How do you know if your organisation is overpaying for Microsoft 365? More often than not, the answer is yes, and a Microsoft 365 licensing review will tell you by how much. A review compares what you are billed for against what your people actually use: the number of active accounts, the features each person touches, and whether anyone is on a premium tier they do not need.

The three questions that expose waste are simple:

• How many licences are assigned to leavers or inactive accounts?
• How many users are on a higher tier than their role requires?
• Which features are you paying for twice, because you bought a third-party tool that duplicates something already in your plan?

Answer those three honestly and the savings often show themselves before the review is finished.

Who This Is For

This guide is for IT Directors, IT Managers and Finance Directors in organisations with 50 to 300 users. You are the person who signs off the Microsoft renewal, or the person who has to justify it.

Licensing probably grew organically: a tier chosen years ago, licences added with each new starter, rarely removed when people left. Now next year’s budget is being set, and the Microsoft line is one of the few costs nobody has properly challenged.

The Problem: Licences Assigned to People Who Left Last Year

Most organisations pay for Microsoft 365 licences that nobody uses, and it happens quietly. Someone leaves, their mailbox is kept “just in case”, and the full licence stays attached to it for eighteen months. Licences are bought in bulk ahead of a hiring push that never fully happens. Someone upgraded the whole organisation to a higher tier for one feature that three people needed.

Finance sees a single consolidated invoice, IT sees a list of accounts, and nobody owns the gap between the two. The result is a renewal figure that climbs every year without anyone deciding to spend more.

If you would rather see the numbers than guess at them, book a free Microsoft licensing audit and we will show you where the waste sits.

What a Microsoft 365 Licensing Review Actually Involves

A Microsoft 365 licensing review is a structured comparison of entitlement against usage, carried out in your tenant with your data. At DMS, we run it in three stages.

1. Match every licence to a person. We pull the full licence inventory and match each assigned licence to an active, working person, flagging leavers, shared mailboxes and service accounts that are holding paid seats.
2. Analyse feature usage per user. We look at the previous 90 days of usage, which shows who genuinely needs a premium tier and who could move down without losing anything they use.
3. Map third-party tools against your plan. Paying separately for backup, device management or email filtering you already own is one of the most common forms of duplication in a mid-sized estate.

As a Microsoft CSP partner, we can put your licences on monthly or annual terms, or a mix of both. Monthly terms let you reduce seats at each monthly renewal, but cost around 20% more. Annual terms are cheaper but fix seat counts until renewal, which is why the review should happen before your renewal date, not after it. Our Microsoft 365 managed services page covers how that works in practice.

Business Premium vs E3 vs E5: Picking the Right Tier

Choosing between Business Premium, E3 and E5 is where most overspend starts, and Microsoft’s July 2026 price changes widened the gap between them.

Business Premium

Capped at 300 users and built for organisations of this size. It includes Intune for device management, Microsoft Defender for Business and Entra ID P1 for conditional access, which covers the security most 50 to 300 user organisations need. Its price was unchanged in July 2026, while E3 and E5 both rose.

Microsoft 365 E3

Removes the user cap and adds enterprise compliance, larger mailboxes and more advanced administration. New E3 and E5 subscriptions are also sold without Teams, which has to be licensed separately and adds to the real cost. For an organisation comfortably under 300 users, E3 is rarely the right default.

Microsoft 365 E5

Adds advanced threat protection, premium compliance tooling and security analytics, at a price to match. It earns its cost for specific security, legal or compliance roles rather than for a whole organisation.

The honest question is not “which tier is best” but “which features will this role use”. If you expect to pass 300 users, plan for it now: the usual route is to keep Business Premium for up to 300 users and add enterprise licences for the rest, rather than moving everyone up a tier.

Always verify current features and pricing with Microsoft before committing, as tiers change. Microsoft publishes a business plan comparison and an enterprise plans and pricing page covering E3 and E5.

Step by Step: How to Run Your Own Microsoft 365 Licence Audit

1. Export your licence inventory. In the Microsoft 365 admin centre, download the full list of assigned licences and the tier attached to each user.
2. Match licences to people. Cross-reference the export against your current HR headcount. Every licence attached to a leaver, a duplicate account or a dormant shared mailbox is immediate waste.
3. Review usage reports. The admin centre’s usage reports show who last used Exchange, Teams, SharePoint and the desktop apps. User names in these reports are hidden by default; a Global Admin can show them under Settings > Org settings > Reports. Anyone inactive for 90 days needs a decision, not a renewal.
4. Map features to roles. List the premium features your top tier includes, then identify which named individuals actually use them. Move everyone else to the tier that matches their use.
5. Check for duplication. Compare your third-party subscriptions against what your Microsoft plan already covers, especially security, backup and conferencing tools.
6. Set a quarterly review date. Licence waste regrows. A short quarterly check keeps the estate matched to the headcount.

What to Watch Out For

• Leaver mailboxes holding full licences. Convert them to shared mailboxes where they are under 50 GB with no archive or litigation hold. Otherwise, apply a retention policy so the mailbox is kept as an inactive mailbox before you remove the licence.
• Annual commitments on licences you may not need in six months. Monthly CSP terms give you room to flex, at a higher per-seat price. Use them where headcount genuinely moves, not across the board.
• Saving on Business Standard at the cost of security. Moving some users from Business Premium to Business Standard saves money, but those users lose conditional access, Intune and Defender for Business. Check that your security policies still cover everyone before you mix tiers.
• Downgrading users who rely on a premium feature you missed, such as conditional access or legal hold. Check usage before you cut.
• Education licensing is different. Schools and trusts use academic plans with their own tiers, pricing and eligibility rules, so do not benchmark them against commercial pricing. Our IT support team works with trusts on exactly this.
• One-size-fits-all tiers. Putting every member of staff on E3 or E5 is rarely the cheapest correct answer.

Quick Checklist

• Export your current licence inventory this week, before budget figures are locked.
• Reconcile licence count against HR headcount and remove leavers.
• Pull 90-day usage reports and flag inactive accounts.
• List every third-party tool and check whether Microsoft 365 already includes it.
• Identify which users genuinely need enterprise-tier features.
• Confirm whether your licences are on annual or monthly CSP terms, and when they renew.
• Check your headcount plans against the 300-user Business Premium cap.
• Verify current Microsoft pricing and tier features before making changes.
• Diarise a quarterly licence review so the waste does not creep back.

Frequently Asked Questions

How often should we review our Microsoft 365 licences?

Review licences quarterly, with a deeper audit before each renewal and during annual budget planning. In a 50 to 300 user organisation, starters, leavers and role changes happen most months, so an annual check alone lets waste build up. A short quarterly reconciliation against HR records catches most of it early.

What is the difference between Business Premium and E3?

Business Premium is capped at 300 users and includes core apps, device management, conditional access and Defender for Business. E3 removes the cap and adds enterprise compliance, larger mailboxes and more advanced administration, but costs more and is now sold without Teams. For most organisations under 300 users, Business Premium covers the real requirement.

Can we reduce Microsoft 365 costs without losing features staff rely on?

Yes, because most savings come from removing unused licences and correcting over-tiered users, not from cutting features anyone touches. Usage reports show exactly what each person uses, so changes are evidence-based. A well-run review should be invisible to end users.

What does a free Microsoft licensing audit involve and is there any obligation?

A free audit reviews your licence inventory, usage data and third-party tool overlap, then presents the findings as a clear savings report. It typically needs read-only access and a short conversation about roles and plans. There is no obligation to act on it or to move your licensing to us.

Do multi-academy trusts have different Microsoft 365 licensing options?

Yes, education tenants have access to academic licensing tiers with different pricing, eligibility rules and feature bundles from commercial plans. Trusts centralising IT across schools often inherit a mix of plans that were never rationalised. A central review across all schools usually finds both duplication and inconsistent tiers.

Look Before You Sign

Your renewal date will arrive whether or not you have looked at the numbers. If you renew as-is, you lock in another year of paying for leavers, dormant accounts and tiers nobody needed, and on annual terms you cannot reduce those seats until the following renewal.

If you review first, the decision becomes deliberate: the right tier for each role, licences matched to real headcount, and a Microsoft line in next year’s budget you can defend in one sentence. The data to make that choice already sits in your tenant. The only question is whether you look at it before you sign.

Request your free Microsoft licensing audit and get a clear, evidence-based savings report before your renewal lands.

Prefer to start on your own? Work through the six-step audit above, and our IT support team can pick it up with you at any point.