9 Questions to Ask to Right-size Your Microsoft 365 Spend

Most enterprises pay more than they should for Microsoft 365. But the rate of overspend has recently reached alarm-worthy levels. According to a study by ShareGate¹, 92.8% of IT professionals surveyed said the pandemic pushed prior Microsoft-related modernization plans ahead of schedule. For many customers, this accelerated pace has become a new reality – one that is costing companies millions of dollars in unintentional overspending each year.

Additionally, once many enterprise customers make the move to Microsoft 365, little attention is given to how to optimize their Microsoft agreement and licensing environment on an ongoing basis – customers often operate at some level of autopilot as they renew with Microsoft. Customers tend to renew what they’re already paying for, and add new licenses to cover growth requirements. By doing so, they close the door to valuable cost and license optimization opportunities.

Here is a checklist that IT procurement practitioners can use to identify and remediate overspending on their rapidly changing Microsoft 365 estates:

A Checklist for Reducing M365 Costs

1. Have you performed price benchmark analysis to ensure you’re paying a best-in-class price? M365 pricing may seem transparent enough, but don’t be fooled – it’s possible to negotiate better pricing and discounts.

The key is coming to the table with external pricing intelligence that validates your negotiation position. Performing price benchmark analysis on your M365 agreement ensures you’re paying a best-in-class price at the line-item level.

2. Are you using everything you’re paying for? Formally assess actual usage across your M365 estate for opportunities to reclaim, reduce and realign licensing counts.

Start by identifying and reclaiming inactive licenses that can be redeployed to meet growing usage requirements (instead of paying for net new licenses). This can reduce demand at true-up or renewal time. Next, reduce or eliminate the consumption of unneeded or underused services. Does every user in your organization use all the functionality in an E3/E5 license?

Most M365 enterprise deployments are bloated, resulting in millions of dollars of overspend each year. Inspecting your M365 estate for license and cost optimization opportunities will deliver powerful savings.

3. Have you created detailed user profiles? It’s not uncommon for M365 customers to lock themselves into a single license type for all users (often one that provides more functionality and cost than they need, at a higher cost than necessary).

Instead, customers should analyze M365 usage patterns to develop multiple usage profiles. This typically reveals opportunities to leverage less-costly license options for some users across the organization.

4. Are you leveraging Microsoft’s Frontline SKUs to your advantage? Microsoft’s Frontline worker products are a direct response to the price sensitivity some organizations have over per-user licensing for task workers using a shared device (call center, production floor, and healthcare environments are good examples).

If your organization employs task-oriented workers that don’t require the most robust versions of the Microsoft user experience, it’s well worth your time to consider whether those users are a good fit for Frontline products. The cost differential is large with Frontline worker SKUs being a fraction of fees for enterprise SKUs.

5. Are you paying for redundant features and licenses across your M365 and greater Microsoft estate? M365 license/subscription features change often, which means it’s possible you’re paying for redundant functionality across your Microsoft estate.

One example is audioconferencing, which is now included in M365 E3 subscriptions. Another is paying for on-premise server licenses (Exchange, SharePoint, Skype for Business) that are included in M365 E3/E5. Before an upcoming renewal, be sure to review functionality across your different Microsoft license types and inspect for redundancies that can be eliminated.

6. How well is your contract safeguarding you against future overspending? Your contract with Microsoft should be optimized to protect you against overspending both today and in the future.

This is particularly important for businesses that are undergoing significant transformation and growth. One example of a contractual safeguard is excluding Future Affiliates in your Microsoft Enterprise Enrollment – an important option for customers with M&A activity on the horizon. This saves companies from having to automatically add newly-acquired users to a true-up – even those users that could be eliminated as a byproduct of reorganization.

7. Have you consulted the Product Terms for the use rights for the products you are licensing? As many of Microsoft’s customers are in hybrid states between cloud and on-premise usage, it’s important to consider Microsoft 365’s Product Terms – specifically how often they change (hint: quite frequently!).

These changes and deadlines set by the vendor can have a significant impact on your organization’s compliance.

8. What is your roll-out scenario for deployment of new M365 licenses over the term of your agreement? Deployment velocity – or how long it will take you to deploy the components of the subscription products – is an important consideration.

Microsoft wants you to pay 100% of the subscription product for all users on Day 1 of the agreement. This approach may not make sense for some roll-out scenarios. Modeling your consumption and deployment velocity, and including these findings in your negotiations, can save you a lot of money.

9. Do you experience fluctuations in user counts year to year? If the answer is yes, consider looking at an Enterprise Subscription Agreement instead of an Enterprise Agreement.

Under the traditional Microsoft EA, each year’s license counts are formalized on the Customer Price Sheet and you cannot reduce counts until the end of the enrollment (3 years). Under the Enterprise Subscription Agreement, only the first year’s licenses and quantities are formalized on the Customer Price Sheet. For second and third-year orders, you supply the license counts to your reseller, allowing the license counts to fluctuate up or down year to year. As the name suggests, this is a subscription model of licensing with no perpetual use rights.

Stop M365 License and Cost Bloat

License and cost “bloat” have become exceedingly common across enterprises’ M365 estates. The result is concerning. Many customers overpay millions of dollars every year for unused/underused licenses and features, and subpar business terms in customer agreements impede IT agility.

NPI advises Microsoft customers to carefully inspect their M365 estate for license and cost optimization opportunities that will deliver powerful savings (and IT flexibility) over the course of their Microsoft investment.

1 https://sharegate.com/resource/microsoft365-cloud-trends-white-paper-2021#migration-modernization-and-security-in-2021