Contents
Key takeawaysWhat Microsoft SAM is forThe four stagesBuilding the usage viewSeat reclaimRight sizing by roleWorked exampleClean data in the renewalWhat we have seenRenewal timelineWhat to do nextFAQMicrosoft SAM run by your own team is a savings program. Reclaiming idle seats returns cash within a quarter, matching plans to roles lowers every later renewal, and reconciled data gives you the stronger hand when Microsoft negotiates.
- SAM should find waste. Partner led SAM tilts toward more spend and feeds the audit team, so run the same reconciliation yourself and point it at the bill.
- Order matters. Build visibility first, then reclaim, then right size, so each stage pays for the next.
- Reclaim is the fast win. Recovering leavers, duplicates and parked seats returned 10 to 20 percent of Microsoft 365 spend within one quarter across our engagements.
- Right sizing is the larger one. Matching E5, E3 plus add ons and F3 to roles cut a further 12 to 22 percent over the following renewal, and the saving compounds.
- Time the reclaim to the contract. Seats come off the invoice at the EA anniversary or the CSP term renewal, so finish the work before the true up is due.
- Clean data wins renewals. Buyers with reconciled SAM data negotiated renewals 8 to 15 percent better than those without.
What is Microsoft SAM, and what should it do for you?
Microsoft software asset management (SAM) is the practice of tracking, reconciling and optimizing your Microsoft licenses against what people actually use. Run by your own team, its main job is to find waste in the bill. Passing an audit is a side effect of doing that job well.
The method is the same whoever runs it. The difference is who the findings serve. A program you own ends in fewer paid seats and cheaper plans, and it gives your negotiators a reconciled count before Microsoft produces its own.
Why the vendor's version of SAM is not neutral
Microsoft frames SAM through partner led engagements, and three things tilt them. Partner economics reward licensing more. The data collected feeds the same Microsoft practice that runs audits. And the final deliverable tends to recommend the upgrade path.
Our guide to common Microsoft audit findings covers the link in full: a SAM engagement often works as the soft opening of an audit. The defense is to build the same reconciliation Microsoft would build, for your side, before any invitation arrives. Our note on preparing for a Microsoft SAM review covers the scoping.
The Microsoft EA Preparation Playbook: The Work That Wins the Renewal
In what order should a Microsoft license optimization program run?
Run it in four stages: visibility, reclaim, right sizing, then negotiation. The order is fixed because you cannot optimize licenses you cannot see, and because each stage pays for the one after it.
| Stage | The work | What it returns |
|---|---|---|
| Visibility | Entitlements, assignments and actual usage joined per user and per workload | The precondition. Nothing later works without the reconciled view |
| Reclaim | Idle seats, duplicates, leavers and parked assignments recovered | Seats taken off the invoice at the next true up or term renewal |
| Right sizing | Plans matched to roles: E5 where it is earned, E3 plus add ons, F3 for the frontline | A lower run rate from the next renewal, repeated every year after |
| Negotiation | The reconciled count taken into true ups, audits and renewals | A better renewal outcome, because your data sets the terms of the discussion |
Reclaim pays for the tooling and the program before the next true up. Right sizing then covers the cost of preparing the negotiation, and the negotiation collects on both.
Why we advise against opening with a SAM maturity assessment
The usual advice is to start with governance: a maturity assessment, policies and a tool, then savings. We disagree, because programs that start that way invert the sequence and run out of budget before they find money. Start with the reclaim instead. A program that returns cash in its first quarter gets funded for the rest of the year.
Microsoft EA Renewal Guide
How to prepare the counts, the plan mix and the asks before Microsoft sends its proposal.
Get the white paper →How do you build the three way view of licenses, assignments and usage?
Join three data sets per user: what you bought, what is assigned, and what is used. Each lives in a different place, and none of them alone tells you where the waste is.
Where each data set lives
- Entitlements. Your enrollment and its latest license statement, plus the product list under Billing in the Microsoft 365 admin center. Reconcile the two, since reseller orders and direct orders often sit in different places.
- Assignments. Microsoft Entra ID shows which user holds which license and whether it came directly or through group based licensing. Export it, because group rules explain many duplicates.
- Usage. The usage reports in the Microsoft 365 admin center cover the last 7, 30, 90 and 180 days per workload. They hide user names by default, so clear "Conceal user, group, and site names in all reports" under Settings, Org settings, Services, Reports before you export.
- Sign in activity. The lastSuccessfulSignInDateTime property in Microsoft Graph, or the "Last interactive sign in time" column in the Entra admin center, shows accounts that no longer log in. Graph access to that property needs Entra ID P1 or P2, which E3 and E5 include.
What counts as an idle seat
Set the rule before you look at names. A reasonable first cut is a licensed account with no sign in and no workload activity across the 90 day report. Confirm each candidate with HR data and the manager, since long leave and seasonal staff look identical to leavers in the logs.
Where does seat reclaim find money in Microsoft 365?
Reclaim is the fast win. Across our engagements, recovering idle and duplicate seats returned 10 to 20 percent of Microsoft 365 spend within one quarter, using directory data joined to usage and a true up calendar. The waste sits in a small number of places:
- Leavers. Accounts never deprovisioned after people left, sometimes still licensed years later.
- Duplicate assignments. The same person licensed in two tenants, often after an acquisition, or twice in one tenant through overlapping group rules.
- Parked seats. Full suites assigned to service accounts, test users, meeting rooms and shared inboxes that need no license or a far cheaper one.
How to keep a leaver's data without paying for the seat
Leavers often stay licensed because someone wants to keep their email. Microsoft holds a user's data for 30 days after the license is removed and then deletes it permanently, SharePoint documents excepted. That deadline is real, but there are cheaper ways to keep the content.
- Shared mailbox. Convert the leaver's mailbox. A shared mailbox stores up to 50 GB with no license assigned.
- Legal hold. A shared mailbox on litigation hold needs Exchange Online Plan 2, or Plan 1 with the Exchange Online Archiving add on, which is still far cheaper than a full suite.
- Inactive mailbox. Apply a retention policy or hold before you delete the account, and the mailbox becomes an inactive mailbox that keeps its content. Confirm the hold first, because without it the mailbox is simply deleted.
When a reclaimed seat becomes cash
Removing a license in the tenant does not change the invoice. Under an Enterprise Agreement, the count comes down at the enrollment anniversary, within the limits your enrollment sets for enterprise products. The annual true up order is due 30 to 60 days before that anniversary, so the reclaim must be finished before then.
Under CSP, license based subscriptions on the new commerce terms allow cancellation with a prorated refund only within seven days of purchase. A reclaimed seat on an annual term therefore lowers cost at the term renewal. Until then, give it to the next new hire and stop buying new seats.
Check group based licensing before you count a seat as reclaimed. A license removed directly from a user comes straight back if a group rule assigns it, so fix the group membership instead.
How do you right size Microsoft 365 plans by role?
Match each user's plan to evidence of what that role uses. That means E5 for the people who exercise the security and compliance stack, E3 plus targeted add ons for the broad workforce, and F3 for frontline roles. Across our engagements, right sizing cut a further 12 to 22 percent over the following renewal.
Scope the add on lines, such as the Defender security suite and the Copilot attach, with the same persona evidence. Microsoft lists E3, E5, F1, F3 and the Business plans as eligible bases for Microsoft 365 Copilot, so Copilot is no reason to move anyone to E5.
What an E5 user loses when moved to E3
Before you move anyone down, list the E5 components they touch and price the ones they need as add ons:
- Power BI Pro. Included in E5. Report authors moved to E3 need it back at $14 per user per month.
- Teams Phone and Audio Conferencing. Included in E5, separate purchases on E3.
- Defender for Endpoint P2 and Entra ID P2. E3 carries the P1 versions. Check whether your security team runs P2 features on these users.
- Purview premium compliance. eDiscovery (Premium) and the advanced retention features that legal or compliance teams may rely on for specific groups.
Our E5 shelfware guide lists the usage signals that show whether a population uses the E5 stack at all, and our E3, E5 and F3 comparison sets out what each plan contains.
Which users fit F3?
F3 suits people on shared or mobile devices who live in Teams, email and line of business apps. It carries a 2 GB mailbox, 2 GB of OneDrive storage and no desktop Office apps. Keep it for roles that fit Microsoft's description of frontline work, since a desk based user on F3 invites questions.
Why the right sizing saving grows each year
The mix correction shrinks the base that every later price uplift and discount applies to. That multiplication runs through all twelve negotiation points in our guide to Microsoft negotiation leverage. Our Microsoft 365 license optimizer runs a first pass on your mix in minutes.
What does the arithmetic look like for a 6,000 seat tenant?
Say you license 6,000 users: 2,000 on Microsoft 365 E5 and 4,000 on E3. At the list prices in force from July 1, 2026 ($60 for E5, $39 for E3, $10 for F3 and $14 for Power BI Pro, per user per month, suites with Teams), the annual bill is $3,312,000 before discounts.
| Step | Change | Annual effect | Annual run rate |
|---|---|---|---|
| Starting point | 2,000 E5 at $720 a year, 4,000 E3 at $468 a year | $3,312,000 | |
| Reclaim E3 | 300 leavers, 130 duplicates, 90 service accounts removed | 520 x $468 = minus $243,360 | $3,068,640 |
| Reclaim E5 | 140 idle E5 seats removed | 140 x $720 = minus $100,800 | $2,967,840 |
| E5 to E3 | 1,000 users with no E5 workload activity moved down | 1,000 x $252 = minus $252,000 | $2,715,840 |
| Add back Power BI Pro | 250 of those users author reports | 250 x $168 = plus $42,000 | $2,757,840 |
| E3 to F3 | 900 frontline users moved to F3 | 900 x $348 = minus $313,200 | $2,444,640 |
In this example the reclaim removes $344,160, about 10.4 percent of the starting bill. Right sizing removes a net $523,200, about 17.6 percent of the reduced base. The final mix is 860 E5, 3,580 E3, 900 F3 and 250 Power BI Pro seats.
The compounding shows at the next price change. A hypothetical 5 percent uplift on the original bill would add $165,600 a year. On the corrected base it adds $122,232, a gap of $43,368 every year the uplift applies.
How does clean SAM data change a Microsoft renewal?
Clean data means the renewal starts from your numbers. Across our engagements, buyers with reconciled SAM data negotiated renewals 8 to 15 percent better than those without. The true up files from your count, an audit finds gaps you already fixed, and the renewal starts from measured usage instead of the account team's assumptions.
What the account team will say, and what to answer
- "Our partner can run a free SAM review for you." Thank them and decline until your own reconciliation exists. If you accept later, agree the scope in writing and share reconciled results, never raw discovery output.
- "Moving users off E5 will cost you the discount." Ask for the per seat price at the lower E5 count in writing. Then compare any change in discount with the saving on the moved seats before you accept the claim.
- "E3 plus add ons ends up more expensive than E5." That holds only if every user needs every add on. Price the add ons for the users who use them, as in the example above.
- "Adoption is growing, so plan for growth in the renewal." Answer with the 90 day activity data by plan. Commit to what is used, and ask for the right to add seats later at the same price.
Our guide to the Microsoft EA true up covers how to file the count once the reclaim is done.
What have we seen in recent Microsoft SAM engagements?
I led roughly 30 to 45 Microsoft SAM and optimization engagements between 2024 and 2026, and the savings came larger and faster than buyers expected. The reclaim rarely needed a new tool. Directory data, the admin center reports and a calendar built around the true up date did most of the work.
Buyers who expected a governance program found a cash program, because the waste was never subtle.
The waste looked the same from client to client: leavers licensed for years, duplicate assignments across tenants, and E5 applied as a blanket over populations that F3 would serve. What kept the savings in place was a quarterly cycle. Reconcile, reclaim, move users to the right plan, and carry the current position into whichever negotiation comes next.
When should each step happen before a Microsoft renewal?
Start 12 months out. The reclaim needs one quarter, right sizing needs change management, and both must land before the count you commit to at renewal is fixed.
| Time before renewal | What to do |
|---|---|
| 12 months | Build the three way join of entitlements, assignments and usage. Clear the report name concealment and export 180 days of activity. |
| 9 months | Run the reclaim: leavers, duplicates, parked seats. Move leaver mailboxes to shared or inactive status first. |
| 6 months | Define personas from usage evidence. Pilot the E5 to E3 and E3 to F3 changes with one business unit. |
| 3 months | Finish the plan changes. Price the renewal at list on the corrected mix and prepare the counts you will commit to. |
| 1 to 2 months | File the final true up 30 to 60 days before the anniversary and negotiate from the reconciled count. |
What to do next
- Build the join first. Put entitlements, assignments and usage side by side per user, because every later step depends on it.
- Run the reclaim this quarter. Recover leavers, duplicates and parked seats, and take them out at the true up instead of renewing them by inertia.
- Fix the offboarding process. Convert or hold leaver mailboxes on the day people leave, so the waste stops coming back.
- Move users by role evidence. Keep E5 where it is earned, use E3 plus add ons for the broad workforce and F3 for the frontline, and let the correction compound at every renewal.
- Decline the partner led SAM invitation for now. Wait until your own reconciliation exists, since the same data can serve opposite sides.
- Take the reconciled count into every negotiation. Use it at the true up, in any audit and at renewal. Our Microsoft practice can run the quarterly cycle with you.
Frequently asked questions
What is Microsoft software asset management?
It is the ongoing work of matching the Microsoft licenses you pay for against the licenses assigned and the ones actually used, then acting on the gaps. Microsoft's version is partner led and framed around compliance. Run by your own team, it becomes a savings program that also leaves you ready for an audit.
How much can Microsoft license optimization save?
It depends on how much waste has built up. In our hypothetical 6,000 seat tenant at July 2026 list prices, reclaim and right sizing together cut the annual bill from $3,312,000 to $2,444,640, about 26 percent. Leaver backlogs, duplicates after mergers and E5 applied as a blanket hold most of the saving.
What is the fastest Microsoft licensing win?
Seat reclaim. Leavers never deprovisioned, duplicate assignments and service accounts holding full suites can be found by joining directory data to usage reports. It needs no plan changes and no user retraining, so it is the quickest saving to bank, and it usually funds the rest of the optimization program by itself.
Should we accept Microsoft's free SAM engagement?
Not before your own reconciliation exists, because the data a partner collects reaches the same Microsoft practice that runs audits. If you accept later, agree in writing which products are in scope, what data leaves your environment and who receives the report, and share reconciled summaries instead of raw tool exports.
What does role based right sizing mean for Microsoft 365?
It means assigning each plan from evidence of use: E5 where the security and compliance stack is exercised, E3 with targeted add ons for most staff, and F3 for frontline roles. At July 2026 list prices, each seat moved from E5 to E3 saves $252 a year before add ons, and each E3 seat moved to F3 saves $348.
How does SAM data improve Microsoft negotiations?
It replaces Microsoft's assumptions with your own telemetry. Bring three exhibits to the table: the reconciled license count by plan, 90 day activity by plan, and the list of seats already removed. The account team then has to argue from your numbers instead of from its own proposal.
Do removed Microsoft 365 licenses lower the bill straight away?
No. Unassigning a license frees the seat in the tenant, but the invoice changes only when you lower the count: at the anniversary under an Enterprise Agreement, or at term renewal for annual CSP subscriptions. Until then, reuse freed seats for new hires.