waste. So do reorganisations, role changes and project-based add-ons.
A licence review should be a recurring operational task, not something that only happens when finance asks why the bill increased.
3. Are many users on E5 without a clear reason?
Microsoft 365 E5 is powerful. It includes advanced security, compliance and analytics capabilities. It is also expensive, and many users do not need every E5 feature.
E5 can be the right choice for administrators, security teams, executives, regulated roles and users with access to highly sensitive data. E5 for everyone is often over-licensing unless the organisation has made a deliberate security and compliance decision.
4. Do you have add-ons nobody owns?
Power BI Pro, Project, Visio, Teams Phone, Defender add-ons and other standalone licences often start with a real need. Later, the project ends or the team changes tool, but the subscription remains.
Every add-on should have an owner and a reason. If nobody can explain why it exists, review it.
5. Does your reseller only discuss renewals?
A good Microsoft partner should help you optimise, not only renew. If the conversation is always about extending the agreement and never about usage, downgrade options or portfolio fit, the incentives may not be aligned with your budget.
The most common sources of waste
Licence waste usually comes from a few familiar patterns.
Former employees with active licences
Disabled accounts do not always lose their licences automatically. If the offboarding process does not remove licences, the organisation keeps paying.
In a company with 150 employees and normal turnover, even a small offboarding gap can create thousands of kroner in annual waste. The fix is operational: remove licence assignment as part of offboarding and run a monthly report for disabled users with active licences.
Wrong licence tier for the role
The most common problem is not always the most expensive plan. It is users on a plan that does not match their work.
Examples:
- Production staff with desktop Office licences they never use
- External consultants with broader access than their task requires
- Shared or service accounts with user licences assigned incorrectly
- Occasional users on full Microsoft 365 plans
- Standard office workers on E5 without using E5 capabilities
Segment users by role and usage. Then match licence tiers to actual need.
Unused add-ons
Add-ons are easy to miss because they sit outside the base licence discussion. Common examples include:
- Power BI Pro licences assigned to users who never publish or share reports
- Project or Visio plans left after a project ended
- Teams Phone licences assigned before telephony was fully rolled out
- Security add-ons duplicated by a broader suite licence
Review both assignment and usage. A licence assigned to an active user can still be unused.
Duplicate capabilities
Microsoft 365 suites overlap with standalone products and third-party tools. Organisations sometimes pay twice for endpoint protection, email security, meeting tools, phone systems, eDiscovery or data loss prevention.
Do not remove a third-party product just because Microsoft includes a similar feature. But do check whether the overlap is deliberate. Paying twice can be right. Paying twice by accident is waste.
How to run a licence review
A useful review combines commercial data, technical usage and business context. Licence portals alone do not tell the whole story.
Step 1: collect the current licence baseline
Export assigned licences from Microsoft 365 admin center or Microsoft Graph. Include:
- User principal name
- Department or role if available
- Assigned licence SKUs
- Account enabled/disabled status
- Last sign-in date
- Group-based licence assignment source
- Add-ons and standalone licences
This creates the factual baseline. Without it, licence discussions become anecdotal.
Step 2: map licences to roles
Group users by work pattern, not only by department. For example:
- Knowledge workers
- Frontline or production users
- Executives
- Administrators
- Consultants and temporary staff
- Shared devices or kiosks
Then define what each group actually needs: desktop apps, mailbox size, Teams, security controls, device management, compliance, analytics or telephony.
Step 3: compare usage with assigned capability
Look for gaps between what users have and what they use. Examples:
- Users with desktop Office licences who only use browser apps
- E5 users with no use of advanced security or compliance features
- Power BI Pro users who never publish or share content
- Teams Phone users without call activity
- Disabled accounts with active licences
Usage data should inform the decision, not make it alone. A CFO may need capabilities only occasionally. A dormant admin account may be intentionally reserved. That is why technical data needs business review.
Step 4: define changes and risks
Do not downgrade licences blindly. For each proposed change, check what the user would lose. This is especially important for security, compliance and device management features.
For example, moving a user from Business Premium to Business Standard may remove Intune and Defender for Business coverage. That may be unacceptable if the device is company-managed or accesses sensitive data.
Document each change with:
- Current licence
- Proposed licence
- Expected saving
- Feature impact
- Business owner approval
- Rollback path
Step 5: implement in batches
Make changes in batches rather than all at once. Start with low-risk clean-up:
- Remove licences from disabled accounts
- Remove unused add-ons with confirmed no usage
- Correct obvious assignment mistakes
Then move to role-based changes. Communicate with affected users and monitor support tickets after each batch.
Savings examples
Savings depend on your agreement, currency and reseller terms, but the pattern is consistent.
Former employees
If 15 former employees still have Business Premium licences at roughly 22 USD per month, that is 330 USD per month, or almost 4,000 USD per year, before tax and local pricing differences.
E5 over-assignment
Moving 25 users from E5 to Business Premium where E5 capabilities are not required can save roughly 35 USD per user per month based on public US list price differences. That is 875 USD per month. The decision must account for security and compliance impact, but the review is worth doing.
Unused add-ons
Thirty unused Power BI Pro licences at roughly 10 USD per user per month cost about 300 USD per month. Add Project, Visio or Teams Phone waste and the number grows quickly.
The point is not that every licence should be reduced. The point is that unmanaged portfolios accumulate waste quietly.
Governance after optimisation
A one-time review helps, but the savings disappear if the old habits continue. Put simple governance around licence management.
Useful controls include:
- Monthly report of disabled users with active licences
- Quarterly review of E5 and add-on assignments
- Role-based licence groups in Entra ID
- Approval process for expensive add-ons
- Licence removal in the offboarding checklist
- Annual review before renewal negotiations
Group-based licensing can help if the groups are well maintained. Poorly maintained groups only move the mess to another layer.
When not to optimise aggressively
Licence optimisation should not weaken security or disrupt work. Be careful when reviewing licences tied to:
- Conditional Access
- Intune device management
- Defender products
- Compliance and retention requirements
- eDiscovery or audit needs
- Privileged administration
The cheapest licence is not always the right licence. The goal is to remove waste while keeping the controls the business needs.
What a good outcome looks like
After a proper review, you should be able to answer these questions:
- Which user groups need which licences?
- Which users have exceptions and why?
- Which add-ons are actively used?
- Which licences support security or compliance controls?
- What changed, what did it save and who approved it?
- When is the next review?
Microsoft licensing will never be perfectly simple. But it can be managed. With a clear baseline, role-based assignments and regular review, most organisations can reduce waste without reducing capability.