Save Money and Optimize your Microsoft Office 365 Licensing

UPDATED: 3/1/2022

Saving money is on the top of every company’s mind today, and one way to do so is through optimizing your software spending. The regular review of your software utilization and spend is an important part of managing your IT department effectively. In this article, we’ll cover how you can evaluate your Microsoft and Office 365 licensing to ensure you’re using the correct plan.

Microsoft offers several different licensing plans for their industry-leading Office productivity suite. These plans are offered in two different lines for what they classify as small businesses and enterprises. As a Microsoft Gold Partner, PEI runs into many organizations that are “over licensed” and could move down to a less expensive plan without a loss in needed functionality.

With constantly evolving licensing packages and new offerings being built, your original justification to pick one of the Office 365 Enterprise plans (over one of the Office 365 Business Plans) in the past may no longer apply. I’ll finish this article with a list of potential scenarios where it could prove advantageous for your business to switch plans and reduce costs.

First, let’s outline some of the major differences between the Business and Enterprise Plans. Then I’ll walk through scenarios where you may want to make changes to your licensing.

As of April 2020, Microsoft has changed their naming scheme for many of the Office Business 365 plans, so I’ll use the new names in this post.

Microsoft Business Plans Limitations

The Microsoft Business plans have several limitations that push many organizations upwards to the Office 365 Enterprise plans.

300 User Limit

To use the Business plans, there is a limit of 300 users for each individual plan, but they can be mixed meaning that you could have 300 users licensed for Microsoft 365 Business Standard and 300 users licensed for Microsoft 365 Business Premium.

Office Suite Functionality

Going with the Business plans gives you access to Microsoft 365 Apps for Business (previously Office 365 Business), which is missing some features that are provided by Microsoft 365 Apps for Enterprise (previously Office 365 Pro Plus), which comes with the Office 365 Enterprise plans.

The Microsoft 365 Business Standard and Business Premium plans provide Microsoft 365 Apps for Business, which includes local downloads of the Office Suite.

Below is a breakdown of only the differences between the Microsoft Apps for Business and Apps for Enterprise plans, not a summary of all features. This is also only a breakdown of the entitlements with included as part of the “Apps” packages. Going with one of the bundle plans can change some entitlements. For example, Microsoft 365 Business Premium would provide Shared computer activation and Windows Virtual Desktop.

Microsoft 365 Apps for Enterprise vs. Microsoft 365 Apps for Business

Hybrid Use Rights

If you’re currently leveraging the Enterprise plans to license users for a hybrid environment, this will not be compliant with the Business plans.

For example, if you use Exchange Online but still have SharePoint or Microsoft Teams on-premises and are using your E3 licensing for users, you would not be able to drop down to a Business plan

Group Policy Support

This is probably one of the biggest determining factors and depends on how you’re managing users and computer accounts.

If you use Group Policies to manage your Enterprise-licensed users, you will not be able to do so if you drop down to the Business plans. Group Polices are a highly important for enforcing security policies, ease of management, and large-scale administration. If your organization has invested lots of effort into group policy around your Office 365 administration, this may be a stopping point for looking at the Business plans.

VoIP and Phone System Functionality

Voice functionality is another popular reason for going the Enterprise route, and up until the release of the Microsoft 365 Business Voice plan in April of 2020, the Enterprise plans were the only option for organizations who wanted to use the Phone System and Audio Calling capabilities of Office 365. Since April of 2020, Microsoft has simplified phone system licensing even more by eliminating their new Microsoft 365 Business Voice package and offering just one add-on license for voice functionality that is eligible to add to both the Business and Enterprise plans.

The new plan released in March 2022 is called Microsoft Teams Phone with Calling plan. The cost is $15/user/month and includes a Phone System and Domestic Calling Plan license for each user. This license does not include an Audio Conferencing license, which is now included (for free) in all Microsoft 365 subscriptions that include Microsoft Teams.

With this plan, you can now add all of Microsoft’s VoIP functionality to your Office 365 users at the Business level for $15/user/month if you’re going to use Microsoft as the voice provider  There’s a cheaper option if you’re looking to go with direct routing and cut out the calling plan license.

While this was traditionally a roadblock for many businesses to achieve the price savings of the business plans while also using the Teams Voice functionality, this is no longer the case. Many of the organizations who chose an Enterprise plan solely on this factor may find it advantageous to now move down to one of the Business Plans.

Additional Considerations for Switching Your Licensing

One very important piece of making the switch down to the Apps for Business, is remembering that this will require an un-install and re-install of Office (Apps for Business), so it’s not as simple as making a licensing change and going about your day. There’s a manual approach and an automatic approach, and you need to take a look at which approach works best for your organization.

Scenarios: Downgrading from Office 365 Enterprise to Microsoft 365 Business

If your users would not be affected by any of the feature differences above, then it’s a good time to explore the different scenarios below.

Keep in mind, you can mix and match Enterprise and Business plans, so let’s say your accounting team uses Excel Spreadsheet Compare & Inquire, but no other team does; You can keep them on Enterprise plans and drop the other users down to Business plans.

Current Plan: Office 365 E3: $23/user/month

This is the plan I see the most within organizations. It provides all the local downloads of the applications, as well as the primary services an organization might have looked for when initially moving to Office 365 (Exchange Online, SharePoint Online, OneDrive).

If your organization is currently licensed for Office 365 E3, there’s two viable options. Below is a breakdown of only the differences between the plans, not the full entitlements of each plan:

Unless you’re looking to drastically change your users’ entitlements, the two primary options to change to would be Microsoft 365 Business Standard or Premium.

The main questions you can ask yourself are as follows:

Is your sole goal reducing costs?

If yes, the move would be to transition users to Microsoft 365 Business Standard and save $126/user/year. There would be items that you would no longer be entitled to, but if those don’t affect your business, then this is the best route.

Is your goal to increase security and better management for my users and devices?

If yes, the best move is to transition to the Microsoft 365 Business Premium Plan. In addition to the majority of entitlements that Office 365 E3 provides, you’d have an additional security suite for email protection with Office 365 Advanced Threat Protection, a full Mobile Device Management solution with Intune, an Identity Management solution with Azure AD Premium P1, and an Information Protection solution with AIP P1.

An additional huge selling point of the Microsoft 365 Business Premium subscription is the entitlements to upgrade to Windows 10 Pro for any legacy windows system (7, 8, 8.1 pro) without additional cost. For most clients, this plan provides the greatest bang for their buck and is one of the fastest-adopted Microsoft subscriptions we’ve seen at PEI.

Current Plan: Office 365 E5: $38/user/month

This one is little trickier to drop down from, assuming you’ve turned up many/all of the advanced features it provides. Office 365 E5 is a robust plan that includes many solutions for security, compliance, and collaboration, but it’s not impossible to drop down and optimize your software licensing if certain features aren’t essential. Below is the breakdown of the differences (not all the plan entitlements) between Office E5 and the only other plan I would recommend if you’re below 300 users, the Microsoft 365 Business Premium Plan.

With Office 365 E5, there’s likely one of several drivers for why this plan was originally purchased that would impact whether or not there’s a better plan for your organization.

Do you have compliance needs that these solutions are addressing?

If yes, then I would advise staying on the Office 365 E5 plan. Between the Advanced data governance, Advanced eDiscovery, and Customer Lockbox, there’s no other plan that will provide those solutions without increasing costs.

Are you on this plan primarily to get Power BI Pro with your Office 365 Apps?

If yes, it may be advantageous to move down to the M365 Business Premium license ($22/user/month) and add the standalone Power BI Pro license ($10/user/month) and end up saving $10/user/month. You would lose some of the compliance features, security features (O365 Cloud App Security, O365 ATP Plan 2) and communication suite (Microsoft Phone System & Audio Conferencing), but if those are not being used today, the savings may be worth it.

Do you have the Microsoft Phone system deployed for your users?

This is the most common reason in my experience for organizations to originally license their users for O365 E5. If this is your primary reason, then now might be a good time to drop down to Microsoft 365 Business Premium and add the newly released Teams Phone with Calling Plan . Below is the breakdown of how the plans compare price wise if you’re using Microsoft as your full voice provider.

Office 365 E5 ($38/user/month) + Domestic Calling Plan ($12/user/month) = $50/user/month total

M365 Business Premium ($22/user/month) + Teams Phone with Calling Plan ($15/user/month) = $37/user/month total

I would make the argument for this being a better strategy under the assumption that you’re not needing the Power BI or the compliance solutions.

However, if you answered yes to more than one of these questions, then your best bet is to likely stay with Office 365 E5, as it’s the most comprehensive package to address your needs.

Current Plan: Office 365 E1: $10/user/month

This is probably the simplest comparison to make, as there’s almost complete feature parity between Office 365 E1 and Microsoft 365 Business Essentials. Below is a breakdown of the differences between the plans.

Seeing as these plans are almost identical, and are typically assigned to lighter IT users, if you’re below 300 users, it’s a no brainer to drop down and save $4/user/month, or $48/user/year.

Current Plan: Microsoft 365 E3: $36/user/month

If you’re on the Microsoft 365 Enterprise E3 plan, then the Microsoft 365 Business Premium Plan is a great step down without much loss of features. Below is a breakdown of only the differences between the plans, not a full feature breakdown of what each includes.

Given that M365 Business Premium includes Office 365 ATP Plan 1 and M365 E3 doesn’t, I’d make the argument that it’s a more comprehensive plan, and $14/user/month cheaper. If your organization is below 300 users and none of the items above are essential to managing your Office 365 users, then dropping down to M365 Business Premium would be a great way to save $168/user/year without giving up much.

Current Plan: Microsoft 365 E5: $57/user/month

This one is tricky to advise dropping down from, as companies that have selected this plan have typically gone all-in with Microsoft, see the wholistic vision for Microsoft addressing many business needs, and have integrated systems to allow for a smaller team to manage many solutions. This is by far the most comprehensive licensing package that Microsoft provides, but there are certain ways to mix plans to get only exactly what you need if everything included with the Microsoft 365 E5 plan is too much. Below is a breakdown of only the differences between the two plans, not all the entitlements that they come with.

As you can see, there’s a tremendous number of workloads that are included with the M365 E5 package that is lacking from the E3 solution. The primary areas that are covered are solutions relating to compliance, security, and collaboration and depending on if you’re looking for a solution that covers just one of those focus areas, there is a potential to pair the M365 E3 package with one of the other bundles that are available.

The bundles I’m speaking of are the Identity & Threat Protection Plan, Information Protection & Compliance Plan, and Microsoft Teams Phone with Calling Plan license bundle.

As you might be able to tell, there’s no easy button for determining which Microsoft subscription best matches your organization’s needs. Our goal at PEI is to simplify the licensing options, learn about your business, and customize a licensing strategy for you. If you are interested in having a free discussion with one of our licensing experts to learn about how we can help you optimize your licensing, please reach out to info@pei.com or call (303) 974-6881 and we’d be happy to set time to speak.

Martin Feehan, PEI

This blog was updated to reflect license price changes that Microsoft implemented on March 1, 2022.