How to Save Money on Microsoft Licensing Costs
- Assess usage: Avoid paying for unused licenses.
- Use volume licensing: Get discounts for bulk purchases.
- Switch to Microsoft 365: Pay monthly or annually for cloud-based services.
- Leverage existing agreements: Check for unused entitlements or benefits.
- Consider Open License: Flexible option for small businesses.
- Evaluate software assurance: This may provide savings and upgrades.
How to Save Money on Microsoft Licensing Costs
Microsoft licensing can be a major budget headache for organizations of all sizes. It isn’t just the cost itself but also how quickly and easily those costs can spiral out of control if not managed carefully.
The average business wastes about 44% of their Microsoft 365 licenses due to underutilization or improper sizing.
However, there are strategic ways to change that.
Let’s explore some practical ways to optimize Microsoft licensing costs.
1. License Usage Analysis
The first step to saving money is understanding your current spending and why. Conduct a license usage analysis. You need to look at your existing licenses and ask a few questions:
- Are there inactive licenses that could be reassigned?
- Are there high-tier licenses being used where a lower-cost option would suffice?
- How many employees are using the features for which they are licensed?
This analysis can be eye-opening. Regular audits of license usage will help uncover wasted spending and show where changes can save money immediately. Licensing analysis should also be carried out at least once a quarter, ideally monthly, to ensure the organization’s license environment aligns with current needs.
Tools like Microsoft’s Admin Center or third-party license management solutions can provide detailed insights into license usage patterns and help identify areas for cost savings.
You can also consider using automated license optimization tools to continuously monitor the license usage and help identify underutilized or redundant licenses. Investing in such tools allows you to set up alerts for unused licenses, streamline license allocations, and quickly make adjustments to save money.
2. Choose the Right Plans
Picking the appropriate licensing plan is a straightforward yet effective strategy. Here’s how to make sure you get it right:
- Small Organizations: If your organization has fewer than 300 users, start with Microsoft Business plans rather than jumping into Enterprise-level licenses. Business plans can often meet all your needs at a lower cost.
- Large Organizations: Enterprise plans may be the right choice for bigger companies, especially when specific advanced features are required.
- Mix-and-Match: You don’t need every employee on the same plan. Use a mix-and-match approach to ensure that only the employees who need high-tier features get those licenses. Others can be on basic, less expensive plans.
This flexibility helps reduce unnecessary expenditure. It’s worth noting that selecting the right plan isn’t just a one-time decision. Needs evolve, especially as organizations grow or change their focus.
If your team expands, you may need to consider hybrid models, in which some members can access advanced tools while others can use basic functionality. Additionally, Microsoft regularly changes its product offerings and pricing, so it’s critical to stay updated and review the options periodically.
Organizations can also consider Microsoft’s NCE (New Commerce Experience) for simplified licensing agreements. This new licensing approach offers more flexible billing options, including monthly, annual, and multi-year contracts, which can suit organizations’ different financial needs.
3. Annual Billing vs. Monthly Billing
Opting for annual billing instead of monthly payments is a small but significant move. Microsoft typically offers discounts for annual commitments. Switching to annual billing can save a substantial amount over a year.
Here’s how to make the switch:
- Log in to the Microsoft 365 Admin Center.
- Go to the Billing section.
- Click on Subscriptions.
- Change the payment option to Annual.
These small tweaks can add up to big savings. It’s also important to align your annual billing cycle with your organization’s fiscal year to optimize cash flow and manage budgets more effectively. However, note that annual billing locks you in for a year, whereas monthly billing is more flexible if you foresee possible downsizing or workforce fluctuations.
Another consideration with billing is the difference between user-based and device-based licenses. Suppose multiple employees share the same devices across different shifts, such as in a healthcare setting or retail environment. In that case, device-based licenses can provide significant cost savings compared to per-user licenses.
4. Advanced Cost-Saving Techniques
A. Monitor Inactive Licenses
If you’re not using a license, why pay for it? Organizations often hold licenses for employees who have left or changed roles. Companies can cut costs by up to 14% by monitoring and managing inactive licenses.
- Set up a process to audit licenses regularly.
- Identify and reclaim licenses from employees who have left.
- Reassign licenses to new employees rather than purchasing new ones.
It’s all about keeping track and making sure each license counts. In addition to employees who have left, it’s worth examining licenses held by temporary employees or contractors. For organizations with seasonal fluctuations, such as those in the retail sector, temporary licenses can be allocated to temporary workers to save money.
B. Right-Sizing Licenses
Do your employees have the licenses they need? The answer often is not always. Look at usage data. If someone is licensed for advanced features but uses only the basics, it’s time to downgrade. Here are some examples:
- Downgrade employees to a cheaper plan if they aren’t using advanced capabilities.
- Upgrade only when necessary.
- Establish regular reviews to monitor whether license needs have changed.
Right-sizing can include downgrading licenses and leveraging add-on licenses for users who need specific capabilities only temporarily.
For instance, some features, such as Microsoft Teams Phone System, may not be required by everyone, so instead of paying for an enterprise license, you can purchase add-ons for only those who need these specific features.
Right-sizing also encourages the use of cost-effective tools like Power Apps and Power Automate, which can often achieve the same results without upgrading entire licenses.
C. Consolidation Benefits
Another way to save money is to consolidate services under Microsoft 365. Organizations can save up to 60% on licensing costs by reducing redundant software.
- Instead of using separate email, collaboration, and document management tools, look to Microsoft 365 to cover all those needs.
- It helps reduce per-user costs while simplifying management.
- Fewer tools mean less IT administration time, which saves money in the long run.
Consolidating licenses also means fewer security headaches. By keeping everything under one roof, you benefit from streamlined security, reduced vulnerability risk, and lower management overhead for IT teams.
Microsoft’s unified platform, including Teams, OneDrive, and SharePoint, allows for collaborative work without needing third-party tools, eliminating redundant software and cutting costs.
Read how Microsoft licensing compares to enterprises and small businesses.
5. Enterprise-Specific Considerations
A. Volume Licensing
For larger organizations, volume licensing programs can bring substantial cost savings. Volume licensing includes benefits such as:
- Discounts on bulk purchases.
- More flexible deployment options.
- Simplified management for handling a larger number of licenses.
These programs are particularly useful if numerous users need licenses, as they offer better rates. Microsoft has several volume licensing programs, such as the Enterprise Agreement (EA), Enterprise Subscription Agreement (ESA), and Microsoft Products and Services Agreement (MPSA). Each agreement offers different pricing and flexibility options, depending on your organization’s size and needs.
One notable volume licensing option is the Microsoft Enterprise Agreement, tailored for organizations with over 500 users or devices. It allows for organization-wide standardization and offers per-user and per-device pricing, simplifying license management.
B. Azure Hybrid Benefit Optimization
If your organization uses Azure, the Azure Hybrid Benefit can save you up to 80% on Azure licensing by leveraging existing on-premises Windows licenses. Here’s what to consider:
- Use licenses you already own for cloud workloads.
- Evaluate whether a hybrid cloud setup could fit your organization’s needs while decreasing costs.
- Proper planning for cloud migration can help get the most out of existing licenses.
With Azure Reserved Instances (RI), you can further reduce costs by committing to a specific capacity over a long-term period, such as one or three years. This form of advance purchase ensures better discounts. Combine it with the Hybrid Benefit for even more substantial savings. Additionally, consider leveraging Azure Cost Management tools to monitor cloud spending and maximize savings.
Microsoft Licensing for non-profits
6. Best Practices for Implementation
A. Regular Monitoring
Continuous monitoring is key to keeping costs low. Set up regular audits to track usage levels:
- Monitor how active users are with the licenses they have.
- Identify features that are underutilized and consider downgrading.
- Ensure all licenses are assigned and in use.
This proactive approach prevents overspending and highlights areas where you can make cost-effective adjustments. Automated license tracking tools such as Microsoft 365 Usage Analytics can be invaluable. Dashboards can provide insight into usage patterns, helping IT teams make data-driven decisions regarding downgrades or reallocations.
B. Proactive Management
Proactive management of licenses involves being hands-on about allocation:
- Quickly reassign licenses as employees leave or change roles.
- Set up automated provisioning and de-provisioning systems to keep everything in order.
- Regular usage reviews are essential to keep tabs on shifting needs.
These steps help you keep up with changes and avoid paying for something you don’t need. Leveraging tools like Azure AD to automatically de-provision access when employees leave can mitigate risks and reduce costs from lingering inactive licenses.
C. Cost Control Measures
A few more steps can further cut down costs:
- Set storage limits in OneDrive to prevent costs from creeping up.
- Automate license management to minimize human errors and optimize license allocation.
- Regularly review your security and compliance needs to ensure you aren’t overspending on unnecessary security features.
7. Long-Term Optimization Strategies
A. User Training and Adoption
Invest in user training. It might seem counterintuitive, but getting users to adopt and properly use the tools they have can reduce the need for third-party applications. This means:
- Training programs to help users understand the full potential of the tools available to them.
- Monitor adoption rates and offer targeted training for those who are underutilizing applications.
- A well-trained workforce makes better use of the tools, reducing the need for unnecessary licenses or overlapping software.
Ensuring the workforce knows how to use advanced features can mean fewer add-ons or third-party solutions. For example, many organizations invest in additional project management software because their teams are unaware that Microsoft Teams and Planner can be combined to offer similar functionalities.
B. Compliance and Security
Ensuring you meet all compliance requirements while not over-purchasing security tools is a balancing act.
- Regularly audit licensing to make sure each security feature has a reason.
- Maintain compliance without adding unnecessary licensing overhead.
- Ensure data protection features are properly managed to meet compliance and cost objectives.
Remember that compliance requirements can vary greatly across industries. Certain industries like healthcare or finance may require specific tools to ensure HIPAA or GDPR compliance. Aligning your license types to these requirements is crucial to avoid overspending.
C. Future Planning
Planning for growth is an important part of keeping licensing costs low. Keep these in mind:
- Flexibility: Make sure your licensing plans allow for scaling up or down without incurring massive fees.
- Regularly review licensing needs to align with changing business objectives.
- Look for scalable license management solutions that can adapt as your organization grows.
Work closely with your Microsoft reseller to watch for promotions and better licensing deals. In some instances, moving to a new type of licensing can present opportunities for discounts or promotions that can save your organization money.
8. Stay Informed on Licensing Changes
Microsoft licensing is not static. It changes as products evolve and new offerings are introduced. Keeping up with new licensing options and feature updates can help you switch to more cost-effective plans or retire unnecessary features.
Given the pace of change in the tech world, staying informed can be challenging. Engage with your Microsoft representative regularly to inform you of new licensing models, product launches, or updates that could impact your licensing needs. Joining Microsoft communities or subscribing to newsletters can help you stay updated on the latest changes.
FAQ: How to Save Money on Microsoft Licensing Costs
What is volume licensing, and how can it save money?
Volume licensing offers discounts for bulk purchases, reducing the overall cost per license.
How can Microsoft 365 help cut licensing costs?
Microsoft 365 provides a subscription model that is often cheaper than individual licenses, with cloud storage and frequent updates.
Are OEM licenses a cost-effective option for businesses?
Yes, OEM licenses are typically cheaper because they come pre-installed on devices. They are ideal for new devices or small setups.
What is CSP licensing, and how can it help businesses save money?
Cloud Solution Provider (CSP) licenses allow businesses to buy Microsoft services through resellers, often with flexible terms and potential cost savings.
Can businesses reduce licensing costs by consolidating software needs?
Yes, consolidating software under one plan can eliminate unnecessary purchases and reduce duplication of tools.
How do I audit Microsoft licenses to identify cost-saving opportunities?
Regular audits help identify unused licenses, overprovisioned software, and areas where you can downgrade or remove services.
Does Microsoft offer any discounts for nonprofit organizations?
Microsoft offers discounted licenses to nonprofits, which can help reduce software costs.
Can I save money by downgrading my Microsoft licenses?
If your business no longer needs certain features, downgrading licenses to a lower-tier option can significantly save costs.
How does licensing by device differ from licensing by user?
Licensing by device is cost-effective for businesses with shared devices, while user-based licensing is better for mobile or remote workers.
Can multi-year licensing agreements offer savings?
Yes, signing multi-year agreements often comes with discounts and lower upfront costs.
What role do Software Assurance benefits play in saving money?
Software Assurance offers access to future software updates, which can save money on upgrades and new licenses.
Is it more cost-effective to buy Microsoft licenses through a reseller?
Resellers may offer competitive pricing and flexible payment terms, potentially reducing the overall cost.
How can I optimize license management to lower expenses?
Implementing license management tools can help track software usage, avoid overbuying, and ensure compliance.
What are the potential risks of over-licensing Microsoft software?
Over-licensing results in paying for more licenses than necessary, leading to unnecessary costs and wasted resources.
How can I assess if my current Microsoft licenses are aligned with my needs?
Review your current licenses periodically and adjust based on actual usage to avoid paying for unneeded services.
