Microsoft 365 licences: where mid-sized companies regularly overpay

Microsoft 365 licences are rarely bought wrongly. They are distributed wrongly. The usual approach is to give everyone the same, and that is almost always either too much, or too little in the wrong place.

Why one plan for everyone rarely fits

In a typical organisation three groups work very differently, and their requirements differ more than the price gap suggests.

• Office workplaces with their own computer: need the applications locally, work a lot with files and meetings.
• Staff without a fixed computer, whether in production, the warehouse or at shared workstations, often need only communication and access to a few pieces of information. There are separate, considerably cheaper plans for them. You need to know their limits, though: the applications are not included for installation, only in the browser and as apps on mobile devices. And even there a threshold applies: on the smallest plan, devices with a screen larger than 10.9 inches allow reading only, not editing. Anyone working daily at their own computer with the full applications is not served by this. It belongs checked per person, not decided per department.
• Shared and functional mailboxes frequently need no paid licence of their own. Two limits to that: beyond a certain size, with an archive, or under a hold policy one becomes due; the size threshold currently sits at 50 gigabytes. And the people accessing the mailbox need an appropriate licence themselves. The mailbox is free of charge, not the access.

The three places where money is regularly wasted

• Dormant accounts: accounts of people who have left, still running because nobody cancelled them. The easiest of the three points here to put right.
• Duplicate functions: a purchased tool providing something the existing plan already includes. This only shows up when someone puts both side by side.
• The same plan for everyone: see above. Where a group needs only communication, they often cost a multiple of what is necessary.

What goes wrong in the allocation

The reason is rarely negligence but the way licences enter a company. At the start a plan is chosen that suits the founding team. Then the organisation grows, and every new joiner gets what their predecessor had, because that is the quickest route and nobody objects.

After a few years a distribution exists that nobody decided on. It was not set up wrongly; it was never reviewed. That is exactly why a review usually finds something without anyone having made a mistake.

What a review delivers

It puts three lists side by side: which licences are paid for, which are assigned, and who actually works with them. The difference between the first and the third list is the starting point, not yet the result. Each case still carries the question of whether a permission or a feature makes the licence necessary anyway. How much remains in the end cannot be stated seriously in advance.

The third list matters most, and it is the hardest one. An assigned licence says nothing about whether it is used; the usage reports in the admin centre give an answer. Two things to keep in mind. First, Microsoft has concealed the names in these reports by default since 2021; anyone needing the per-person view has to change that setting first. Second, absent activity is no proof of absent need: security and management features do not appear as usage in the usual reports at all.

And a point easily overlooked: evaluations at person level touch data protection and, where a works council exists, its involvement. Aggregated figures are enough for a first overview. The question about the individual person belongs settled beforehand, not afterwards.

What to watch after the review

• Reducing is tied to a short deadline. On an annual contract the quantity can only be lowered within seven calendar days, counted from the transaction in question: from the purchase, from the renewal or from a mid-term addition. One point matters: an addition opens the window for the newly ordered seats, not again for the whole estate. After that the quantity is fixed until the next renewal. Those seven days are the actual date to watch, not the end of the term.
• In the other direction more is possible: adding seats works at any time. Moving to a larger plan is governed per product pairing and is not provided for in every combination. Check that beforehand, because term and billing depend on it too.
• Anyone needing real flexibility needs a monthly contract term, not merely monthly billing. That is the most common misunderstanding: an annual contract paid monthly remains an annual contract. The monthly term carries a premium but can be adjusted at month end.
• A smaller plan may lose features someone actually uses day to day. Before switching, check what the person genuinely needs, not what they are entitled to.
• Security and management features often depend on the plan. Saving here shifts the cost into operations.
• Accounts of people who have left are not only a cost question: before a licence is withdrawn, settle what happens to the data and how long it has to be retained.

What to watch out for is on our page about Microsoft licensing. Which features sit in which plan depends closely on how Microsoft 365 is set up in your organisation. If you like, we will look at your licence situation before any changes are discussed. A first conversation costs nothing.

Status: August 2026. Microsoft changes licence terms, deadlines and thresholds regularly, and they differ by purchasing channel. For your own situation the current contract text applies.