Microsoft 365 licensing without the guesswork: a guide
Microsoft 365 licensing has a reputation for being confusing, and prices change from time to time. Here is how to make sense of it, and how to stop paying for things you do not use.
The main families
Microsoft sells several plan families. The names and bundles shift over time, so check Microsoft’s current pricing page, but the pattern is stable.
Microsoft 365 Business plans are aimed at small and medium organisations. They have a cap of 300 users per tenant. Broadly:
- Business Basic: web and mobile versions of the apps, email, Teams and cloud storage
- Business Standard: adds the desktop apps
- Business Premium: adds advanced security and device management features, such as Microsoft Defender for Business and Intune
Microsoft 365 Enterprise plans (E3, E5) have no user cap and add more compliance, security and analytics tools. These suit larger or more regulated organisations.
Frontline plans (F1, F3) are for staff who do not sit at a desk, such as shop floor or warehouse teams.
Add-ons such as Copilot, Power BI Pro or extra security tools are charged on top.
Which plan do you need?
Start with the people, not the plan.
- List your groups. Office-based staff, field staff, shared-device users, contractors, executives.
- Decide what each group does. Do they need the desktop apps? Do they handle sensitive data? Do they need advanced security?
- Match the cheapest plan that does the job. You can mix plans in one tenant. Not everyone needs the same licence.
For many businesses of 30 to 300 people, Business Premium is a sensible default because it bundles security features you would otherwise buy separately. Above 300 users, you will need Enterprise plans for at least part of your staff.
Billing and commitment
Microsoft usually offers monthly or annual commitments, and either monthly or annual billing. Paying monthly on an annual commitment generally costs a little more than paying annually upfront. Monthly commitments offer the most flexibility but cost more per user.
Think about how stable your headcount is. If it jumps around, flexibility may be worth the premium. If it is steady, an annual commitment is usually cheaper.
Read the terms for removing licences too. Some commitments only let you reduce numbers at renewal.
Where money leaks
Leavers. Accounts that stay licensed after someone leaves are the most common waste. Build licence removal into your leaver process.
Over-specifying. Giving everyone a premium plan when half the team needs only email and Teams.
Shared mailboxes and room mailboxes. Shared mailboxes under 50 GB do not need a licence in most cases, but check the current rules before you remove any.
Duplicate tools. Paying for a separate endpoint security, backup or conferencing tool when your plan already includes a capable alternative.
Unused add-ons. Review who is actually using Copilot or other paid extras.
Price changes
Microsoft has raised prices and re-bundled features several times, and sends notices to administrators. Make sure the right person receives those emails, and review your plan every year, ideally before renewal. add the latest Microsoft 365 price-change details and effective dates, checked against Microsoft’s announcements at the time of publishing
Look after the licences you have
A partner who manages your licences can review usage, remove waste and tell you early when a change is coming. As a Microsoft Partner, we manage licences for our customers as part of our managed IT services, including selecting the right subscriptions and handling migration and configuration.
Licences and security go together
Which plan you hold affects what security tools you can use, from conditional access to phishing simulation. Before you buy separate products, check what is already included. For example, some plans include endpoint protection that goes beyond basic antivirus, which we explain in EDR vs antivirus. Our cyber security services page shows how these tools fit together.
Quick checklist
- Do we know how many licences we pay for and how many are in use?
- Is anyone licensed who has left?
- Are we on the right plan for each group?
- Do we know our renewal date and commitment terms?
- Who receives Microsoft’s price notices?
If the answer to any of these is “not sure”, we can help. Talk to us about managed IT.
