Cost Savings In Microsoft 365

Great thread — the "more licensed users than employees" line is exactly how these usually start. On top of the buckets already covered, here's what moved the needle most when we did this systematically:

1. Building on HarryP's shared-mailbox point— worth chasing hard, and it has a licensing edge case people miss: a shared mailbox is freeuntil it needs an archive / litigation hold (or grows past 50 GB), and if you want Defender for Office 365 to actually cover it, that can pull a license back in. So "unlicense all shared mailboxes" isn't automatically safe — check archive/hold status first.
2. Redundant add-ons are pure, risk-free removal.The one a usage report never flags, because the licenselooks used: a standalone add-on stacked on a suite that already includes it — Defender for O365 P2 on top of E5, Entra ID P1 next to Business Premium, standalone Intune next to E3/E5, Power BI Pro next to E5. No downgrade risk, just stop paying twice.
3. Split the waste before you touch it."Assigned but never signed in" (offboarding leftovers, service accounts) is pure removal. "Signs in but never touches the premium workloads" is adowngrade, not a removal — E5→E3, E3→Business, or an F-tier for frontline (a fraction of an E3). Different action, different risk.
4. Anchor every downgrade on real feature usage, not gut feel.Only keep E5 where Defender for O365 P2, Purview, or Teams Phone is genuinely in use — everything else is an E3 conversation. This is what makes the 22 % defensible instead of a guess you have to walk back later.
5. Don't forget the newest, most expensive seat: Copilot.At $30/user/month (annual commitment), one assigned-but-unadopted Copilot costs about as much as three unused E3s. Pilots get rolled out broadly and never re-trued — check actual Copilot interaction counts in the usage reports, not just who has the license.
6. The lever that isn't about usage at all: your NCE terms.Monthly-term seats run ~20% over annual, and even annual-commitment-paid-monthly carries a ~5% premium over paying upfront. Permanent headcount sitting on monthly terms is money left on the table — and shrinking teams stuck on annual commitments is the opposite trap. Worth a pass every renewal.

Full disclosure: I build a tool in this space, so I'm biased — but all of the above works with plain Graph + the M365 usage reports, no tooling required. Happy to go into how we set the usage thresholds; bit more in my profile.

— Philipp