Microsoft 365 licensing is confusing on purpose. More confused you are, more likely you’ll just buy the expensive licenses for everyone.
Client was paying for Business Premium licenses for forty people. Twenty-two dollars per person per month. Seemed reasonable until we looked at how they actually use the software.
Fifteen of those people only used email and calendar. Didn’t need SharePoint, advanced Teams features, Power Platform, or any of the other stuff in Business Premium.
Moved them to Exchange Online licenses at four dollars each. Saved two-seventy a month. Over three thousand a year.
Same email functionality. Full features for people who actually needed them.
Nobody had bothered to look at how they actually worked.
Why Most Businesses Overpay
The “Keep It Simple” Trap
Most IT companies take the easy route. Business Premium for everyone. Simpler to manage, easier to bill, covers everything anyone might need.
Problem is, not everyone needs everything. And you’re paying for features that never get used.
Microsoft’s Pricing Games
Microsoft makes more money when you buy expensive licenses. So they structure pricing to make premium licenses seem like better value.
Business Basic at six dollars seems expensive when Business Standard is only twelve-fifty. Premium at twenty-two is barely more than Standard, so why not get premium features?
Because you probably don’t use most of those features.
Set It and Forget It
Most businesses buy licenses once and never revisit the decision. People’s roles change. Software needs change. Licenses stay the same.
We regularly find businesses paying for advanced features nobody uses, or licenses for people who left months ago.
What You Actually Get
Microsoft licensing is deliberately confusing. Here’s what the common plans include:
Business Basic (six dollars) Web versions of Office apps, email and calendar, basic OneDrive storage, basic Teams and SharePoint.
Good for people who mainly use email and don’t need desktop applications.
Business Standard (twelve-fifty) Everything in Basic plus desktop Office apps, more OneDrive storage, more advanced Teams features.
Good for people who need full Office but don’t need advanced security or compliance features.
Business Premium (twenty-two dollars) Everything in Standard plus advanced security, device management, compliance tools, advanced analytics.
Good for businesses that need enhanced security and compliance.
Real-World Usage Patterns
Customer Service Teams
Most customer service people only need email, calendar, maybe basic Teams chat. Don’t need desktop Office apps, advanced SharePoint, or compliance tools.
Business Basic works fine for most customer service roles.
Administrative Staff
Office managers, receptionists, administrative roles often need email and basic Office but not advanced features.
Business Standard usually covers what they need.
Power Users
Sales managers, project managers, executives who need advanced features like Power BI, security controls, compliance tools.
These are the people who actually benefit from Business Premium.
Paying for Microsoft 365 features your team never uses? Most businesses can save money with smarter licensing.
Part-Time Workers
Do seasonal employees or part-time contractors really need full Microsoft 365? Sometimes Exchange Online for email only makes more sense.
Common Licensing Mistakes
Everyone Gets the Same Thing
Easiest for IT management, usually most expensive. Different roles have different needs.
Paying for Inactive Users
We regularly find businesses paying for licenses for people who left months ago, or generic accounts nobody uses.
Over-Licensing for Security
Business Premium includes advanced security, but you might get better security with Standard licenses plus dedicated security tools that cost less.
Under-Licensing for Compliance
If you need compliance features, trying to save money with Basic licenses can create problems. Sometimes the expensive license is necessary.
Smarter Licensing Strategies
Match Licenses to Job Functions
Base decisions on what people actually do, not organizational charts. Job titles don’t determine software needs.
Regular License Reviews
Check licensing every six months. Who’s using what features? Remove licenses for people who left. Optimize based on actual usage.
Hybrid Approach
Most businesses benefit from mix of license types. Core users get Standard or Premium. Light users get Basic or Exchange-only.
Usage Analysis
Microsoft provides reports showing which features people actually use. Base licensing decisions on real data, not assumptions.
Industry Considerations
Professional Services
Lawyers, accountants, consultants often need advanced compliance and security. Under-licensing can create liability issues.
Manufacturing
Office workers need different licenses than shop floor supervisors. Don’t pay for Office apps for people who only need email on mobile.
Healthcare
HIPAA compliance may require specific security features only in higher-tier licenses. Saving money on licensing can cost more in compliance problems.
Working With Your IT Provider
Demand Regular Reviews
IT provider should regularly review licensing and suggest optimizations. If they’re not doing this, ask for it.
Understand Their Incentives
Some IT providers make money on license sales. Make sure recommendations align with your needs, not their revenue.
Get Usage Reports
Microsoft provides detailed analytics. IT provider should show you who’s using what features and make recommendations based on actual data.
The Real Calculation
Most businesses can save twenty to forty percent on Microsoft 365 costs with smarter licensing. Not by cutting features people need, but by matching licenses to actual usage.
Key is understanding what people actually do with the software, not what they might theoretically need.
Start with usage analysis. Look at actual data. Match license types to job functions. Review regularly as business changes.
Your IT provider should help with this, not just sell you expensive licenses because they’re easier to manage.
Microsoft 365 is powerful, but you shouldn’t pay for power you’re not using.
