Why Do Licence Costs Keep Rising?

Licence costs often increase because of commitment terms and poor visibility. Most Microsoft 365 and similar SaaS licences are tied to 12-month agreements, meaning you can’t reduce seats mid-term. Businesses frequently add licences during growth phases but rarely remove them when staff leave. Over time, this creates “licence creep” – paying for accounts that no longer exist.

Other common reasons:

• Spare licences left active “just in case” instead of switching to annual plans.
• No structured offboarding process, so ex-employee accounts remain licensed.
• Over-licensing: assigning premium licences (e.g., Microsoft 365 E5) to users who only need email or basic apps.

Are We Getting Value?

Not always. Many SMEs pay for features they never use:

• A shared mailbox could replace a full user licence.
• Frontline licences (F1/F3) are cheaper and ideal for task-based roles.
• Business Premium is often sufficient, yet some users are given full Enterprise licences unnecessarily.

This mismatch means you’re paying for advanced security, analytics, or compliance tools that your team doesn’t use. Research shows up to 30–44% of Microsoft 365 licences are underutilised, costing SMEs thousands annually.

How to Fix It (and Save Money)

1. Quarterly Licence Audits - Use Microsoft Admin Centre or tools like Power BI to review active vs. inactive accounts. Identify unused licences and downgrade where possible.
2. Right-Size by Role
   Map licences to job functions:
   • Frontline staff → F3 or Exchange Online Plan 1
   • Knowledge workers → Business Standard or Premium
   • Executives needing advanced compliance → E3/E5 only if justified
     This approach can cut costs by 14–30% without reducing capability.
3. Automate Offboarding
   Implement a process to revoke licences immediately when staff leave. Consider licence lifecycle policies to prevent “ghost accounts.”
4. Avoid Duplication
   Stop paying for third-party tools when Microsoft already includes equivalents (e.g., Defender for Endpoint, Teams telephony).
5. Switch to Annual Plans Where Possible
   Annual commitments often cost less than monthly billing and reduce the temptation to keep “spare” licences.

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