Microsoft License Optimization Techniques
Microsoft licenses are often underused or misaligned.
Microsoft licensing is a major expense, so even small optimizations can yield significant savings.
Optimization reduces waste.
License optimization aligns licensing with actual usage and business needs.
It ensures you pay only for what you truly use.
This guide explains proven techniques to optimize Microsoft licenses and responsibly reduce Microsoft licensing costs.
For more insights, read our ultimate guide, Microsoft Licensing Strategy & Optimization.
Step 1 – Identifying Unused and Dormant Licenses
Over time, organizations accumulate licenses that no one is actively using.
Licenses often remain assigned to users who no longer need them.
Without oversight, these dormant licenses stay allocated and drain budgets.
Run regular reports to find accounts with no recent activity.
Reassign or de-provision unused licenses as soon as they are identified.
Improve your offboarding process to reclaim licenses immediately when employees leave.
Checklist:
✔ Inactive users.
✔ Former employees.
✔ Test accounts.
✔ Temporary projects.
✔ Poor offboarding.
Expert Insight: Dormant licenses are the fastest optimization win.
Step 2 – Rightsizing License Tiers
Many organizations give every user a premium license by default.
This one-size approach means paying for features most users never use.
Analyze usage patterns to spot users who can be moved to cheaper plans.
For example, users who only use email and Office apps can be on E3 instead of E5.
Rightsizing matches each user with the right license tier for their needs.
Microsoft license rightsizing ensures each user has the tools they need at the lowest cost.
Checklist:
✔ E5 overdeployment.
✔ Security feature overlap.
✔ Power user misclassification.
✔ Blanket upgrades.
✔ Role misalignment.
Expert Insight: Most users only need a subset of premium features.
Step 3 – Optimizing Microsoft 365 License Assignments
Even the best licenses waste money if assigned incorrectly.
Use role-based licensing to align licenses with actual job needs.
Automate assignments with dynamic groups to ensure licenses update when roles change.
Allow higher-tier licenses only by exception and with justification.
Review license assignments regularly and adjust them based on usage changes.
Checklist:
✔ Role-based licensing.
✔ Dynamic group assignment.
✔ Regular review cycles.
✔ Usage-based downgrades.
✔ Controlled exceptions.
Expert Insight: Licenses should follow roles, not titles.
How to manage your licenses: Effective Microsoft License Management Best Practices.
Step 4 – Managing Security and Compliance License Overlap
Overlapping tools mean you pay twice for the same capability.
Many companies have Microsoft security features and separate solutions doing the same job.
Audit usage of built-in security and compliance features before purchasing additional products.
Identify and eliminate redundant tools to reduce cost.
Eliminate one of each pair of overlapping tools to avoid paying double.
Take advantage of security and compliance features already included in your Microsoft licenses before buying additional tools.
Checklist:
✔ Duplicate security tools.
✔ Overlapping endpoint protection.
✔ Redundant compliance features.
✔ Separate vendor solutions.
✔ Unused bundled features.
Expert Insight: Overlapping security tools quietly inflate costs.
Step 5 – Optimizing Azure Related Licensing Costs
Cloud services can hide inefficient license use.
Apply existing license entitlements to Azure workloads where possible.
For example, use Azure Hybrid Benefit to apply on-premises licenses to cloud VMs.
Find idle or overprovisioned cloud resources.
For example, test virtual machines left running can accrue charges without providing value.
Shut them down or resize them to lower costs.
Also, retire any Azure subscriptions that are no longer needed.
Implement consistent tagging to track ownership and usage of Azure resources.
Checklist:
✔ Hybrid benefits review.
✔ Unused subscriptions.
✔ Overprovisioned services.
✔ Idle workloads.
✔ Poor tagging.
Expert Insight: Cloud consumption hides licensing inefficiencies.
Step 6 – Leveraging Volume and Commitment Discounts
Microsoft offers discounts for volume and long-term commitments.
Plan your license needs to buy in bulk and secure better rates.
Align purchases to maximize volume benefits without buying unnecessary licenses.
Avoid committing to more than you actually need.
Base commitments on realistic growth projections, not hopeful estimates.
For example, overestimating the number of licenses needed to get a volume discount will backfire.
Work with your Microsoft representative to understand discount tiers, but stay realistic about your needs.
Checklist:
✔ Commitment planning.
✔ Enrollment timing.
✔ Consolidated purchasing.
✔ Multi-year alignment.
✔ Avoiding overcommitment.
Expert Insight: Discounts only help when usage is accurate.
Step 7 – Optimizing Licenses at Renewal Time
Renewal time is the best opportunity to adjust your licensing.
Clean up and remove any unused licenses before you renew.
Validate your current usage so you only renew what you need.
Use the renewal period to negotiate terms that fit your actual requirements.
Do not allow your agreement to auto-renew without a fresh review.
Start your renewal planning early to maximize your leverage.
If your usage has decreased, use that data to negotiate a lower renewal quantity.
Checklist:
✔ Pre-renewal cleanup.
✔ Usage validation.
✔ Tier adjustments.
✔ Scope reduction.
✔ Timing leverage.
Expert Insight: Renewals lock mistakes in for years.
Step 8 – Aligning Optimization With Business Changes
Revisit your licensing whenever your business changes.
Adjust license counts if your workforce grows or shrinks.
Update license types when your technology strategy shifts.
Make sure licenses reflect current organizational needs and structure.
For example, after a merger, consolidate licenses to eliminate duplicates.
Reduce license counts when parts of the business are sold or spun off.
As you adopt more cloud services, adjust on-premises license counts accordingly.
For instance, more remote work can reduce on-premises license needs while increasing cloud service use.
Checklist:
✔ Workforce growth or reduction.
✔ Mergers and divestments.
✔ Hybrid work shifts.
✔ Security posture changes.
✔ Cloud strategy updates.
Expert Insight: Licensing must adjust as the business changes.
Step 9 – Avoiding Common Optimization Mistakes
Optimize thoughtfully to avoid new problems.
Do not cut essential features that users rely on.
Cutting too deeply can cause productivity losses that outweigh the savings.
Plan for future needs so today’s savings do not cause tomorrow’s shortages.
Put governance in place to control and sustain changes.
Keep security and compliance requirements in mind before downgrading licenses.
Test any major license changes in a small group before company-wide rollout.
Remember that the goal is cost efficiency without sacrificing productivity or security.
Checklist:
✔ Over downgrading.
✔ Ignoring future needs.
✔ Optimizing without governance.
✔ Breaking security models.
✔ Short-term focus only.
Expert Insight: Poor optimization creates operational risk.
Step 10 – Building an Ongoing Optimization Process
Make license optimization a continuous practice.
Assign a team or owner to oversee license management.
Involve stakeholders from security, finance, and IT for a balanced approach.
Schedule regular audits of license usage and costs.
Integrate license reviews into your standard IT governance meetings.
Document changes and track savings from optimizations.
Report results to stakeholders to maintain support for these efforts.
Checklist:
✔ Assign ownership.
✔ Schedule reviews.
✔ Track savings.
✔ Document decisions.
✔ Report results.
Expert Insight: Optimization is a process, not a project.
Step 11 – Using Optimization to Strengthen Negotiations
Optimizing first makes you a stronger negotiator with Microsoft.
Go into renewals with accurate data on what your organization actually needs.
Show Microsoft that you are not paying for excess or unused services.
Be ready to adjust your plans or explore alternatives, showing Microsoft you have options.
Negotiate for contract flexibility to scale down or swap licenses if needed.
This credibility can lead to better discounts and contract terms.
Checklist:
✔ Clean usage data.
✔ Accurate requirements.
✔ Reduced dependency.
✔ Better credibility.
✔ Stronger leverage.
Expert Insight: Microsoft negotiates differently with prepared customers.
6 Expert Takeaways
- Unused licenses create hidden waste.
- Rightsizing delivers immediate savings.
- Security overlap inflates cost quietly.
- Renewal timing matters.
- Governance sustains savings.
- Optimization improves negotiation outcomes.
Read about our Microsoft Optimization Services.
