Understanding & Optimizing Microsoft 365 Licensing

Most businesses have made the transition to Microsoft/Office 365 licensing for things like email and the Office suite of products. They’ve done this because the subscription model is simple to purchase and manage compared to traditional volume licensing. It has the significant advantage of keeping all staff on the same up-to-date version of the software. Now they need to Optimize Microsoft Licensing! There are so many choices now, and it can be easy to buy the wrong offering or not take advantage of what you have purchased. We’ll explain it below and offer a free Microsoft licensing audit if you think you could use it.

Name Change?

To get this out of the way – the name of several product suites changed as of April 21. This name change has impacted the business suites (plans with 300 or fewer licenses) and desktop applications. Here’s a summary:

Office 365 Business EssentialsMicrosoft 365 Business BasicEmail, Teams, Web versions of Office, OneDrive$5.00
Office 365 Business PremiumMicrosoft 365 Business StandardAbove + Client version of Office$12.50
Microsoft 365 BusinessMicrosoft 365 Business PremiumAbove + Win 10, Intune, ATP, email encryption, security/compliance features$20
Office 365 BusinessMicrosoft 365 Apps for BusinessOffice Client, OneDrive$8.25
Office 365 ProPlusMicrosoft 365 Apps for EnterpriseAbove + Enterprise deployment features for Office$12.00

What’s Included in Microsoft 365

Online services make up the bulk of Microsoft 365 services and fall into the following categories:

  • Exchange Online (email & calendar)
  • OneDrive and SharePoint (file storage and collaboration/intranet)
  • Online Applications (web-based versions of traditional Office applications, including Word, Excel, PowerPoint as well as Visio and Project)
  • Teams (chat and meetings, formerly known as Skype for Business, also now phone system offerings)
  • Enhanced Security & Compliance (basic level is part of the above)
  • Other – Microsoft offers many other services – Power BI for business analytics, Bookings, which allows customers to schedule and manage appointments, and MileIQ, a mileage-tracking service are a few.

Desktop applications are also part of Office 365, referred to as Apps. These include Word, Excel, PowerPoint, etc. and desktop versions of Visio, Project, PowerBI, etc. You can install these on up to 5 devices per user, such as work desktop, home desktop, laptop, iPad, etc.

Optimizing Microsoft 365 for Your Organization

Microsoft has plans for small/medium businesses, enterprises, and non-profits. There are also plans for home/family and education, but we won’t address those here. Small/medium offerings have a limit of 300 licenses. “Enterprise” can be an organization that needs more than 300 licenses from any single plan. Or one that wants enterprise features. Non-profits have to be qualified by Microsoft – if you qualify, it is a great deal. Microsoft also has an excellent website that includes descriptions of all the Microsoft 365 suites and the features included.

Small/Medium Business Suites

Most small/medium businesses have traditionally used Office 365 Business Premium, now Microsoft 365 Business Standard. Business Standard wraps email, desktop apps (Word, Excel, Outlook, PowerPoint, etc.), OneDrive, SharePoint, and Teams and a host of other services. Over time, we’ve seen these businesses add other services. These added services include (ATP – Advanced Threat Protection, Email Encryption, and others), while others find they need Azure AD Premium. As you add up the cost of these other services, Microsoft 365 Business Premium makes more sense. And Microsoft is now rolling Azure AD Premium P1 and Intune into Microsoft 365 Business Premium.  That is making it a clear winner for these organizations. 

Microsoft 365 Business Standard$12.50
Email Encryption$2.00
Azure AD Premium Plan 1$6.00
Intune (device management)$6.00
Compare to the suite below with all of the same features:
Microsoft 365 Business Premium $20.00

Enterprise Suites

The Office 365 E3 suite dominates enterprise Plans. The E3 suite includes email, desktop apps, OneDrive, SharePoint and Teams, email encryption, archiving/compliance, a larger mailbox, and other services all tailored toward larger enterprises. As clients add services such as ATP, Azure AD Premium, Windows 10 licensing, and more, Microsoft 365 E3 begins to make sense. (Yes, the terminology is confusing!) And if you want to include the phone system and some of the advanced security features included in EMS E5, Microsoft 365 E5 becomes attractive.

E3: Office 365/Microsoft 365/User/Month **E5: OFFICE 365/MICROSOFT 365/USER/MONTH
Office 365 E3$20.00Office 365 E5$35.00
ATP$2.00EMS E5$14.80
EMS E3$8.74Power BI Pro$9.99
Windows 10 Pro Upgrade or Windows 10 Enterprise$7.00Windows 10 Pro Upgrade or Windows 10 Enterprise$7.00
Compare to the suite below with all of the above features:Compare to the suite below with all of the above features:
Microsoft 365 E3$32.00Microsoft 365 E5$57.00

Frontline Worker Suites

Microsoft also offers suites tailored to Firstline Workers, which are deskless workers – factory staff, retail, and drivers. These suites are evolving and focus on web-based versions of the various services. A full-fledged version of Teams is also now included.

Mobility & Security Suites

Microsoft packages the Enterprise Mobility + Security suites (EMS) as add-ons to the Office 365 suites. These can be added individually to almost any licensing, and are part of the following Office Suites:

  • This is the first option: Office 365 E3 + EMS E3 + (other services) = Microsoft E3
  • And this is the second option: Office 365 E5 + EMS E5 + (other services) = Microsoft E5

Microsoft 365 Products


This is where Office 365 started, way back in 2008 with BPOS (Business Productivity Online Services), which then became Office 365 in 2011. Email comes in three basic flavors:

  • (50 GB Mailbox) Exchange Online Plan 1 
  • (100 GB Mailbox, unlimited storage via archiving and compliance) Exchange Online Plan 2 
  • (generally limited to 2 GB mailbox) Exchange Online Web Only 

Included with email are email filtering, distribution groups, shared mailboxes, and calendaring.

File Storage & Collaboration – OneDrive for Business and SharePoint

You can purchase OneDrive on a standalone basis, but it often comes as part of a suite. The default storage is 1 TB, but depending on the plan and the number of users, this space can grow to more than 5 TB. Your administrator manages your OneDrive for Business and will allow you to share files with coworkers and individuals outside your organization with appropriate security.

Teams has evolved from Skype for Business and is Microsoft’s hub for online meetings, chat, and voice. You can’t purchase it alone, but it comes with most suites. Microsoft is investing in Teams as businesses become more geographically dispersed. There are add-ons to Teams that provide dial-in audio conferencing and a phone system.

Desktop Applications (Word, Excel, Outlook, PowerPoint, etc.)

For almost 30 years, Microsoft Office has meant Word, Excel, Outlook, etc. Until several years ago, those were perpetual software – you bought it and owned it forever, with no updates unless you paid for them. These applications can either be on your desktop/laptop/tablet/phone, or in the cloud – online applications. The desktop versions can be bought alone but are most often come with the suites. When you purchase applications as part of Office 365, they are updated continuously, so there is never a need again to upgrade versions of Office. You will see changes in the interface but on a more gradual basis.

  • First, consider Microsoft 365 Apps for Business – the desktop version of the Office Client (Word, Excel, PowerPoint, Outlook, OneNote, Access and Publisher, and 1 TB OneDrive for Business.)
  • Then take a look at Microsoft 365 Apps for Enterprise – plus Enterprise deployment features for Office.

You can also purchase applications such as Visio, Project, and PowerBI via Office 365.

Optimizing Microsoft 365 Licensing

So, now that you’ve lived through a fairly exhaustive explanation of Microsoft licensing pieces, how do you make sure you are not either paying too much or using too little? The most common mistakes we see are:

  • Duplicating licensing – for example, assigning a Microsoft 365 Business Standard license and an Exchange Online license – the user would be double licensed for Exchange.
  • Buying standalone services when a suite would be either the same price or less – for example, buying Exchange Online and Office 365 ProPlus when Microsoft 365 Business Standard would provide a good feature set for 99% of users.
  • Unused licenses for legacy accounts. We see users who are long gone but still have licensing, and most of these could be shared mailboxes, which are free. Even the accounts that still need to receive and send email can be downgraded to Exchange Only.
  • Assigning suites but not using the features. We see resource mailboxes or field staff without computers (info@CompanyABC) with Microsoft 365 Business Standard licenses – neither of these can use the desktop application license, which is the most expensive part of the suite. We also see staff who could use these capabilities but are unaware that they have then.
  • You may be paying for services such as Zoom or DropBox when Teams or OneDrive would work just as well. Of course, it may be that these services are so entrenched in your business processes that you don’t want to change, but it does make sense for some.

We hope this is helpful, and if you would like to review your Microsoft licensing in detail, please fill out the form below, and we’d be glad to do an evaluation and provide our recommendations.


Microsoft Licensing Audit – Contact Us