Microsoft 365 licensing is now the single largest line of recurring IT spend in many SMBs. It is also, in our experience, the line item most resistant to honest review — because nobody quite trusts that switching a user from E3 to Business Premium will not break something on Monday morning.
The instinct to consolidate is right. The instinct to do it across the board, in one weekend, is not. Here is how we approach it.
Start with what people actually use, not what they have
Pull 90 days of usage data from the Microsoft 365 admin centre: who has opened Teams, who is using OneDrive, who has actually run Power BI in the last quarter. About a third of any sizeable estate will have licences attached to features they have never opened.
Segment users by role, not by department
A finance director and a finance graduate need very different things. A field engineer with a phone but no laptop is a different user from a desk-based engineer. We tend to land on three or four user archetypes per business, each with a deliberate licence shape.
Where consolidation is usually safe
- Users on E3 who have never touched Power BI Pro, Power Automate Premium or compliance tooling — Business Premium is almost always the right answer.
- Frontline staff currently on full E3 — F1 or F3 frontline plans typically save 60–80% per seat.
- Shared mailboxes assigned full licences — these usually only need an Exchange Online plan, not a full M365 suite.
Where consolidation needs caution
- Anyone touching regulated data — compliance and eDiscovery features in E5 are sometimes the entire reason that licence was bought.
- Senior users with niche Power Platform usage — strip the premium licence and you may break a flow nobody documented.
- Defender for Office 365 Plan 2 — switching off advanced threat protection to save a few pounds per user is almost never the right trade.
A staged approach beats a big bang
We typically run consolidation in three waves. First, the easy cleanups — disabled accounts, shared mailboxes, obvious frontline users. Second, the segmented review by archetype. Third, the careful conversations with the small handful of users whose licence cannot be standardised. That third wave usually represents less than 10% of the estate, but consumes most of the careful thinking.
Build a renewal calendar, not just a saving
The real win is not the one-off save. It is putting a structure in place — owners, archetypes, renewal dates, a quarterly check — so the next renewal does not need a rescue. We hand the calendar over at the end of an engagement; it tends to outlive several IT managers.
For most SMBs of 50–500 users, a full M365 licence review pays for itself in the first month or two of the new term. The harder argument is for the discipline that stops the same problem recurring eighteen months later.
