Microsoft 365 Licenses: Preventing Over-Purchasing and Under-Utilization

By identifying organization needs and comparing them to what Microsoft 365 licenses are in place and being used, gaps can be identified. Further, increased efficiency and savings can also be achieved, writes Paul Robichaux, senior director of product management, Quest Software.

Over the past year, IT admins have increased Microsoft 365 licenses to enable remote work and front line workers, added additional license types to enable video conferencing and security features and removed folks who were furloughed or no longer with the company. With the wave of license changes, IT teams have been struggling to differentiate between what licenses they have now versus what is really needed, as well as track overall usage to determine where there is underutilization and redundancy happening. 

Before cloud services, it was common to over-purchase and was acceptable due to purchasing cycles or funding mechanisms. With Microsoft 365 in the cloud, there’s no longer a need for over-purchasing. Licenses can simply be added when needed, but in most organizations, there’s significant overcapacity going to software that isn’t being used by anyone. On top of this, upgraded licenses are assigned to people that work in functional roles that don’t require that kind of access.

As companies look toward returning to the office, fully or in hybrid capacity, comprehension of Microsoft 365 licenses in use is becoming even more important. It’s simply not necessary to have a surplus of licenses anymore. Licenses can now be procured and turned up as needed. With an accurate understanding of what licenses there are and what teams need, organizations can prevent over-buying and wasting money.

Here’s what organizations must understand on over-purchasing and under-utilization of licenses, and what effective license management and user adoption strategies they should put in place to overcome issues and prevent future ones, as well as save money and increase efficiency. 

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Identifying Over-Purchasing and Under-Utilization of Licenses

A big reason why identifying over-purchasing and under-utilization of licenses is critical is because of the shadow IT it can create. A recent surveyOpens a new window of users and teams reported that more than two-thirds (67%) were using tools that hadn’t been vetted by their company’s IT team. With more employees working remotely and on personal devices, this practice has only accelerated. As users adopt more cloud software tools – paid and unpaid – without getting approval from IT, unsanctioned devices, applications, and software can cause real problems. 

Besides the potential for incompatibility with other company apps, shadow IT presents additional security risks when employees are using software and apps that IT teams don’t know about. A recent surveyOpens a new window of CISOs and other security professionals revealed that 95% reported increased challenges in security with more people working at home. Nearly half (47%) of those concerns were from untested software, tools, and services. Additionally, the use of these unauthorized apps may also be a violation of compliance regulations or governance policies.

The first step in understanding what an organization’s licensing situation looks like is to do a Microsoft 365 licenses audit for waste. For enterprise organizations, licenses tend to accumulate. As employees come and go, they may get reassigned, or they may sit there running up a tab. A studyOpens a new window found that, in a combined database of 3.4 million Microsoft 365 licenses, about 18% of the licenses were unassigned. If these licenses were no longer needed, a 10,000-user organization on a typical Microsoft E3 licensing deal could save more than $150,000 a year on these unassigned licenses.

The larger the enterprise, the more likely there will be wasted or unused licenses. In many enterprises, unassigned licenses are stacking up while new licenses are being bought for new employees. One division might have a bunch of unassigned licenses, while another needs more. So they go out and buy some. Because of a lack of communication and coordination, an organization might be wasting money in both divisions. 

License usage reports can help identify those that aren’t using or underutilizing company-authorized Microsoft 365 tools and using unauthorized apps to get work done. This will uncover which apps employees are using and can identify employees that aren’t leveraging Microsoft 365 apps even though they’re assigned a license. This supports trimming of licensing costs and better management of Microsoft 365. It’s also possible to uncover employees using different apps to do the same job. For example, instead of using Microsoft 365, they might be using another paid app. By eliminating the other app, software expenses can be cut down.

The trick to doing Microsoft 365 licensing right is knowing how much an organization needs to purchase and taking proactive steps to increase utilization.

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Effective License Management and User Adoption Strategies

To get rid of wasteful license spending, two simple principles should be put in place: stop over-purchasing (buy only what you need) and increase utilization (adopt everything that you buy). It’s important to have a system in place to support the measurement and management of licenses. Without this, organizations can fail in analyzing what’s being used and then trimming licensing for employees who aren’t using all the tools. 

By being mindful of what’s possible with Microsoft 365, organizations can focus on upskilling workers to fully utilize the tools available versus trimming licenses. In many cases, businesses have found productivity gains that significantly outweighed license cost reductions by training employees on Microsoft 365 tools to make their job easier. If employees are underutilizing Microsoft 365, implementing additional training can increase adoption, leading to increased efficiency. 

Another piece to this puzzle is the difficulty with tracking renewal cycles. As employees are added, or companies are bought, sold, or consolidated, it’s common to find license renewals for certain instances come due at different times. It can make it hard to track what an organization has and what is being paid for. Microsoft gives some basic tools to see licenses and assignments, expiration dates, etc. If there are a hundred users, it may be manageable. However, for larger organizations, it’s not manageable when they have to scale. Here is where more flexible procurement practices can be adopted to add flexibility in managing licenses. 

In most organizations, it’s left to the IT to handle, becoming one more task for IT team members that already have a full plate. This may work well in small shops, but with larger enterprises, having IT and the business office collaborating on licensing typically proves to be a more efficient method. Someone will need a firm grasp of licensing that goes well beyond buying licenses. Whether a team member or a consultant, they should understand how licensing works and what can be negotiated. Relying solely on the information obtained from Microsoft is a mistake.

As organizations and employee roles evolve, and with the shift to intentional remote work, needs change. While you don’t want to overpay for capacity that won’t be needed for some time, it’s crucial that organizations factor in a realistic picture of where things are headed. That’s why the inventory and development of user-profiles are important. If IT teams don’t have visibility into the current status and an understanding of what will be necessary for the future, organizations will likely over-purchase and spend money where it shouldn’t be spent.

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