For many organisations, the Microsoft 365 environment is a leaky bucket where thousands of pounds in licensing spend disappear every month. Despite the tools being essential, the complexity of the Microsoft ecosystem often leads to significant over-licensing, especially as teams scale and roles evolve.
As a Microsoft licensing provider and Microsoft CSP, we see this all the time with our customers. In this article we share the common pitfalls and how to avoid them.
56% of Firms are Over-Licensed for Microsoft Licensing
Recent industry research from CoreView and Flexera indicates that an average of 56% of a business’s Microsoft 365 licenses are underutilised, oversized, or unassigned.
In most organisations, IT departments purchase licenses in “batches” based on headcount estimates rather than actual usage data. This leads to three primary types of waste:
- Dead Accounts: Licenses assigned to employees who have left the company or to dead accounts that have been inactive for over 90 days.
- Oversizing: Paying for a premium E5 license for an employee who only uses Outlook and Teams, tasks that a much cheaper E1 or Business Basic license could handle.
- Duplicate Assignments: Users accidentally being assigned multiple licenses that offer overlapping features, such as having both a standalone Visio subscription and a bundle that already includes it.
Examples of Cost Savings for Microsoft Licensing
The financial impact of a licensing audit is immediate. For a mid-sized organisation with 500 users, a 25% waste reduction, which is conservative by industry standards, can yield annual savings of over £37,500.
- The Leaver Recovery: If a company with 20% annual turnover (100 departures) takes just four weeks to revoke licenses for departing staff, they waste approximately £26,000 per year on dead seats.
- The E5 to E3 Right-Sizing: Downgrading just 10% of users from an E5 tier to an E3 tier typically saves 30–40% per seat. In large enterprises, this single move often recovers six-figure sums before renewal negotiations even begin.
How to Audit Your Microsoft Licenses: A 4-Step Guide
To stop the bleed, follow this structured audit process annually, or ideally, 90 days before your contract renewal:
Step 1: Inventory & Usage Gap Analysis
Using the data available within the Microsoft 365 Admin Centre, you can identify if there are users that haven’t accessed core applications such as Teams or SharePoint and use this to find dead accounts.
Step 2: Identify Oversized Tiers
Identify users on high-tier plans (E5/E3) who are only utilising Basic features. Frontline workers or administrative staff often do not require advanced analytics or the full desktop suite and can be moved to Frontline (F3) or Business Basic plans.
Step 3: Clean Up Offboarding Processes
Automate the link between your HR system and your Microsoft tenant. Ensuring that a license is revoked the moment an employee’s status changes to “Inactive” is the simplest way to maintain a clean estate.
Step 4: Review Add-ons and AI Subscriptions
With the rise of Microsoft 365 Copilot, organisations are frequently over-committing to AI seats. Audit your AI usage logs; if a user hasn’t interacted with Copilot in a month, reallocate that high-cost seat to someone on the waiting list.
A Microsoft license audit is not just a “one-off” cost-cutting exercise; it is a vital part of modern IT governance. By aligning your subscriptions with actual employee behaviour, you protect your bottom line and ensure that your IT budget is spent on innovation, not unused dead licenses. This activity is not just an IT or finance activity with the high costs involved departments should take an interest and part to play in their audit.
Microsoft Licensing Provider Services
As a tier 1 Microsoft CSP Bridgeall helps organisations save money on their licenses, and buy the right licenses. We provide free license reviews and include licensing advice across the board. All of this designed to help you save and make your Microsoft licensing experience as smooth as possible.
