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6 min read

Unlock Savings: Mastering Microsoft Licensing Costs

Unlock Savings: Mastering Microsoft Licensing Costs

In today’s digital landscape, Microsoft products have become an important part of businesses around the world. Office 365, for example, is leveraged by over 1 million companies worldwide, with around 146,000 in the U.S. alone. Also, nearly 56% of businesses worldwide rely on Microsoft Azure for cloud services. 

But as organizations grow and expand their digital footprint, they often face the challenge of managing the costs associated with Microsoft licensing. 

Microsoft licensing can be complex, with various options, plans, and models to navigate. As a result, organizations may need help to strike the right balance between meeting their unique software needs and controlling expenditures.  

Saving costs on Microsoft licensing is more than finding the cheapest options available - it’s about making well-informed decisions, aligning your licensing strategy with organizational goals, and optimizing software usage. 

Whether you’re a small business looking to scale up efficiently, or a large enterprise seeking to streamline licensing across multiple departments. Explore a range of effective practices and strategies to enhance the value of your Microsoft investments while reducing licensing expenses.

Why Microsoft Licensing Costs Can Strain IT Budgets 

Within the scope of organizational IT budgets, one challenge looms tall: the intricate landscape of Microsoft licensing. It can be a formidable hurdle, even for the most seasoned IT professionals.  

Microsoft licensing is usually one of the most expensive line items in an organization’s IT budgets due to:  

  • Product breadth: The comprehensive product suite, ranging from endpoint management tools like Intune to collaboration platforms like Sharepoint, and their associated licensing costs can quickly add up. This is particularly true for organizations that require multiple Microsoft solutions to meet their business needs.  
  • Licensing complexity: Microsoft licensing can be complex, with numerous models, editions, and versions at any given time. Understanding the nuances of each licensing option and choosing the appropriate one for specific user scenarios and organizational requirements is difficult. Potential pitfalls can ensue, such as inadvertently purchasing licenses that exceed actual usage or failing to optimize licensing configurations for cost savings. 
  • User-based licensing: Microsoft’s primarily user-based licensing model means licensing is tied to individual users instead of devices. This enables users to access products and services from multiple devices, but it also requires the purchasing of licenses for every user who needs access.  As workforces grow, the user licenses necessary can escalate, contributing to higher licensing costs. 
  • Software Assurance: Microsoft’s Software Assurance program, which offers benefits like free version upgrades and License Mobility, typically comes bundled with licensing agreements, adding to the overall licensing costs. Additionally, if an organization opts to add Microsoft Unified Support in order to get better support and faster response times than what Microsoft O365 support can provide, the cost can be substantial and will increase annually as the organization adds more licenses.  
  • Compliance and audits: Microsoft is vigilant about license compliance and regularly conducts audits to ensure organizations use their software within the terms of the licensing agreements. To mitigate compliance risks, organizations may feel compelled to invest in additional licenses or opt for more expensive licensing options, further driving up costs. 
  • Enterprise-level features and integration: Microsoft’s enterprise-level products frequently come with advanced features and seamless integration capabilities to accommodate the needs of larger organizations. But this often equals a premium price point compared to more basic versions. 

Top Tips to Save Money on Microsoft Licensing 

As you can see, it’s easy to get lost in the complexity of Microsoft licensing. But with these tips, you can transform your licensing approach and minimize the likelihood of wasted resources. 

Optimize user profiles 

By optimizing user profiles, organizations can ensure that the proper Microsoft licenses are in place per user. This involves analyzing and adjusting user licensing configurations to match software usage and business needs, eliminating unnecessary expenses associated with over-licensing or under-licensing. Profiling users also usually results in more cost savings than negotiating prices. 

  • Pinpoint shared, licensed mailboxes: Shared mailboxes don’t need a license if the users accessing are licensed for Exchange Online, unless the size of the mailbox surpasses 50 GB or it needs to be placed on litigation hold. 
  • Purchase licenses specific to employee roles: Instead of obtaining general licenses that cover a wide range of products and features, procure licenses that align with the software needs of different employee positions and responsibilities. For example, certain employees may need Word, Powerpoint, and Excel, while others require only Office for the web. Utilizing role-based access control (RBAC) to assign permissions according to predefined responsibilities can mitigate the potential for excessive privileges.  
  • Organize Microsoft Office 365 users and permissions: Organizing M365 users is time-intensive but crucial in ensuring licenses are allocated appropriately. This approach involves categorizing users based on their roles, departments, or teams; evaluating license assignments and identifying users with licenses for products or features they don’t require; analyzing access rights; and conducting periodic audits to review and update user profiles and permissions. For example, C-Suite executives may need E5 licenses for the additional security features. 

Deduplicate licenses 

Deduplicating licenses help eliminate redundancies, ensuring that organizations aren’t paying for the same licenses multiple times. For example, a Office 365 subscription might be unintentionally repurchased because of a lack of internal communication, insufficient license monitoring, or renewal overlap. 

  • Conduct a license inventory: Performing a thorough inventory of all Microsoft licenses within the organization can help identify discrepancies and determine if duplicate licenses can be deactivated or consolidated due to low usage. This might involve redistributing licenses to other users or departments, or candling redundant licenses.  
  • Maintain updated license records: Establishing processes to maintain accurate and current license records, including tracking licensing assignments, changes in user roles, and ensuring proper documentation of licensing agreements, can help prevent the potential for future duplicate licenses.  

Harvest unused licenses 

By regularly assessing and reclaiming unused licenses that aren’t being leveraged effectively, organizations can streamline license management and improve license allocation to reduce expenses. This can also enable businesses to better plan for future licensing requirements. 

  • Identify license usage: Organizations can bring visibility into license usage by producing a license usage report that includes all Microsoft 365 users and their associated licenses. 
  • Withdraw licenses from former employees: Many companies disable the accounts of former employees, but this doesn’t actually withdraw the license from these users. Disabled users with active licenses should be identified via the step above so the license can be removed. 
  • Locate and eliminate licenses from inactive users: In the instance where it’s difficult to find and withdraw licenses from former employees or inactive users, they can still be identified by their last active or last logon date. Accounts that have been inactive for over 90 days are a typically good indicator that the account is connected to a user that doesn’t require a subscription or is no longer with the organization. The associated license can confidently be removed in either circumstance.
  • Recover licenses from deleted users: Organizations can repurpose licenses from deleted users to new users who are currently being onboarded, which mitigates the need to buy additional licenses.  
  • Create a licensing management process for employee exits: Have a licensing management process in place for employees who have already exited or will exit the organization. Establish a standardized procedure that includes timely communication between HR and IT departments, ensuring licenses are promptly revoked or transferred when an employee leaves. Also, maintain an updated record of license agreements, and leverage license management tools to streamline the process. 

Assign licenses using group-based licensing 

Group-based licensing involves assigning licenses to users based on their group membership within Azure Active Directory (AAD). It also allows administrators to define groups, like departments, and allot specific licenses to those groups. Users who become members of a particular group automatically inherit the assigned licenses.

In order to take advantage of group-based licensing however, you need to have the requisite licenses for every user, including a subscription Azure AD Premium Plan 1 or Plan 2, or Microsoft 365 Business Premium, Office 365 E3, or higher plan. Furthermore, you need to have the correct amount of licenses for the number of users per group, like 500 licenses for 500 unique group members. 

This approach can greatly simplify license management and provides flexibility and scalability because users can easily be added or removed from groups to adjust license assignments - which is particularly useful in dynamic environments where user roles and license requirements frequently change.  

Ensure your organization is in the right licensing program 

Many organizations are switching from Microsoft Enterprise Agreement (EA) to Microsoft New Commerce Experience (NCE) because of how increasingly difficult it’s becoming to negotiate EA discounts, among other reasons 

NCE enables companies to purchase and renew their licenses through a Microsoft Cloud Solution Provider (CSP), which opens up numerous benefits: access to improved pricing,  value-added services like Licensing Assessments, and the ability to obtain the best possible Office 365 subscriptions within the right NCE term. 

How to Create an Actionable Microsoft Licensing Strategy 

Unfortunately, there’s no magic button for determining which Microsoft subscription best matches your organization’s needs and objectives.  

But the right expertise can shed light on different licensing models, avoid potential roadblocks, and help you make educated decisions to effectively optimize your licensing and unlock substantial cost savings. 

Our goal at CloudServus is to simplify licensing options, familiarize ourselves with your business, and ultimately customize a licensing strategy for you. As a triple Gold Microsoft partner and industry-leading Cloud Solution Provider (CSP), our team is highly experienced in working with organizations across all industries to achieve the ideal balance between functionality and cost-effectiveness through a personalized Microsoft licensing strategy. 

For example, Our Microsoft Licensing Assessment is a popular service that: 

  • Evaluates your licensing landscape, including programs, SKUs and pricing.  
  • Provides definitive insights into your existing licensing approach. 
  • Identifies opportunities for optimization to help you improve the cost-effectiveness and impact of your licensing throughout your Microsoft environment.  

Our team is also experienced in helping organizations review their Office 365 reports and Microsoft License Statements (MLS), transforming intricate data into straightforward information. We frequently hear from our clients how challenging this process is and understand how frustrating it can be to make sense of this data. That’s why organizations entrust us to untangle the clutter 

We offer a no-pressure complimentary consultation with our licensing experts so we can discover exactly how we can best empower you to take control of your licensing.  

Contact us at CloudServus to start optimizing the licensing across your Microsoft ecosystem and enjoy greater cost savings.  

free microsoft licensing assessment

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