7 Ways to Save on Microsoft Office 365 License Costs

Proven Strategies to Lower Your Microsoft 365 Licensing Expenses

Microsoft 365 with its phenomenal collaboration tools and seamless accessibility provides a profitable ROI. However, with the recent increase in the pricing of Microsoft 365 and “hidden costs” associated with data storage upgrades and add-on tools, the Total Cost of Ownership (TCO) can far exceed the original forecast. In this blog, tailored for admins, CSOs, MSPs, and business owners looking for ways to bring down the cost of Microsoft 365, we detail seven cost saving measures. Implement these proven pointers to reduce your Microsoft Office 365 license costs and increase your ROI..

How to Save on Microsoft (Office) 365 License Costs?

#1 Opt for Annual Billing

Opting for annual billing can be an excellent strategy to cut down on your Microsoft 365 license costs. Microsoft often provides significant discounts for customers who choose annual subscriptions over monthly ones. The cost savings over the year can be substantial, especially for businesses with a larger number of users. Here are the steps to switch to annual billing:

1. Visit the Microsoft 365 Admin Center: Log in to your Microsoft 365 admin center with your admin account.
2. Navigate to the Billing Section: On the left-hand navigation pane, click on ‘Billing’, and then on ‘Subscriptions’.
3. Select Your Subscription: In the subscription list, find the subscription you want to change to annual billing.
4. Switch to Annual Billing: Click on ‘Billing’, select ‘Change how you pay’, then choose ‘Annual’. Follow the prompts to confirm the changes.

Remember, this change will take effect at the start of your next billing cycle, and the entire annual amount will be charged upfront. Consider your organization’s cash flow and budgeting before making the switch. Plan ahead and opt for annual billing.

#2 Choose the Right Plan to Save on Microsoft 365 License Costs

Choosing the right Microsoft 365 plan for your business is another effective way to manage your license costs. Microsoft offers a variety of plans designed to meet the needs of different business sizes and sectors, each with its own price point and set of features. Understanding your organization’s needs and usage patterns is pivotal to selecting the most cost-effective plan. Here’s how to do it:

1. Assess Your Needs: The first step is to assess the needs of your organization. Determine which applications and features are essential for your daily operations. Also, bear in mind the growth plans and future needs of your business.
2. Compare Microsoft 365 Plans: Review the different Microsoft 365 plans available. Compare their features, limitations, and prices. Microsoft provides a detailed comparison chart that you can use for this purpose.
3. Choose the Right Plan: Based on your needs and comparison, choose the plan that best fits your organization. If you have a small team and do not require advanced features, a basic plan might suffice. On the other hand, larger businesses with complex needs might benefit from a more robust plan.
4. Periodic Review: Finally, your business needs might change over time. Therefore, it’s essential to periodically review your plan and make any necessary adjustments to ensure that it continues to align with your business needs.

Remember, the goal is not to find the cheapest plan but to find the most cost-effective one that fulfills your needs without incurring unnecessary costs.

#3 Monitor and Manage License Types

Regularly review your Office 365 licenses and usage. In particular, check on Power apps, higher-tier licenses, external users, and flows that require a premium license.

Power Apps

The usage of premium features in Power Apps necessitates a premium license. Always verify your app’s components and their corresponding licensing requirements before deployment. Here’s how to identify the situations in which a premium license would be required:

1. Premium Connectors: Power Apps comes with over 300 connectors, including commonly used ones like Excel, SharePoint, and Office 365. However, some connectors like Salesforce, Common Data Service, and SQL Server are considered premium and require a premium license to use.
2. On-Premises Data Gateway: If you’re using the On-Premises Data Gateway to connect your Power App to an on-premises database, this would require a premium license.
3. Common Data Service: Using Power Apps to create or run apps that are based on the Common Data Service or use premium entities would require a premium license.
4. Administrative Actions: Activities like creating environments, databases, and other administrative actions in Power Apps demand a premium license.

Power Automate (Microsoft Flow)

Just like Power Apps, there are certain situations in Microsoft Power Automate (previously known as Microsoft Flow) that require a premium license. Always review the components of your flows and the corresponding licensing requirements before implementing them. Here are some instances where a premium license would be necessary:

1. Premium Connectors: Similar to Power Apps, Power Automate comes with several connectors, but some are considered premium. Using premium connectors, like Salesforce or Common Data Service, requires a premium license.
2. On-premises Data Gateway: Connecting your flows to an on-premises database via the On-Premises Data Gateway necessitates a premium license.
3. Run Flows that Call Azure Logic Apps: Flows that call upon Azure Logic Apps need a premium license.
4. Running Flows with Admin Rights: If a flow is designed to run with administrative rights or to perform administrative actions, a premium license would be required.

Identify E5 License Users

Identifying and managing “over-licensed” users is another critical aspect of controlling your Microsoft 365 (M365) licensing costs. Over-licensed users are those who have been assigned more or higher-level licenses than they actually need. Here’s how to locate and manage these over-licensed users:

1. Audit License Usage: Start by using the Microsoft 365 admin center to conduct a comprehensive audit of license usage across your organization. This will help you identify users who have been assigned licenses but aren’t using them or aren’t using all the features they’re licensed for.
2. Analyze User Activity: Analyze user activity to identify any disconnects between the services users are licensed for and the services they are actually using. For instance, a user might have a license for Power BI Pro but only uses the basic features of Power BI.
3. Identify Over-Licensed Users: Based on your audit and user activity analysis, identify users who appear to be over-licensed. That is, those who have licenses or features beyond what they use or need.
4. Downgrade or Reassign Licenses: Once you identify over-licensed users, consider downgrading their licenses or reassigning unused licenses to other users. This ensures that you’re getting the most value out of your existing license pool.

Remember, managing over-licensed users is a continuous process. Regular audits and activity analysis are necessary to keep your licensing costs optimized.

Check on Licenses Assigned to External Users

Microsoft provides the ability to share resources with external users, also known as guests, in your Microsoft 365 environment. However, this could inadvertently lead to an increase in license costs. Here’s how to manage licenses for external users:

1. Identify Active External Users: Utilize the Azure Active Directory portal to identify active external users who have been assigned a license.
2. Evaluate Usage: Assess the resources and services these external users are utilizing. Determine if these users need the full suite of services, or if access to a limited set of services would suffice.
3. Assign Appropriate Licenses: Based on the above evaluation, assign licenses that cater to the needs of external users without providing unnecessary access to services. This could involve assigning a lesser, cheaper license that provides access only to the needed services.
4. Periodic Review: Regularly audit the active external users and the licenses assigned to them. This ensures that the licenses assigned to inactive external users can be reclaimed and reassigned as necessary.

#4 Monitor SharePoint Site collections storage size

Microsoft SharePoint provides a comprehensive solution to manage and share information within an organization. However, it’s crucial to be mindful of the storage limits of your SharePoint Site collections. Exceeding these limits can result in additional costs and potentially disrupt normal operation. Depending on your Microsoft 365 subscription, your storage capacity threshold will increase by default. To prevent this from happening, identify and address your 90% capacity alerts straight away and at scale.

To discover SharePoint Site collections nearing their storage limit, follow these steps:

1. Access the SharePoint admin center: Log in to your Microsoft 365 admin center, navigate to ‘Admin centers’ in the left navigation pane, and select ‘SharePoint’.
2. Go to Active Sites: In the SharePoint admin center, select ‘Active sites’ under the ‘Sites’ category.
3. Check Storage Metrics: Here, you’ll see a list of all your Site collections. To view the storage usage for each Site collection, click on ‘Storage used (MB)’. This will sort your Site collections according to the amount of storage they are using. Sites that are near their storage limit will appear at the top of the list.

By regularly monitoring your SharePoint Site collections, you can manage your storage effectively and avoid unexpected costs.

#5 Monitor OneDrive Site storage size to save on Office 365 license costs

In addition to your SharePoint sites, monitor your OneDrives with more than 100GB of data. This will stop you from entering the next tier. Here’s how to do it:

1. Access OneDrive Admin Center: Log into your Microsoft 365 admin account, navigate to ‘Admin centers’ in the left navigation pane, and select ‘OneDrive’.
2. Go to Storage: Within the OneDrive admin center, click on ‘Storage’ to view the storage metrics.
3. Identify Large Sites: The storage page will display a list of all OneDrive sites sorted by their size. Sites using a large amount of storage will appear at the top.
4. Evaluate Storage Needs: Review the content of the large sites to evaluate whether the storage used is necessary. This can be files that are rarely accessed, old versions of files, or duplicate files.
5. Clean Up Sites: If unnecessary storage use is identified, clean up these sites by deleting unnecessary files and/or instructing users to do the same.
6. Set Storage Limits: To prevent sites from using excessive storage in the future, consider setting storage limits. You can do this in the OneDrive admin center under ‘Storage’.

#6 Explore the “Specials”

Microsoft offers “special” pricing in certain cases such as for enterprise use cases and for non-profits.

Volume Licensing is particularly beneficial for enterprises with a considerable number of users. Microsoft’s Volume Licensing program allows businesses to acquire licenses for software and services at discounted prices, based on the volume of the purchase. each out to a Microsoft partner who can provide you with a quote for the volume licensing program.

Microsoft also offers special pricing and plans for certain industries such as nonprofits, government organizations, and frontline workers.

#7 Save on Inactive Licenses with Cloud Backup

Office 365 requires an active license for data access. Deactivating a terminated employee’s account limits their access to company data. However, deleting their account also means losing files they created. On the other hand continuing to pay for licenses for terminated employees is a financial burden. One effective method to save on inactive Microsoft 365 (M365) licenses is through Cloud Backup. This approach allows you to backup user data before deactivating their licenses, ensuring that valuable data is preserved while reducing the costs associated with idle licenses. Here’s how:

1. Identify Inactive Users: Use reporting tools within the Microsoft 365 admin center to identify users who are not actively using their accounts. Consider factors such as last sign-in date and usage activity. Check on licenses given to external users too.
2. Backup User Data: Before you deactivate the license of an inactive user, ensure that all their data – including emails, documents, and other files – are backed up. Cloud backup solutions, such as Azure, provide robust and secure options for this.
3. Deactivate Licenses: Once the backup is confirmed, you can proceed to deactivate the license. This can be done from the Microsoft 365 admin center.
4. Reallocate or Cancel Licenses: Now that the license is deactivated, you can either reallocate this license to a new user or cancel the license subscription to reduce costs.

By using Cloud Backup, you can ensure data continuity while effectively managing your Microsoft 365 license costs.

Save Big on Microsoft 365 License Costs with CloudAlly

CloudAlly’s Microsoft 365 Cloud Backup is a secure and cost-effective solution to save on the expense of maintaining inactive Office 365 licenses while avoiding data loss. Simply back up data of ex-employees and those accounts that are marked as “Unlicensed” on CloudAlly’s secure AWS S3 storage. These accounts can be newly created or system-generated group accounts. Once their data is backed up, you can release the license without worry of losing the data. What’s more, you can subsequently use CloudAlly’s account recovery feature to easily transfer this inactive account data from exiting employees, vendors, or contractors to newly joined ones without any hassle or risk of data loss. This ensures that all relevant data is securely transferred to the new user’s account when required, saving you on licensing costs. Our latest release, includes improved visibility and tracking of licensed and unlicensed Microsoft 365 accounts being backed up.

30,000+ organizations trust us to secure all their Microsoft 365 data from loss – Mail,  Calendar,  Contacts, Tasks, Groups/ Teams, OneDrive, SharePoint,  and  Public Folders – while reducing their Microsoft 365 license costs. Book a quick demo now or  Schedule a free 14-day trial and let the savings begin.