How License Optimization Can Cut Your Microsoft 365 Costs

For companies of all different sizes, optimizing operational costs while ensuring productivity and efficiency is a big concern. Microsoft 365 is a major asset to most businesses because of its suite of office applications, collaboration tools, and security features but navigating the complexities of Microsoft 365 licensing can leave businesses struggling to align their investments with their actual usage. This has led to an increased interest in license optimization—a strategic approach designed to make sure that companies are only paying for what they truly need. Through this optimization process, companies can unlock potential savings on their Microsoft 365 spend. 

How to Save on Microsoft


License optimization enhances a business’ operational efficiency and ensures that each dollar spent contributes directly to their productivity and growth. By carefully assessing their license use, identifying redundancies, and reallocating resources, businesses can achieve a more streamlined, cost-effective approach to using Microsoft 365. In this blog post we will review the benefits of license optimization and the overall impact it can have on a business including how it can significantly reduce overall Microsoft 365 spending.  


Understanding Microsoft 365 Licensing 

Microsoft 365 offers a variety of plans that are tailored to meet the needs of businesses large and small which in theory is great, but for most businesses navigating through this variety can be rather overwhelming and time consuming and leaving them to practice a to ‘set it and forget it’ approach to their Microsoft licenses. Understanding the nuances of these licensing models is the first step towards optimizing your Microsoft 365 spend. Here, we will break down the key licensing options and highlight common pitfalls that can lead to unnecessary spending. 

Overview of Microsoft 365 Licensing Models 

Microsoft 365 offers several licensing models, each is designed with different business needs in mind: 

  • Microsoft 365 Business Basic: This is Ideal for small businesses that require remote collaboration tools without the need for desktop Office applications. It includes access to web and mobile versions of Office apps, email hosting, and cloud storage.  
  • Microsoft 365 Business Standard: This plan includes everything from the basic plan in addition to: 
    • Desktop versions of Word, Excel, PowerPoint, and Outlook  
    • Webinars with attendee registration and reporting 
    • Collaborative workspaces to co-create using Microsoft Loop 
    • Video editing and design tools with Microsoft Clipchamp 
  • Microsoft 365 Business Premium: Business Premium includes everything from Business Standard in addition to:
    • Advanced identity and access management 
    • Enhanced cyberthreat protection against viruses and phishing attacks 
    • Enterprise-grade device and endpoint protection 
    • Discover, classify, and protect sensitive information 
  • Office 365 E3: This is a more advanced option that is designed for larger organizations. This plan includes additional compliance tools, information protection services, and unlimited cloud storage. 
  • Office 365 E5: This is the most comprehensive plan which offers advanced security, analytics, and voice capabilities on top of all the features included in the E3 plan. 

Each of these models mentioned above comes with its own set of features and pricing, which makes it important for businesses to really carefully assess which plan aligns best with their operational requirements and budget. 


Common Mistakes we see in Microsoft 365 Licensing 

Common Mistakes in Microsoft 365 Licensing Microsoft 365’s licensing models offer flexibility (which can be great), but there are several mistakes that we see businesses frequently make that can lead to overspending. These mistakes include: 

One of the most common mistakes that we see businesses make is buying more licenses than they actually need or choosing plans that go above and beyond their needs. Often this happens when businesses don't perform regular audits of their license usage, which leads to unused or underutilized licenses. Sometimes, less is more!  

The higher-tier Microsoft 365 plans offer a list of different cool features that make it easy for businesses to fall into the trap of paying for functionalities that may seem useful but end up rarely, if ever, being used. We often see this in companies that choose the E5 plan without having a clear requirement for its advanced security and analytics tools. 

Yet another mistake we see businesses make is not taking advantage of the ability to mix and match licenses based on their individual user needs. Often, businesses end up defaulting to a one-size-fits-all approach. This approach causes them to miss out on potential savings because they are not tailoring their license choices to their specific requirements of different user group's needs.  

Ultimately, you can’t fix it if you don’t know it’s broken. Understanding these common mistakes with Microsoft 365 licensing models can help you take a step towards more effective license management and optimization. Keep in mind that the goal here is not just to reduce costs but to make sure that every license within your business serves a purpose and aligns closely with your users' needs and strategic objectives. 


What is License Optimization and What are the Benefits? 

License optimization is a strategic process that is designed to make sure a business’ software licenses are aligned with their actual needs and usage patterns. This process eliminates waste and ensures cost-effectiveness. When applied to Microsoft 365, license optimization is a crucial exercise in balancing functionality and cost. This process involves a thorough assessment of current license usage across the business, identifying the specific needs of different user groups, and reallocating or adjusting license types and quantities to match these needs as closely as possible. 

As mentioned above, companies can easily find themselves either overspending on unnecessary licenses and features or, underutilizing the capabilities that they are paying for. The good news is that effective license optimization addresses these challenges by ensuring that each user has access to the necessary tools at the right level of service, without paying unnecessary costs. 

The optimization process starts with an in-depth analysis of how each Microsoft 365 license is being used within the business. This includes identifying inactive users, underutilized services, and potential mismatches between license types and user requirements. From there, businesses can make informed decisions about reallocating licenses, downgrading over-specified licenses, or acquiring new licenses to fill any gaps in their current setup. 

There are several benefits to license optimization. Below are some of the key benefits for businesses:   

✔️ Cost Savings: The direct monthly and annual savings on Microsoft spend is probably the most immediate benefit of license optimization. When your business only pays for the licenses it needs and uses, you can see significant savings. For large organizations, even small per-user savings can scale up to major amounts in savings. 

✔️ Improved Efficiency: License optimization streamlines the user experience and simplifies the management of licenses for IT administrators, which allows for a more agile and responsive IT infrastructure. For true efficiency your employees should have access to the tools and services they need to perform their jobs effectively, without the clutter and confusion of unnecessary features.  

✔️ Compliance and Risk Management: A business with mismanaged licenses can struggle with compliance issues, especially with software audits. On one hand, over-licensing is a financial drain, while on the other hand under-licensing can result in legal and financial penalties. License optimization solves this problem by reducing the risk of non-compliance penalties, making sure businesses are in compliance with licensing agreements. Not to mention, when all users have the appropriate level of access and security features, based on their specific roles and needs a business’ IT environment is much more secure.  


How License Optimization Works 

How License Optimization for Microsoft 365 WorksAt iuvo, all of our current clients benefit from iuvo License Optimization. Over time we have recognized that so many (too many in our opinion) businesses are overpaying on Microsoft and ultimately not running as efficiently as they could. To help illustrate how license optimization works, we’ve outlined how we implemented iuvo License Optimization for Microsoft 365 for a business that came to us facing challenges with their cloud service provider (CSP). When they approached us, they were looking to renew their Microsoft Licenses – at that time they were completely unaware of the savings opportunities that were hiding in their Microsoft spend!  

First, we did a comprehensive review of their current Microsoft licenses, usage rates, and business needs. This stage was important for establishing a baseline of what resources were currently in place and how they were being used. For this case, this meant looking at their existing setup to identify the scope of their Microsoft license usage and pinpointing any initial areas of concern, such as unused licenses or services that were not aligned with their operations. 

We next took a closer look at the data we collected to identify mismatches between the licenses they purchased and their actual usage or needs. We quickly realized that this business was over-purchasing licenses, resulting in overspending. Our examination highlighted the specific areas where licenses were not being utilized to their full potential, including 823 unused Office 365 E3 licenses and 1804 Microsoft 365 Audio Conferencing licenses that they were paying for but not using. 

Once we had a detailed understanding of this business’ license usage, we adjusted the license types and quantities so that they better aligned with their requirements. This involved reducing license redundancy and overprovisioning, as well as optimizing license terms to strike a better balance between cost savings and flexibility. By tailoring the license portfolio to match the business’ actual needs, we were able to eliminate waste and make sure that each license served a specific, justified purpose. 

The final step in the iuvo License Optimization process was establishing practices for ongoing license management. This included implementing tools and procedures to continuously monitor license usage and needs, which ensured the business would remain aligned with its operational requirements and financial objectives. For this business, this meant setting up mechanisms to regularly review and adjust their licensing strategy to protect them against future inefficiencies and over-spending. 


Our example with the business mentioned above helps to illustrate how iuvo License Optimization can produce impressive financial benefits. Through our comprehensive review and recommendations, we were able to identify initial savings of $9,000 per month, or $108,000 per year!  


If you’re interested in optimizing our Microsoft licenses and revealing hidden savings for your business contact our experts today.  


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