Microsoft 365 Licensing Tricks (2025): how to optimize costs without losing capabilities
This guide calmly expands on and explains the real-world patterns to save on Microsoft 365: what problem they solve, how they work under Microsoft’s contract, how to implement them step by step, what compliance controls you need, and which pitfalls to avoid. We cover Entra ID (P1/P2), Defender, Teams/Phone/Rooms, Exchange/OneDrive/SharePoint, Purview, and Power BI/Fabric. The idea is not to “cheat”: it’s to pay only for what you use while staying compliant with licensing rules.
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Before you start: how to save without violating terms
Problem solved: many popular “shortcuts” violate the contract (e.g., enabling a premium feature for everyone with just one license). The goal is optimize, not expose yourself.
What it is: Microsoft requires licensing every user who benefits from a feature. If a feature is configured at the tenant level (Purview, Auditing, DLP…), you must scope it so it only affects users with the correct license.
How it works in practice: design your policies (DLP, CA, MDO, eDiscovery…) targeted at specific groups and underpin those directives with group-based license assignment. Document “who/which users benefit.”
Common mistakes: assuming “if the portal lets me turn it on, it’s allowed,” or mixing licensed and unlicensed users under the same policy.
1) “Tenant-wide” services scoped correctly: apply only to licensed users
Problem solved: overpaying by extending premium features across the whole org—or worse, creating non-compliance exposure.
What it is: many solutions (e.g., Audit Premium, eDiscovery (Premium), Insider Risk, Communication Compliance) used to be toggled “for the entire tenant.” Today, they must be limited to the people/groups who are entitled (licensed).
How to implement:
- Define “Licensed-Feature-X” groups.
- Assign the appropriate licenses to those groups.
- Target policies/retention/alerts only to those groups.
- Keep evidence (screenshots, policy exports, member lists).
Success indicators: # of users who truly benefit ≈ # of users licensed, and internal audits with no findings.
2) E3 + add-ons (E5 Security/Compliance) for critical cohorts
Problem solved: “E5 for everyone” is usually unnecessary and expensive.
What it is: standardize on M365 E3 (productivity + security baseline) and add E5 Security where you need XDR, privileged identity management, or advanced protection; add E5 Compliance where you need eDiscovery/Audit/Insider Risk.
How to implement:
- Segment cohorts: Legal/Finance/Admins/VIPs vs. everyone else.
- Assign E3 as the standard; add E5 Security/E5 Compliance only to critical cohorts.
- Align policies (DLP, Auditing, PIM) with those groups.
Common mistakes: giving E5 to people who use nothing advanced, or forgetting that add-ons require policies that only affect licensed users.
3) Entra ID P1/P2: segment Conditional Access and PIM by groups
Problem solved: paying for P1/P2 across the entire workforce when only part of it needs those capabilities.
What it is: P1 enables Conditional Access, and P2 adds Privileged Identity Management (PIM) and advanced governance. The key is to target policies (CA, PIM) at licensed groups.
How to implement: create a “CA-Licensed” group and a “PIM-Licensed” group, assign P1/P2 via group-based licensing, and make policies apply only to those groups. Document each “policy ↔ licensed group” pair.
Guardrails: if a user without P1 falls within the scope of an advanced CA rule, they’d be “benefitting” without a license; avoid global scopes.
4) SMBs: Business Premium as “E3 + P1 + Defender” up to 300 users
Problem solved: duplicate security/management purchases in small/medium environments.
What it is: Business Premium bundles full Office apps, email, Intune, Defender for Business (endpoint), Defender for Office 365 P1, and Entra Conditional Access (P1), with a 300-user-per-plan limit.
How to implement: set BP as your base license; elevate to E3/E5 only for certain roles (e.g., advanced Purview, complex voice, or large-scale BI).
KPIs: endpoint incident rate, CA/Intune coverage, and cost per user vs. perceived value.
5) Defender for Office 365: protect and license only the mailboxes in scope
Problem solved: protecting all email at once and paying for unnecessary licenses.
What it is: MDO (Safe Links/Attachments, anti-phishing) is assigned through policies. Microsoft requires licensing every covered mailbox, including shared mailboxes if you protect them. Savings come from starting with higher-risk cohorts and expanding based on data.
How to implement: create “MDO-Protected” groups (VIPs, Finance, external-facing roles), design MDO policies targeting only those groups, and expand in waves according to telemetry (detections, clicks, blocked attachments).
Common mistakes: global, unsegmented policies, or leaving out shared mailboxes that are in fact protected.
6) “Without Teams” suites + Teams as a separate product: pay for Teams only where it’s used
Problem solved: paying for Teams for cohorts that don’t use it (or use a different tool).
What it is: Microsoft 365 and Office 365 suites exist both with and without Teams. You can purchase the “without Teams” suite for roles that don’t use it and add Teams as a separate product only for those who need it.
How to implement: extract a Teams usage report by area, classify profiles as “no Teams” vs. “collaborative,” and adjust your purchases at renewal. Also review telephony needs (see trick 7).
Typical benefit: immediate reductions for back-office/administrative users and cohorts with marginal meetings/chat usage.
7) Teams Rooms & shared devices: room/device licenses, not user licenses
Problem solved: wasting E1/E3/E5 on rooms and hallway phones.
What it is: rooms are licensed with Teams Rooms (Basic or Pro) and common endpoints with Teams Shared Devices/Common Area Phone. These are specific licenses and cheaper than user licenses.
How to implement: inventory rooms and devices, classify by complexity (huddle rooms vs. larger rooms), assign Rooms Basic to simple rooms and Rooms Pro where you need management, analytics, and advanced features. For reception/warehouse phones, use Shared Devices instead of user licenses.
Common mistakes: creating “fake” user accounts for rooms or phones and assigning E3.
8) Per-device licensing for shared workstations
Problem solved: shared workstations (front desk, shop floor, classrooms) where multiple users rotate on the same PC.
What it is: Microsoft 365 Apps for enterprise (device-based) lets you license the Office suite to the device instead of the user. Combined with Intune and restricted profiles, it simplifies and reduces cost.
How to implement: join the device to Entra ID/Intune, create a “Per-Device-Office” device group, assign the license, and deploy Office with device-based activation. Set session policies and profile cleanup.
Guardrails: validate that your scenario meets Microsoft’s defined “shared use” requirements.
9) Exchange Online Archiving: online archive for EXO Plan 1
Problem solved: mailboxes growing out of control, pushing you to “upgrade to E3/E5” just for size.
What it is: with Exchange Online Archiving (add-on) you enable an auto-expanding online archive for users on Exchange Online Plan 1. You get several hundred GB to multi-TB archiving without changing suites.
How to implement: buy the add-on only for those who need it (high-retention departments, heavy email users), enable the feature, and direct your archive rules there. Document which mailboxes have the add-on.
10) OneDrive up to 25 TB per user upon request
Problem solved: premature purchases of extra storage or external solutions when OneDrive can still scale.
What it is: OneDrive starts at 1 TB per user (expandable to 5 TB on many plans) and, meeting certain criteria, can be increased up to 25 TB per user via a support request to Microsoft.
How to implement: define thresholds (e.g., at 80% occupancy), standardize the request process, and pair it with lifecycle policies (see trick 16) so you don’t “keep everything forever.”
11) Power BI/Fabric: capacity for “many readers, few authors”
Problem solved: paying for hundreds or thousands of Pro licenses when most users only consume reports.
What it is: when publishing to a Microsoft Fabric capacity (pay-by-capacity model), Free users can consume content assigned to that capacity (depending on the chosen SKU/capability), keeping Pro/PPU only for those who create & publish.
How to implement: count authors vs. readers; if readers are the vast majority, evaluate Fabric capacity and move consumption workspaces into it; keep Pro/PPU for creators/editors.
Practical note: ensure the capacity SKU you choose enables your consumption pattern (minimum requirements can vary by region/date).
12) Departures: inactive mailboxes (retention without paying licenses)
Problem solved: continuing to pay for licenses for people who have left—just “in case” for legal reasons.
What it is: if you apply a retention policy/label or legal hold and deprovision the account, Exchange turns the mailbox into an inactive mailbox: content is preserved for the retention period without requiring a license.
How to implement: standardize your offboarding flow: (1) apply retention/hold, (2) verify, (3) delete the account, (4) store evidence for audit.
13) B2B Guests / External ID: external collaboration without M365 seats
Problem solved: assigning internal licenses to temporary partners/vendors.
What it is: B2B guests can collaborate (Teams, SharePoint, etc.) without a Microsoft 365 license in your tenant. If you apply advanced governance/identity to externals, billing typically goes by MAU (monthly active users) with a free tier at basic levels.
How to implement: link your tenant to an Azure subscription for MAU billing, define guest-specific policies (MFA/CA), and clearly separate the data/resources they can access.
14) Auto-claim & self-service blocking: fewer billing surprises
Problem solved: users activating trials or self-service purchases that blow up your budget.
What it is: with Auto-claim policies, if a user starts a service, they draw from the correct license “pool” automatically with no manual tickets. In parallel, block/limit unwanted self-service purchases and trials.
How to implement: define auto-claim per product (Power Apps/Automate, Visio, etc.), review the monthly report of automatic assignments, and disable unapproved trials from the admin center.
15) Group-based licensing + dynamic groups
Problem solved: “orphaned” licenses when someone changes role or leaves and nobody removes them.
What it is: assign licenses to groups (not individuals), and make those groups dynamic (auto-populated based on Entra attributes: department, country, cost center…). HR onboard/offboard → license on/off automatically.
How to implement: define your profile catalog (E3, E3+Security, E3+Compliance, BP, F3…), create dynamic groups for each profile, and assign licenses to the group; record the rules and owners.
16) OneDrive/SharePoint retention to contain storage
Problem solved: “keep everything forever,” which inflates costs and complicates compliance.
What it is: configure OneDrive retention upon user deletion (e.g., 180–365 days depending on country) and apply retention policies/labels in SharePoint/Teams to balance legal requirements and cost. The goal is to keep what’s necessary and dispose of the rest with defensible disposition.
How to implement: define your retention schedule by country/record series, create baseline policies (mail, sites, OneDrive), enable disposition review, and automate storage-consumption reports.
Frequently asked questions
Can I enable a premium feature tenant-wide with a single license?
No. You must license every user who benefits from the feature and scope policies so they affect only those users.
Does Business Premium remove the need to buy P1 separately?
Yes—it includes Conditional Access (P1), Intune, and Defender for Business, in addition to full Office. It’s ideal as a base up to 300 users per plan.
Can I reduce Power BI Pro licenses with Fabric?
If most of your people only read and you publish to a suitable Fabric capacity, you can keep Pro/PPU for authors and editors, and let readers consume within the capacity.
How do I preserve former employees’ email without paying for a license?
Apply retention or a legal hold, verify, and delete the account. The mailbox becomes “inactive” and is preserved for the configured period with no license.
How MSAdvance can help
Best-price sales & supply: as a partner, we can sell and supply Microsoft 365 licenses with discounts, official promos, and monthly or annual billing—prorated and broken down by cost center.
Optimization & compliance: we run a licensing health check, propose your optimal mix (E3 + add-ons, BP, Frontline, Teams separate, Fabric…), set up group-based licensing, auto-claim, and self-service blocks, and leave evidence for audits.
