Microsoft 365 licensing often looks simple: choose a plan, multiply the price by the number of users, and approve the invoice.
In practice, that number rarely represents the real cost.
The biggest waste usually does not come from one expensive license. It comes from hundreds of small decisions accumulating inside the tenant.
The default-license problem
A new employee joins, so someone assigns the standard company package.
That is reasonable. The problem starts when the same package becomes the default for everyone:
Office-based employees
Frontline workers
Contractors
Shared-device users
Employees who only need email
Users who require one specific security feature
They do not necessarily need the same services. Yet many organizations keep most users on E3 or E5 because reviewing individual requirements takes time.
The difference may look insignificant for one account. Across hundreds or thousands of users, it becomes a serious annual cost.
Licenses survive longer than users
Offboarding is another common source of waste.
Disabling an account does not automatically mean that every paid subscription associated with it has been removed or reduced. Licenses may remain assigned to inactive users, test accounts, former contractors or accounts retained for administrative reasons.
Nobody intentionally approves this expense. It simply becomes part of the next renewal.
A useful review should therefore compare:
Active employees
Enabled accounts
Recently active users
Assigned licenses
Actual service requirements
These numbers are often surprisingly different.
Add-ons make comparisons difficult.
Two Microsoft 365 offers may use the same base product name and still have very different total costs.
Teams Phone, Copilot, security products, compliance features and other add-ons can significantly change the annual cost per user. Billing frequency, commitment period, currency and partner conditions matter as well.
This is why comparing only the headline price is rarely enough.
Before comparing two offers, normalize them:
Use the exact same SKU.
Confirm whether Teams is included.
Compare the same commitment and billing period.
Include every required add-on.
Use one currency.
Calculate the complete annual cost.
Otherwise, the cheaper-looking offer may simply contain less.
Start with roles, not product names
The cleanest licensing model begins with a small number of real user profiles.
For example:
Knowledge workers
Security-sensitive employees
Frontline workers
Email-only users
Contractors
Shared-device users
Define what each group actually needs before choosing the corresponding license.
This is usually more effective than reviewing users one by one, and more accurate than assigning one package to the entire organization.
Review before the renewal window
The worst time to discover licensing waste is after an annual commitment has renewed.
A practical review should start early enough to identify inactive accounts, unnecessary add-ons and users assigned to an unsuitable plan. Procurement can then compare equivalent offers using the corrected configuration rather than last year’s invoice.
For a more detailed breakdown of the factors that influence Microsoft licensing prices, this article provides a useful overview:
What Determines Microsoft License Pricing?
The main lesson is straightforward: Microsoft 365 cost management is not primarily about finding one cheaper SKU. It is about maintaining a license structure that still reflects how people actually work.
That structure changes continuously. The licensing model should change with it.
