Back to blog

Office 365 License Optimization: What You Need to Know

29 May 2020 by Becci Velzian

Office 365 License Optimization

Why do you need Office 365 License Optimization?

Our latest study into Office 365 license optimization found that many large organizations are over-purchasing their Office 365 licenses. The most common license which appeared in the research is the Enterprise E3, where we found 2.67 million Office 365 users, 1.32 million users have E3 licenses.

An E3 license gives users full access to the following workloads: Word, Excel, PowerPoint, Outlook, OneNote, SharePoint, OneDrive, and Microsoft Teams. Sounds good, right? This bundled option appears to make sense when purchasing licenses because your Office 365 users have access to a full suite of applications, no matter the nature of their work.

Unfortunately, this makes for an expensive if a common licensing strategy as not all users adopt or actively use these workloads.  We review this in more detail on in our white paper ‘How to Close the Office 365 License Gap’.

In times of economic uncertainty, you can immediately identify cost savings and be in a better position to negotiate at renewal time. For example, if you have 10,000 users or more in your environment, this could account for as much as $150,000.

Last year, Microsoft reported that it’s now hitting 200 million monthly active users, growing on average 3 million active users each month. This proliferation has stemmed from a huge number of companies migrating to the cloud since Microsoft launched its flagship SaaS productivity suite back in 2011. Consequently, this demonstrates why large organizations need to understand and manage their Microsoft licenses closely to avoid over-licensing and impacting the return on their IT investment.

In the past, we’ve also touched on how the Office 365 buying process is a complicated task because of the numerous parties involved – IT, procurement, purchasing managers, and the license sellers. It gets thorny here because everyone has different priorities, needs, and requirements which can often inadvertently subject you to the over-purchasing of Office 365 licenses.

Fortunately, to save you arduous, time-consuming hours of investigative work, Office 365 management software, such as Quadrotech’s Nova, has an Office 365 license optimization feature within its full suite of reporting and analytics tools. The advanced reporting capabilities provide you with full oversight of your environment through its intricate and customizable reports. Here, you’ll be able to clearly identify where the gaps lie in your organization and analyze the scope to reduce your spend on Office 365 licenses.

Microsoft Office 365 License Plans

Understanding Microsoft’s extensive array of Office 365 License plans is another task in itself. This requires significant analysis to ensure you’re not over-purchasing. The plans each offer various features, access, and products that are suitable for several roles. For a full rundown on what’s available, you can visit their website.

Identify & analyze your Office 365 environment

Licensing selection should be a data-driven process. At this stage, you need to examine your environment thoroughly to identify which roles in your organization need specific licenses. We recommend you start by listing your users and departments, and communicate with their respective managers, to find out what tools your users have actively adopted and need.

Another factor that can influence a lesser spend with Office 365 licenses is the data being used. Fortunately, there are cheaper options you can take advantage of for those who aren’t using it as much. During your examination process, find out the size in GB of workloads your users have access to as part of their quota, and what they’re actually using. We’ll talk about this in further detail later in the article.

A typical scenario here would be if you have a user who works offline, such as a frontline construction worker, they may only need basic functionalities such as email, storage and web edit options, and also less data. Whereas, an IT power user will need to access the full suite of Office 365, business applications, advanced analytics, security and compliance tools and more.

For an organization of even 1,000 people or more, this is a labor-intensive area of the project. If you’re using automated Office 365 management software like Nova, you have access to full licensing reports and the data needed on your environment, such as who’s adopted which apps and how much data they’re using.

Assessing what Office 365 Licenses are being utilized

You’re now equipped to make evidence-based decisions on how you’re going to optimize your Office 365 license purchasing strategy.

It’s tempting to want to eliminate any under-used licenses and downgrade users immediately based on your findings from the previous stage. However, we urge you not to do this until you have a more granular understanding of your users and environment.

Communication here is key, ask your managers and users in the organization what projects they’re working on, and does this result in certain applications being adopted more actively or becoming dormant? Also, find out whether your users are in full or part-time work, or on leave. This could potentially give you options to optimize your Office 365 licenses even further.

You’re likely to find here there is a disparity between products and role types. For instance, you’ll find a frontline worker, one who is working in construction for example, is unlikely to use a tool like Word, however, they’re more likely to use Microsoft Teams.

How are your Office 365 users accessing their workloads?

You need to know here if your users are working from their mobile devices or desktop. We’ve seen many business leaders fall at this hurdle, and you could lose a lot of capital by not checking how your Office 365 users operate.

If you find that a certain department engages more in offline work than online, you have additional opportunities to optimize here because the pricing here is different. We previously mentioned frontline workers, these are the people in the business who are working in the field so are more likely to be using mobile versions of Exchange, Teams, OneDrive and so on.

Microsoft’s E3 and E5 license plan provides your users with full access to desktop versions of Word, Excel, PowerPoint, Publisher and Access. Whereas, with an Office 365 E1 license your users have access to this web-only. There is a huge saving to be made here because an E1 is $8 per license, whereas an E5 is $35 and E3 is $20. So already, there is a 77% saving to be made here when optimizing an E3 license to an E1. 

What data is being used in your Office 365 environment?

We previously mentioned to find out what data is allocated per workload, and what’s actually being utilized. You’re now equipped to draw conclusions on how much storage is needed by license and user type, where you’ll most likely find there is scope to optimize.

With an Office 365 E3 license, your users gain access to unlimited personal OneDrive storage and 100 GB of email storage. If your organization is utilizing another storage app such as Google Drive, Box or DropBox, you may have more options to downgrade your license here as you’re not using all the data in your license quota.

Examine, optimize, repeat

Although this task is highly beneficial to making crucial business savings, it is a long-winded and manual process. Whether you’re an IT admin or a business leader, you’ll have to bear in mind Office 365 license optimization is a project which must be executed in addition to normal daily business activity. In light of this, it can be hard to find the resources and time to do this, and as a result, can be pushed down on your IT team’s priorities list.

Especially in the current economic environment, it’s likely you will experience organizational changes even over the short period of a quarter. The dynamic of your users working styles are likely to change, at the time of writing, many are working from home. Or, if your organization has had to make more difficult decisions, you may have less users since the last time you purchased licenses.

Learn more: How to Rapidly Enable Working From Home: 5 Tips to Maximize Microsoft Teams

So, it’s important to stay on top of this and keep reviewing and optimizing your Office 365 license requirements. If your organization is going through other changes, such as a merger, acquisition or divestiture, you also want to ensure you’re not unnecessarily inheriting an over-purchased license plan.

We’ve mentioned throughout this article, you have other options available such as using intelligent Office 365 management software like Quadrotech’s Nova to drive better data-driven decisions. Here, you can take advantage of the Office 365 license optimization feature which provides you with granular reporting itemizing all the information which has been discussed in this article. To find out more about our solution, get in touch here and speak to one of our experts.

Read more on Office 365 license optimization and check out this expert guide by Nigel Williams on ‘How to Close the Office 365 License Management Gap’. Nigel details real-world scenarios explains the common challenges and how to overcome them, and, most importantly, how to enable a successful Office 365 licensing strategy in your organization.