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Most mid-market Microsoft 365 tenants are paying for E5 features they will never use, or running E3 when their compliance requirements actually demand more. A practical audit you can run this quarter.
A Microsoft 365 E3 license costs around $36 per user per month. An E5 license costs around $57. For a 100-person company, the difference is roughly $25,000 per year. That is the same order of magnitude as a junior engineer’s annual salary, and most mid-market businesses we audit are leaving at least that much on the table in either direction.
Either they are paying for E5 and using none of the features that justify it, or they are paying for E3 with bolted-on add-ons that would have been cheaper bundled.
A licensing audit is the cheapest, fastest engagement we run. The math almost always pays back in the first month.
E5 for everyone when only a fraction need it. E5 is the right license for users who actually need Defender for Office 365 Plan 2, Defender for Endpoint Plan 2, advanced compliance, or analytics. It is the wrong license for the warehouse manager who only opens email and runs reports. The fix is mixed licensing: E5 for the security and compliance-sensitive roles, E3 or Business Premium for the rest.
Stand-alone Defender or Phone System on top of E5. E5 already includes both. We see tenants paying for E5 plus a separate Defender or Phone System plan because somebody added it without checking. Quick win.
Visio and Project desktop licenses for users who need Online. Visio Plan 1 (web-only) is around $5 per user per month. Visio Plan 2 (full desktop) is around $15. Most users do not need the desktop client. Same for Project: Plan 1 is half the cost of Plan 3, and the browser experience is what most casual users actually use.
Power Apps premium per-app instead of per-user. Power Apps licensing is confusing on purpose. If a user runs more than two custom apps, per-user licensing is cheaper. If a user runs one app rarely, per-app is cheaper. The wrong choice can double the cost without anyone noticing for a year.
Compliance requirements that need E5 but the tenant is on E3. If you have HIPAA, CMMC, FedRAMP, or any data-loss-prevention regime that auditors actually check, E5 is not optional. Specifically: Defender for Office 365 Plan 2, Purview Information Protection, advanced eDiscovery. Trying to bolt these onto E3 individually costs more and looks worse to auditors.
HIPAA without the right add-ons. Microsoft will sign a Business Associate Agreement for tenants on E3, E5, and Business Premium. They will not sign one for tenants without it. We have seen healthcare clients on Microsoft 365 Apps for Business plans that explicitly do not qualify.
Privileged access management without Entra ID P2. If your administrators are not using PIM (Privileged Identity Management) for just-in-time elevation, your auditors will ask why. P2 is included in E5, available as an add-on otherwise. Skipping it is a compliance gap.
Phone System per-user instead of bundled. If you have an E3 tenant and you are paying separately for Phone System, do the math: in many cases, upgrading the affected users to E5 costs less than E3 + standalone Phone System.
Pull the assignment data from the Microsoft 365 admin center: Users → Active Users → Export Users. You get a CSV with each user’s assigned licenses.
For each license type, ask:
If you find that more than a third of E5 holders show no E5-specific activity in 90 days, you have an over-spend problem. The cleanest fix is a downgrade at renewal.
A licensing audit is the kind of work where Microsoft Partners earn their keep. Microsoft’s licensing matrix changes quarterly, the discounts available through partners are not posted publicly, and the negotiation leverage at renewal is meaningfully different depending on contract structure.
If your tenant is over 100 seats, an outside review will almost always find more than the engagement costs. If it is under 25, you can probably do this yourself with a spreadsheet and an afternoon.
The pattern we see most often: a $40k licensing review that finds $80k of annual savings. The work is straightforward. It just rarely gets done because nobody owns it.
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