📖 In This Playbook
In today's threat landscape, CIOs must balance robust security and compliance with cost-effectiveness. Microsoft offers premium Microsoft 365 E5 add-ons that enhance security and data governance without requiring a full E5 license for every user.
This playbook provides a comprehensive guide to Microsoft's security and compliance add-ons, specifically Microsoft 365 E5 Security, Enterprise Mobility + Security (EMS) E5, and Microsoft Purview (compliance). It offers actionable strategies for CIOs on how to deploy them strategically, assign advanced tools to the right user roles, and evaluate the ROI versus baseline capabilities or third-party solutions.
Microsoft 365 E5 Security Add-on
🛡️ E5 Security Per-User Add-on
A bundle of Microsoft's top-tier security tools designed to be layered on top of M365 E3 or Office 365 E3. Delivers advanced threat protection and identity security features of a full E5 plan, without paying for unrelated extras like voice or analytics.
How it is licensed: Purchased per-user-per-month and assigned to any user with a qualifying base license (M365 E3 or Office 365 E3). It upgrades that user's security capabilities to E5 level. You do not have to buy it for all users in the tenant. Priced significantly lower than a full E5 license since it excludes non-security components.
What is included:
🔐 Entra ID Premium P2
Risk-based conditional access, Azure AD Identity Protection, and Privileged Identity Management (PIM) for just-in-time admin access.
💻 Defender for Endpoint P2
Full EDR for Windows and other devices. Behavior-based threat detection, automated investigation and remediation, threat and vulnerability management.
📧 Defender for Office 365 P2
Safe Links, Safe Attachments, phishing AI detection, attack simulation training, Threat Explorer for hunting across email, Teams, and SharePoint.
👤 Defender for Identity
Cloud-based analytics for on-premises AD. Detects pass-the-ticket, lateral movement, and domain compromise in hybrid environments.
☁️ Defender for Cloud Apps
CASB for shadow IT detection, conditional access to cloud apps, and data exfiltration protection across third-party cloud services.
These Defender components work together as an extended detection and response (XDR) suite, sharing signals to correlate threats across email, endpoints, identities, and cloud apps.
What is NOT included: E5 Security does not include compliance solutions (eDiscovery, data governance, Insider Risk), telephony, or Power BI. Intune is not bundled either, since it is already part of EMS E3 (included in M365 E3). The add-on is purely security-focused.
Enterprise Mobility + Security (EMS) E5
🔒 EMS E5 Per-User Bundle
Advanced identity, device, and information protection capabilities. Includes the top-tier features of the EMS suite that complement Office 365. Often used to strengthen identity security and protect information across devices.
How it is licensed: Purchased as a standalone per-user subscription. Often combined with Office 365 E3 or M365 E3 (which already includes EMS E3). Separate from the E5 Security add-on, though they have overlapping goals. Typically cheaper per user than E5 Security because it does not include Defender for Endpoint or Defender for Office 365.
What is included (everything in EMS E3 plus):
🔐 Azure AD Premium P2
PIM, Identity Protection, risk-based MFA automation, access reviews. Same P2 as in E5 Security.
📄 Azure Information Protection P2
Automatic classification and encryption of sensitive files, user-defined sensitivity labels with protection, document tracking.
👤 Defender for Identity
On-premises AD threat monitoring for hybrid environments. Detects identity-related attacks.
☁️ Defender for Cloud Apps
Full CASB for shadow IT discovery, app control, and DLP across third-party cloud services.
📱 Microsoft Intune
Mobile device and application management. Enforce device compliance, deploy apps, wipe lost devices. Already in EMS E3 but included here at full tier.
E5 Security Add-on
Full Microsoft Defender XDR suite (endpoint, email, identity, cloud app) plus AAD P2. Best when you want advanced threat protection across the board.
EMS E5
AAD P2, Intune, AIP P2, MCAS, and Defender for Identity. Best for identity and data security when you handle endpoint/email separately or want a budget-friendly middle ground.
What is NOT included: EMS E5 does not include Defender for Endpoint or Defender for Office 365. Those endpoint and email protections are part of the E5 Security add-on. EMS E5 also does not include any compliance solutions (eDiscovery, audit, etc.).
Microsoft Purview and Compliance (E5 Compliance Add-on)
📜 E5 Compliance / Purview Per-User Add-on
The counterpart to E5 Security. Unlocks all advanced compliance features of Microsoft 365 E5: information protection, data loss prevention, insider risk, audit, eDiscovery, and more. Essential for highly regulated or security-conscious organizations.
How it is licensed: Per-user add-on assigned to those who need it. Often purchased for legal staff, compliance officers, or executives handling sensitive data. Important: for some features like placing a hold on content, users whose data is governed may also require licensing. Microsoft's guidance is that if a user benefits from or is subject to a feature, they should be licensed.
What is included:
🏷️ Information Protection (AIP P2)
Auto-labeling based on content using ML or predefined rules. Trainable classifiers for detecting resumes, source code, financial data, and more.
🚫 Advanced DLP
Endpoint DLP extending policies to Windows/macOS endpoints. Teams chat DLP and integration with Defender for Cloud Apps for third-party protection.
⚠️ Insider Risk Management
Identifies risky user activities (data theft, policy violations) using signals from DLP incidents, file downloads, and HR data. E5 exclusive.
💬 Communication Compliance
Monitors Teams chats, emails for policy violations: harassment, insider trading, code-of-conduct issues. Vital for regulated industries. E5 exclusive.
🔎 Advanced eDiscovery (Premium)
End-to-end legal discovery workflow: case management, legal hold notifications, custodian management, near-duplicate analysis, themes. Includes Advanced Audit with 1-year log retention.
🔒 Compliance Extras
Customer Lockbox, Privileged Access Management for O365, Compliance Manager with additional assessments, increased retention limits.
Measurable impact: A Forrester study found that companies using M365 E5 Compliance saw a 30-40% reduction in the risk of a data breach and were able to retire several legacy compliance tools, cutting costs by consolidating on the Microsoft suite. Retiring legacy compliance software saved $2.3M over three years in one study.
Allocating Premium Licenses by Role
One of the key advantages of these add-on licenses is the flexibility to assign them to specific users or roles who need the enhanced features. A cost-effective strategy involves assigning different license levels based on risk profile, job function, and data access:
| Role | E5 Security | E5 Compliance | Rationale |
|---|---|---|---|
| Executives / VIPs | Required | Required | High-value cyber targets. Handle the most sensitive data. Need full Defender suite and compliance coverage for legal retention. |
| IT Admins / Security | Required | If admin | "Keys to the kingdom" accounts. Need PIM, risk-based MFA, and full Defender. E5 Compliance if they administer compliance tools. |
| Legal / Compliance Officers | Optional | Required | Need Advanced eDiscovery, legal holds, and audit. E5 Security only if they also handle high-risk data or are cyber targets. |
| HR / Insider Risk Team | Optional | Required | Need Insider Risk Management and Communication Compliance dashboards. Often a small group of 2-3 investigators. |
| Finance / High-Impact | Recommended | Recommended | Handle earnings data, customer financials. Need stronger email protection and endpoint DLP. Assess per risk level. |
| Developers / Engineers | Recommended | Baseline | Access source code and IP. Benefit from AAD P2, Defender for Cloud Apps for monitoring unusual data downloads. |
| Frontline / General Staff | Baseline | Baseline | Lower risk profile. Secure with MFA, Exchange Online Protection, and basic DLP. Upgrade selectively if handling sensitive data. |
License management tip: Use Azure AD group-based licensing. Create security groups for each role (e.g., "Execs - E5 Security") and assign licenses to those groups. This automates deployment as people join or leave roles and provides a clear mapping for audits and renewals.
Evaluating Cost-Effectiveness: E5 Add-ons vs. Baseline vs. Third-Party
CIOs must continuously evaluate whether Microsoft's premium features justify their cost compared to baseline tools or third-party products. Here is how to approach this analysis:
1. Understand Baseline Capabilities
Know what M365 E3 already provides: Azure AD P1 for basic identity (MFA, conditional access), some threat protection (Defender for O365 Plan 1), Intune for device management, and core compliance features (basic eDiscovery, DLP in Office apps). Evaluate recent incidents: if phishing slips through or data exfiltration goes undetected, the baseline is insufficient.
2. Identify Gaps and Overlaps
List what E5 Security or Compliance would add and map against your specific gaps. If you already own third-party CASB, endpoint detection, or DLP, check if E5 could replace those. Consolidating multiple tools into Microsoft 365 often saves money and simplifies operations.
3. Use Data to Justify ROI
Factor in risk reduction and tool consolidation. Tangibly: eliminate subscription costs for redundant third-party products. Intangibly: breach prevention and rapid response have significant financial impact. E5's advanced tools can lower breach likelihood by 30% and cut breach costs nearly in half.
4. Compare Against Third-Party Efficacy
Evaluate whether third-party tools are truly "best of breed" and providing value above Microsoft's native offering. Consider the integration and complexity cost: a patchwork of solutions means multiple consoles, potential gaps, and slower response. Microsoft's integrated approach correlates signals automatically across domains.
5. Consider Partial Deployment
By limiting E5 add-ons to 20% of users who account for 80% of risk, you maximize value. Instead of upgrading all 10,000 employees, license 2,000 key users. Many enterprises use an "E3 for most, E5 for few" strategy to stay within budget.
Key principle: Paying twice for the same capability is never cost-effective. Once you adopt an E5 add-on, retire any redundant third-party subscriptions. Create a roadmap: list current tools by category (Identity, Endpoint, Email, CASB, DLP) and determine which Microsoft now covers.
Best Practices: Consolidating Third-Party Tools into the Microsoft Stack
Adopting E5 security and compliance features creates an opportunity to consolidate formerly siloed tools into a unified platform. Fewer vendors means lower costs, streamlined IT operations, and improved security through integration.
🛡️ Integrated XDR Approach
Replace standalone anti-malware, EDR, CASB, and email filtering with corresponding Defender components. Use Microsoft 365 Defender as your centralized console for correlated, cross-domain alerts.
🔐 Identity Consolidation
Consolidate onto Azure AD Premium P2 as your single SSO, MFA, conditional access, and identity governance platform. Evaluate migrating from Okta or Duo to reduce complexity and cost.
💻 Endpoint Security
Transition to Defender for Endpoint P2 plus Intune as your primary endpoint security and management. Built into Windows 10/11, reducing agent bloat. Native integration with Azure AD conditional access.
📄 Data Protection and DLP
Use sensitivity labels as your unifying classification system. Enforce protection through Purview DLP across Exchange, SharePoint, Teams, and endpoints. Phase out legacy DLP agents.
📧 Email Security
Consider whether Defender for Office 365 P2 can replace your third-party secure email gateway. Safe Links, Safe Attachments, and impersonation detection are on par with many SEG products.
☁️ Cloud App Security
Evaluate whether Defender for Cloud Apps can replace third-party CASBs (Netskope, McAfee Skyhigh). Shadow IT discovery, OAuth app monitoring, and DLP for cloud transactions, all feeding into one portal.
⚡ Automation and Response
Develop unified playbooks using Microsoft's automation: automatic investigation in Defender, cross-domain remediation (isolate device, reset password, initiate eDiscovery hold), all within one ecosystem.
🔄 Continuous Improvement
Microsoft releases updates frequently. Stay informed via the roadmap. A feature update can allow you to disable another tool. Being agile in adoption ensures maximum consolidation value.
CIO Recommendations
Here are the key actions and licensing strategies for CIOs planning for security and compliance in Microsoft 365:
1 Align License Levels with User Risk
Take a tiered approach. Perform a role-based risk assessment and assign E5 Security to accounts that are prime cyber targets (executives, admins) and E5 Compliance to those handling legal, HR, or sensitive data oversight. Maximize protection where it is needed without overspending on low-risk users.
2 Leverage E5 Add-ons Before Full Suite Upgrades
Use E5 Security and E5 Compliance add-ons as flexible ways to enhance capabilities without switching everyone to a full E5 subscription. Start with an E5 Security add-on for 500 users in critical roles rather than E5 for all 5,000 users. Get much of the E5 value at a fraction of the cost.
3 Compare Bundle vs. Standalone Costs
Prefer Microsoft's bundled suites (E5 add-ons or EMS E5) over standalone feature licenses. Bundles are generally priced for better value. EMS E5 includes AAD P2, Defender for Identity, Cloud App Security, and AIP P2 together at lower cost than buying them separately.
4 Consolidate and Retire Redundant Tools
Audit existing security and compliance solutions. Plan to retire third-party tools that overlap with E5 features. Common targets: legacy email gateways, separate MDMs, on-premises DLP, standalone CASBs, and secondary identity providers. Each eliminated redundancy is one less contract and one less platform to maintain.
5 Maximize Feature Usage (Avoid Shelfware)
Buying an E5 add-on does not improve security. Using the features does. Set project timelines to roll out each component. Provide training to IT staff and end-users. Measure feature usage through Microsoft's analytics. The goal is to derive the full value from every E5 license you pay for.
6 Pilot and Phase Deployment
Start with pilot groups for Defender for Endpoint or Purview DLP. Work out configuration issues, build internal success stories, and validate that Microsoft's tools function as expected in your environment. Quick wins (MFA for all, basic Safe Links) can be done early with immediate risk reduction.
7 Track Outcomes and Value
Track key metrics: reduction in malware incidents, phishing emails caught, time saved in eDiscovery, and cost savings from eliminated products. Compile metrics into reports for executive leadership. With hard data, justify ongoing investment and identify areas for expansion.
8 Maintain Licensing Flexibility
Use annual true-up or true-down cycles to adjust license counts. Consider short-term add-on subscriptions for temporary projects (e.g., a big legal case needing many mailboxes on hold). Periodically audit who has E5 add-ons and confirm they still need them.
9 Partner with Stakeholders
Engage executive risk committees, legal, HR, and the board. Garner CFO support with consolidation savings and CEO support with reduced risk. Work closely with HR and legal when deploying tools like Insider Risk or Communication Compliance. Use Microsoft licensing partners for expertise and promotional programs.
10 Embrace the Full Ecosystem (Long-Term)
Plan for a future where most security and compliance needs are met within the Microsoft 365 ecosystem. Keep an eye on innovations: Microsoft Sentinel, Microsoft Priva, new Entra ID features, AI security copilot. As a large E5 customer, you gain more support and influence on feature requests. Commit to the platform and shape your roadmap around it.
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