Microsoft 365 Cost Optimization

Optimizing Microsoft 365 Licensing Costs: A Strategic Approach

The Microsoft 365 service offers many variations for software licensing in their platform today. Many organizations may simply chose a recommendation based upon word-of-mouth or “best guess”. While the licenses themselves are not that expensive for a single license, as the business grows the scaling costs of these licenses can have a dramatic impact on the monthly technology budget. Furthermore, scaling licenses back can remove critical security features and entitlements needed. We’ll highlight some of the major components of optimizing your Microsoft 365 licensing needs for small businesses.

The Hidden Costs of Inefficient License Management

Many organizations unknowingly overspend on M365 licenses through inefficient management practices. We have found that organizations typically overspend by 15-30% on SaaS licensing due to redundant licenses, overprovisioning, and poor offboarding procedures. For a SMB company with 100 employees, this can translate to thousands of dollars in unnecessary annual expenditure.

Strategic License Right-Sizing

The foundation of any cost optimization strategy begins with understanding your actual needs. Many organizations default to providing premium licenses to all employees, regardless of their requirements.

Start by conducting a comprehensive license audit. Document which features each employee actually uses versus what they’re paying for. You’ll likely discover that many users only need basic functionality—email, basic Office applications, and file storage—rather than the advanced features included in premium licenses.

Implement a tiered licensing approach where:

• Front-line workers who primarily need email and web-based applications receive Microsoft 365 F3 licenses
• General office workers receive Microsoft 365 Business Basic or Standard licenses
• Only specialized roles requiring advanced security, compliance, or analytical features receive premium licenses

This differentiated approach can immediately reduce licensing costs by aligning expenditure with actual usage patterns. Remember to review license utilization quarterly, as needs evolve with changing job responsibilities and organizational priorities.

Efficient User Offboarding: Recovering Unused Licenses

Inefficient offboarding processes represent another significant source of waste. When employees depart, their licenses often remain assigned for weeks or months afterward, creating unnecessary expenses.

Develop a standardized offboarding workflow that includes:

• Immediate license recovery upon employee departure
• Data preservation for compliance and business continuity
• Clear ownership of the offboarding process within IT

By implementing automated offboarding workflows through Microsoft Power Automate or similar tools, you can ensure licenses are recovered promptly while preserving critical business data.

Maximizing Shared Mailboxes

One of the most overlooked cost-saving opportunities involves shared mailboxes. Unlike regular mailboxes, shared mailboxes don’t require separate licenses if accessed by users who already have Exchange Online licenses.

Consider converting the following to shared mailboxes:

• Departmental email addresses (info@company.com, support@company.com)
• Former employee mailboxes that need occasional reference
• Project-based communication channels
• Administrative accounts

A strategic approach to shared mailboxes can significantly reduce license requirements, especially for functional roles where multiple team members share responsibility for communication.

Leveraging Filters and Groups for Streamlined Management

In the M365 Admin portal, by selecting the Users tab you can search for Users based on certain filters. You can build filters to quickly display users of certain license types or specific roles.

Conclusion

Optimizing Microsoft 365 licensing costs doesn’t require sacrificing functionality or security. By implementing a strategic approach to license management—right-sizing licenses, streamlining offboarding, leveraging shared resources, and utilizing automated tools—organizations can achieve substantial cost savings while maintaining productivity. The key lies in aligning licensing expenses with actual business requirements rather than defaulting to one-size-fits-all solutions.

Start with a comprehensive audit of your current environment, identify the most promising optimization opportunities. Get in touch with us today for a quick M365 cost analysis report to optimize your monthly costs.