Right-Sizing Microsoft 365 Licences: How to Stop Paying for Software You Don’t Use

A Microsoft 365 licensing review is the most reliable way to start right-sizing Microsoft licences across your business. In almost every review we run, there’s something worth changing. Sometimes the business is over-licensed at the top of the stack. Sometimes the mix could be working harder. Often there’s a bit of both, in different parts of the same tenant.

This is the work our Microsoft 365 consulting team does for mid-market Australian businesses every week, and with prices rising on 1 July 2026, the conversation around Microsoft 365 cost optimisation is becoming time-sensitive. Right-sizing isn’t only about cutting cost. It’s about making sure every user is on the licence that fits their role, their risk profile, and how they actually work. Sometimes that means downgrading. Sometimes upgrading. Almost always, a different mix from the one in place today.

It’s not surprising that most licence structures have drifted. Microsoft 365 has evolved significantly over the last few years. New features get added, plans get repackaged, headcount changes, security needs shift, and licence assignments rarely get revisited. Most organisations don’t have the time or visibility to keep up, so the mix gradually moves out of step with what the business actually needs.

What is a Microsoft 365 licensing review

A Microsoft 365 licensing review, sometimes called a Microsoft licence audit, is a structured assessment of every licence in your tenant, mapped against actual usage data and business need. The output is a clear picture of where the current mix is wrong, in which direction, and what the right mix should be.

A real review covers four things. It looks at what licences you’re paying for, who they’re assigned to, and what those users actually do with them. It identifies where capability is missing, particularly around security and compliance. It checks where third-party tools overlap with capability already included in the Microsoft licences in your tenant. And it produces a future-state model sequenced against your renewal calendar so the changes get implemented in the right order, at the right time.

The licence count is the easy part. The harder questions are role-based. What does each group of users do, what do they need, and what’s the right plan for them. That’s where the value comes from.

When to do a Microsoft 365 licensing review

Most businesses we work with haven’t done a structured licensing review in two or three years, sometimes longer. The reasons are usually understandable. IT teams are stretched, the licence mix feels like a settled question, and renewal time is busy enough without opening up the whole structure. But Microsoft 365 has changed significantly in that time, and so has the business using it. There are three triggers worth paying attention to:

• Your renewal is approaching. If your next renewal falls before 1 July 2026, the review needs to happen now so the right structure is locked in before the new pricing takes effect. If your renewal is later in the year, you have more runway, but a proper review and a clean implementation take longer than most businesses expect.
• Your headcount has changed significantly. Growth of 20% or more in the last 12 months, restructure activity, or onboarding an acquisition all mean the licence mix that was right before isn’t right now. Roles shift, headcount profiles change, and the assumptions that shaped the original structure stop applying.
• It’s been more than 18 months. Microsoft repackages plans, bundles in new capability, and changes pricing more often than most businesses revisit their licence mix.

If none of those triggers have fired yet, the Microsoft 365 price increase in 2026 is doing the job for you.

How the July 2026 Microsoft 365 price increase affects Australian businesses

Microsoft has announced its first Microsoft 365 commercial price increase since March 2022, taking effect 1 July 2026. Increases range from around 5% to 33% depending on the plan, with the biggest jumps on Business Basic and Frontline plans. Enterprise plans see more modest rises. Existing customers stay on current pricing until their next renewal after 1 July, which gives most Australian businesses some time to plan for their needs before any changes, even if modest come into play later this year.

Two things are worth understanding about the increase. The first is that Microsoft is bundling additional capability into the plans at the same time. Features that used to be paid add-ons, including parts of Defender, Intune and Purview, are being folded into the standard tiers. For some businesses, that means the price rise is partly offset by capability they were already paying for separately. For others, it means there’s now an opportunity to drop a third-party tool and use what’s already included in the Microsoft licence.

The second is that the price rise tends to dominate the conversation in a way that misses the bigger number. For most businesses we work with, the cost of the price increase itself is a fraction of the cost of having the wrong licence mix in the first place. The price rise is the trigger to look. What you find when you do is usually the real story.

The most common Microsoft 365 licensing mistakes

When we run a licensing review, the same issues come up again and again. Some cost money. Some cost protection. Most businesses have a mix of both, and the value of the review is usually in finding both at the same time.

Where businesses are over-licensed

The biggest single source of waste is uniform licensing. A blanket E3 or E5 rollout regardless of role is the default in many mid-market businesses, usually because it was the simplest decision at the time. But a finance manager, a project coordinator and an executive assistant often have very different needs from a security analyst or a developer. Putting them all on the same licence means the business pays for the highest common denominator across the whole workforce, and the per-user gap multiplied across a few hundred staff adds up quickly.

The same problem shows up at the other end of the workforce. Frontline workers, field staff, depot teams, shift workers and shared-device users often sit on knowledge worker licences when Microsoft 365 F1 or F3 plans would cover what they actually use. F-tier plans exist for exactly this reason, and the saving when a business moves frontline users to the right tier is usually the single largest line item in a review.

Dormant licences are the next pattern. Staff who have left, contractors who finished their engagement six months ago, mailboxes kept active just in case. Every one of those is a paid licence doing nothing. Most environments have more than the business realises, because licence assignments don’t automatically drop when someone leaves. They sit there until someone goes looking.

Then there are orphaned add-ons. Power BI Pro, Project, Visio, Teams Phone, Defender as a standalone. Add-ons attached to a user or a project years ago, never removed when the need ended, and quietly billed every month since. And finally, third-party tools that overlap with capability now included in your Microsoft plan. Defender for Office, Intune, Purview, Information Protection. Many businesses are paying twice for the same capability without realising it, because the Microsoft side bundled the feature in after the third-party contract was signed.

Where businesses are under-licensed

The opposite problem is just as common, though the cost shows up as exposure rather than as a line on an invoice, which is why it tends to go unnoticed longer. The most common gap is Business Standard where Business Premium would be a better fit. Business Standard doesn’t include the security and device management capability most mid-market businesses now expect, including Intune, Defender for Business, conditional access and information protection. For businesses managing client data, hybrid workforces or any kind of compliance requirement, the uplift to Premium is usually worth it, and the gap is one of the more straightforward things a review picks up.

Frontline and shared-device users are another area worth looking at. F1 and F3 plans need careful configuration to provide the right protection, and it’s easy to assume frontline users are lower-risk and leave them with the default setup. In reality, they often warrant more attention than knowledge workers, not less. Businesses pursuing compliance frameworks hit a different version of the same problem. Essential Eight, ISO 27001 and DISP often require capability the current licence mix doesn’t include, and adding those as separate licences after the fact almost always costs more than getting the base licence right in the first place.

Right-sizing Microsoft licences means looking at both sides at once. The goal isn’t the cheapest licence. It’s the right licence for each user, with no waste and no gaps.

Martinus Rail: nearly $1M in savings through a structured review

Martinus Rail is one of Australia’s leading rail infrastructure companies, with operations across Australia, New Zealand and the United States and a workforce that has grown from a small local team to over 700 staff. That kind of growth puts real pressure on IT, and licensing is one of the first places the strain shows up.

We worked with Martinus Rail on a 12-month ICT strategy and cost consolidation project, with a Microsoft licence audit as one of the core workstreams. The combined work, covering Microsoft 365 optimisation, infrastructure consolidation and a phased strategic IT roadmap, delivered nearly $1 million in savings over three years. Right-sizing Microsoft licences was a significant part of that number.

It wasn’t only about cost. The review also identified where the existing licence mix could be working harder for the business as it scaled. Moving certain user groups up to the right tier closed real security and compliance gaps that growth had created. The result was lower spend overall and better protection where it mattered.

With the licence mix and IT spend aligned to the business, Martinus Rail moved into a Managed IT Services partnership with us that has supported continued growth, leadership transitions and expansion into new regions. The licensing review was the entry point. The ongoing relationship is what made the structure stick.

That’s the bit often missed in a one-off audit. Licensing isn’t a once-a-year exercise. Headcount changes, plans get repackaged, new features get bundled in, and the right mix shifts. The businesses that keep the savings and the protection are the ones that build the review into how IT gets managed, not the ones that do it once and move on.

How to right-size your Microsoft 365 licences

A licensing review isn’t opening the admin centre and counting licences. The licence count is easy. The actual work follows a clear sequence.

The starting point is a full audit of the current state. Every licence, every user, every add-on, mapped against actual usage data from Microsoft 365 and any connected reporting tools. This is where dormant licences and orphaned add-ons surface, but it’s also where the more interesting patterns show up. Users on E5 who only use E3 features. Users on Business Standard who would benefit from Business Premium. Groups of users on identical licences whose actual usage profiles are wildly different.

From there, the work shifts to mapping licences to roles rather than to job titles. A finance manager and a project coordinator may have similar Microsoft 365 needs even though their titles look unrelated. A field supervisor and an office-based supervisor may share a title but need very different licences. Grouping users by what they actually do, not what their job description says, is what turns a generic licence structure into one that fits the business.

The third step is checking for overlap with third-party tools. Every security, compliance and management tool the business pays for, compared against capability included in the Microsoft licences in your tenant. This is often where the largest single savings come from, because third-party contracts tend to renew automatically and the duplication accumulates over years rather than months.

Then comes the gap analysis, which is the step most reviews skip. Where is capability missing? Which user groups need more protection, more compliance coverage, or features they currently lack? Closing gaps matters as much as cutting waste, and a review that only looks for waste leaves real value on the table.

Finally, the future-state model and sequencing. Build the right licence mix for the business as it is now, quantify the saving and the capability uplift, and time the changes against the renewal calendar so each move happens at the point where it costs the least and disrupts the least. The output isn’t a spreadsheet. It’s a decision. Here’s what you should be paying. Here’s what you are paying. Here’s the gap in both directions. Here’s how we close it, and in what order.

Where to start

If it’s been a while since anyone looked closely at your Microsoft 365 licence mix, there’s almost always something worth tightening up. The question is where, in which direction, and by how much.

The July price rise is the trigger, but the bigger opportunity is usually in the licence mix itself. The window to right-size your Microsoft licenses properly is open right now.

If you’d like a conversation about what a review might find for your business, get in touch.

Rob Rattray

Rob Rattray is the Commercial Director of A1 Technologies, a Microsoft consultancy based in Australia. Rob's focus is settings the strategic and cultural direction for A1 Technologies, while also overseeing Sales and Marketing. Rob is passionate about business and helping good people do good things through technology.