The Microsoft 365 bill is usually the second or third largest line item on the IT budget. It's also one of the least-optimised — partly because licence design is intentionally complex, partly because most IT teams are focused on delivery, not procurement. This guide shows you how to claw back 15–30% of your M365 spend without degrading service.
Know what you're actually paying for
Start with a complete inventory. Every SKU, every quantity, every price, every renewal date. Microsoft 365 admin centre gives you active users. Your EA or CSP portal gives you licensed users. The gap between them is your first target.
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Run the M365 Usage Tool
Get a directional view of how much of your M365 licence you're actually using, and what it's costing you not to.
Step 1 of 4
How big is your organisation?
We'll use this to estimate your total spend and scale the recommendations. Change the seat count if you know it exactly.
The five biggest overpayment patterns
1. E3 for everyone
The default SMB pattern: buy E3 for the whole business because it's what the partner quoted. For 40–60% of frontline and transactional roles, F3 at around a quarter of the cost does the job. Audit who actually needs desktop Office installs, Exchange mailbox, SharePoint storage and compliance tooling — and demote the rest.
2. E5 where E3 + Defender would do
E5 is brilliant for compliance-heavy industries. For most Australian businesses, E3 plus Defender for Office 365 Plan 2 plus Entra ID P2 is cheaper and covers the same security posture. Run the maths on your user mix before you commit to E5 across the board.
3. Duplicate add-ons
Audio Conferencing bought separately when it's already in the licence. Teams Phone Standard and a separate telephony contract. Defender bought on top of E5. These double-pays add up fast — single-digit percentage each, double-digit percentage in aggregate.
4. Inactive user sprawl
Ex-employees still licensed. Shared mailboxes with full licences. Test accounts. Service accounts on paid SKUs. A quarterly deprovisioning sweep typically reclaims 5–10% of seats immediately.
5. Wrong agreement type
Organisations on legacy Open Value or Enterprise Agreements who'd be cheaper on a modern CSP (Cloud Solution Provider) agreement. Or vice-versa — businesses on CSP paying a premium for seats they could lock in on EA. The answer is entirely volume-dependent.
The quarterly optimisation loop
One-off optimisation reclaims 15–25%. A quarterly loop keeps you there.
- 1Month 1: export active users by SKU. Identify inactive licences (no sign-in for 30+ days).
- 2Month 2: right-size. Move inactive users to lower-cost SKUs or deprovision.
- 3Month 3: audit add-ons and identify duplicates.
- 4Repeat. Report reclaimed spend to the executive team each quarter.
Renewal leverage
The best time to renegotiate is three to six months out from renewal. Get comparable quotes from at least two licensing partners. Microsoft will sharpen its pencil if it thinks it's at risk of losing the agreement. Also consider committing to Copilot or E5 in exchange for a discount on the base — Microsoft values the upsell commitment.
What good looks like
You should be able to answer these in under 10 minutes: what are we spending per seat per month, blended? What's our utilisation percentage? What did we reclaim last quarter? When does the agreement renew?
If you can't, that's the first thing worth fixing.