How to optimise Microsoft 365 licence costs

In March 2022 Microsoft 365 licence costs will increase by as much as 20% across the following 6 SKUs:

  • Microsoft 365: Business Basic, Business Premium, E3 
  • Office 365: E1, E3, E5

For many organisations the price increase will consume IT budget that is already allotted for other activities, using up a sizeable chunk of available spend. Consequently, if they haven’t already, IT teams urgently need to optimise Microsoft 365 licensing to reduce costs and protect IT budget.

Lock in your current Microsoft 365 prices until February 2023. Learn more here >

Microsoft 365 licence cost optimisation: the basics

Ahead of the price rise the first thing IT teams should do is ensure they are not over-provisioned. Review your licence counts and allocation to make sure you don’t have more licences than needed, and that those you have are allocated to people who need them.

Key areas to explore include:

  1. Licences assigned to users who have left your organisation
  2. Licences assigned to inactive users
  3. Licences assigned to users who only need a few services
  4. Licences that are unallocated

From this exercise you can see if there are opportunities to reduce your Microsoft 365 licence costs by purchasing fewer licences. You can also reassign unused licences to people who need them. Finally, you can review whether some users who are under-adopting services either require a different licence SKU with fewer services, or to be enrolled in a technology adoption programme to get more value from their tech.

Escape the price rise for 12 months

Another way to optimise your Microsoft 365 licence costs is to lock in current pricing for the next 12 months. If you renew a licence plan now, before 1st March 2022, with a 12 month subscription term the price increase will only be applied when that subscription ends in February 2023. 

This can buy you more time to plan for the eventual price increase when your subscriptions renew next year. 

Please note that at the same time as publicising the 365 licence price increase, Microsoft also announced that customers will no longer be able to decrease their licence count until end of the subscription term. You can increase your licence count and pay for additional licences pro rata, but you can’t remove licenses during the term. It is therefore important to ensure you keep your licence counts lean.

Get creative now to save on Microsoft 365 licence costs later in the year

If your organisation has seasonal fluctuations in the number of users requiring Microsoft 365 licences, or if you are planning for a period of growth this year, a bit of creativity now can save you money later.

For example, if your organisation needs to increase your licence count for Microsoft 365 Basic for the Christmas holiday season, you could purchase an annual subscription plan now with a minimal number of licences at the current pre-March price point. When you need to increase your licence count in November and December 2022, you can add those additional licences to your 12 month subscription still on the old pricing. Even though you may not require those additional licences in January 2023, you could still make a significant saving compared to procuring licences at the new price point on a monthly subscription term.

It is also worth speaking to your Cloud Service Provider (CSP) about whether they can discount 365 licence plans further. Many are offering competitive prices on annual subscription plans to help customers manage this price increase.

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