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Microsoft 365 Licensing Review: Do You Actually Need E3 or E5?
A mapped, measured answer on which tier you should be on and what you are already paying for and not using.
Get more from what you already own
In short: A review of what you are licensed for, what is assigned, what is actually used and what tier you should be on. Aimed particularly at organisations under 300 users, where Business Premium is frequently the right answer and E3 is frequently bought anyway. You get a written mapping, a straight recommendation and a costed comparison. We measure your tenant rather than quoting you an industry average.
Almost every Microsoft 365 estate is paying for capability it has never switched on. Not through carelessness, but because nobody has ever sat down and compared what the licence includes against what the business actually does.
The problem
Licensing waste does not announce itself. It is a slightly larger invoice each year, a security product bought separately that was already included, a tier upgrade taken on advice nobody re-examined, and licences still assigned to people who left. None of it is visible from the invoice, which shows what you bought rather than what anyone uses.
What we would do
Map users to what they actually do before comparing tiers at all. Licensing everyone the same way is what produces overspend and gaps at once. If you are under 300 users, start from the assumption that Business Premium is the answer and make the case for moving up, rather than starting at E3 and looking for reasons to justify it.
- Above 300 users Business Premium is not available, so the comparison genuinely starts at E3 and the question becomes which users need more than that.
- If you have a specific regulatory or contractual requirement that names a capability only in E5, buy it for the people it applies to rather than for everyone.
- If you are mid-term on an agreement, the right move may be to plan now and act at renewal, because breaking a term rarely saves what people expect.
When we are not the answer: If you want the cheapest price on licences you have already chosen, a volume reseller will beat us and you should let them. We are worth paying for when the question is which licences you should be buying, particularly when you suspect the answer is fewer or cheaper ones than you are being sold.
This is a review of your Microsoft 365 position: what you are licensed for, what is assigned, what is genuinely being used, and what tier each group of users should actually be on. It exists because the licensing decision is usually made once, under time pressure, on advice from somebody selling the licences, and then never revisited while the business changes around it.
More on how we deliver Microsoft 365 licensing review
There are two halves. The first is right-sizing: are you on the correct tier, are you paying for seats nobody uses, and would a different mix cost less. The second is the half most reviews skip, which is activation: what does your existing licence already include that you have never switched on. That second half regularly turns out to be worth more than the first, because it removes a product you are buying separately rather than shaving a percentage off a renewal.
Systech is founder-led by Ryan Mangan, a Microsoft MVP for Azure Virtual Desktop and Windows 365, a Chartered Fellow of the BCS (FBCS) and author of Packt's two-edition Mastering Azure Virtual Desktop.
Where the Cloud PC question is the one that matters, the AVD vs Windows 365 vs traditional desktops guide works through that decision in detail.
Everything you need, managed for you
Why does the 300-user line matter so much?
Because Microsoft 365 Business Premium is capped at 300 seats, and under that cap it is unusually good value for what it bundles. Above it, the comparison starts somewhere else entirely.
Business Premium brings together the Office applications, Exchange, SharePoint and Teams, plus the parts organisations most often buy separately: Entra ID Plan 1 for Conditional Access, Intune for device management, Defender for Business for endpoint protection, and Defender for Office 365 Plan 1 for email.
The consequence catches people out. A business under 300 users being quoted E3 is frequently being moved to a tier that costs more and, historically, arrived with less security included, because endpoint protection and email protection were add-ons rather than part of it.
That is exactly the kind of claim worth checking rather than trusting, including when we make it, and the next section explains why.
Why is most licensing advice online out of date?
Because Microsoft changes what is in the boxes, and comparison articles are written once and left.
A concrete and recent example: on 1 July 2026 Defender for Office 365 Plan 1 was added to Office 365 E3. A large amount of the comparison content still circulating was written before that and states the previous position confidently. Anyone making a decision from it today is working from a comparison that is no longer true.
This is not a criticism of those articles so much as a description of the category. Licensing is not a fixed landscape you can learn once: tiers gain and lose components, add-ons get absorbed, names change, and the price changes independently of all of it.
So treat any comparison table, including the one further down this page, as a starting point that needs verifying against current Microsoft licensing on the day you decide. It is also the honest reason a licensing review is worth repeating rather than doing once: the correct answer genuinely changes, and a decision that was right three years ago may not be now.
What are you already paying for and not using?
This is the half of the review that usually pays for the whole exercise, and it is skipped by most licensing conversations because it does not lead to a sale.
The capabilities most commonly already licensed and switched off:
- Conditional Access, so sign-ins are evaluated on device, location and risk rather than on a password alone.
- Intune, where devices are being managed by something bought separately or not managed at all.
- Defender for Office 365, where a third-party email security product is being paid for alongside it.
- Defender for Business or Defender for Endpoint, where antivirus is a separate line on the invoice.
- Purview sensitivity labelling, where the requirement to classify documents is being met manually.
- Self-service password reset, which quietly removes a meaningful share of service desk calls.
- Retention and archiving policy, where mailbox size is being managed by asking people to delete things.
Not all of those should be switched on, and we will say so where the answer is that the third-party product you have is better for you than the bundled one. Plenty of them are genuinely better.
But the decision should be made knowingly, and in most estates it never was: the product was bought because a gap existed, and nobody went back to check whether the gap had since been filled by a licence change.
Where does Windows 365 Business fit?
For organisations under 300 users who need a Windows desktop delivered from the cloud without building the infrastructure to host it.
Windows 365 Business is the simpler end of Cloud PC: a fixed monthly price per user for a personal, always-on Windows desktop, sized when you buy it, with no host pools to design and no Azure consumption to forecast. That predictability is the point of it and it is genuinely well suited to smaller organisations.
It tends to be the right answer when:
- You need a handful of people to reach a full Windows desktop from anywhere or from unmanaged devices.
- You are supporting contractors or seasonal staff and do not want to ship hardware.
- You want an application on a proper Windows desktop rather than a laptop refresh.
- Predictable per-user cost matters more than optimising per-hour cost.
It tends to be the wrong answer where usage is uneven enough that being able to scale down out of hours would save real money, or where you need shared session hosts and fine-grained control. That is where Azure Virtual Desktop earns its complexity, and the comparison guide works through that decision properly.
How do you actually decide between tiers?
By licensing groups of people rather than the organisation, which is the single change that most reliably reduces cost without reducing capability.
The instinct is to pick one tier for everybody because it is simpler to administer. That produces both problems at once: people over-licensed for what they do, and specific individuals under-protected because the tier chosen for the average does not suit the ones handling the most sensitive work.
Most estates contain at least these groups, and they genuinely differ:
- Frontline or shift staff who need email, Teams and little else, often from a shared device.
- General office users, the largest group, well served by the standard tier.
- Users handling sensitive or regulated material, where advanced protection is worth paying for.
- Administrators and privileged accounts, where identity protection matters more than anything else in the bundle.
- External or occasional users, who are often licensed as staff when they should not be.
Once people are mapped that way the tier question usually answers itself, and the answer is normally a mix. It is also the mapping that makes an add-on decision rational: buying an E5 component for the twelve people who need it is a completely different proposition from moving two hundred people to E5.
What does the review actually produce?
A document you can act on without us, which is deliberate.
What you get:
- A mapping of users to groups, based on what they do rather than job titles.
- Assigned licences against actual activity, so unused and leaver-held seats are visible.
- A recommendation per group, with the reasoning stated rather than asserted.
- A costed comparison of the realistic options, including staying exactly as you are.
- A list of what you already own and have not enabled, ranked by what we would do first.
- Renewal timing, and what is worth doing before the conversation rather than during it.
We do not need to be the ones who implement it. If the recommendation is that you stay where you are and switch three things on, that is a perfectly good outcome and it is one we reach reasonably often.
The one thing worth saying plainly: we are a Microsoft partner and we sell licences, so ask us what we would recommend if you bought them elsewhere. The answer should be the same, and if a supplier's advice changes depending on who supplies the licences, that tells you what the advice was.
| Business Premium | Windows 365 Business | E3 | E5 | |
|---|---|---|---|---|
| Seat limit | Up to 300 users | Up to 300 users | No cap | No cap |
| What it is for | The whole productivity and security bundle for a smaller business | A Cloud PC, bought alongside a productivity licence | Enterprise scale and Windows Enterprise | E3 plus advanced security, identity and compliance |
| Security posture | Strong for the price: identity, device and email protection bundled | Not a security tier. It delivers a desktop | Solid, and historically needed add-ons Business Premium already had | The most complete, and priced accordingly |
| Typically right when | You are under 300 users. Start here | People need a full Windows desktop from anywhere | You have outgrown 300 seats, or need Windows Enterprise | A specific requirement names something only E5 has |
| Common mistake | Never turning on half of what it includes | Buying it where a managed laptop would do | Buying it under 300 users out of habit | Buying it for everybody rather than for the people who need it |
Questions we hear a lot
We have fewer than 300 users. Do we need E3?
Usually not, and it is worth making anyone recommending it explain why. Microsoft 365 Business Premium is capped at 300 seats and under that cap bundles a great deal: the Office applications, Entra ID Plan 1 for Conditional Access, Intune, Defender for Business and Defender for Office 365 Plan 1. A smaller business moved to E3 has historically ended up paying more for a tier that needed add-ons to match that security position. The genuine reasons to be on E3 under 300 users exist, most often Windows Enterprise or a specific capability, but they should be named rather than assumed.
How much of Microsoft 365 do most organisations actually use?
We are not going to give you a percentage, because the figures in circulation are not sourced well enough to repeat. What we can tell you is what is true in your tenant, which is more useful anyway: which licences are assigned against which are active, and which included capabilities have never been switched on. That is measurable rather than estimated, and an industry average would tell you nothing about your own position even if it were reliable.
Should we move to E5?
For some of your people, possibly. For all of them, rarely. E5 adds advanced identity protection, threat protection and compliance capability that genuinely matters for administrators, executives and anyone handling regulated material, and is usually more than a general office user needs. The mistake is treating it as an organisation-wide upgrade rather than as protection bought for the roles that warrant it. Mapping users to groups first almost always produces a cheaper and better-protected answer than picking a single tier for everybody.
Why is licensing advice we find online so often wrong?
Because what is in each licence changes and articles do not. A concrete example: on 1 July 2026 Defender for Office 365 Plan 1 was added to Office 365 E3, which invalidated a large amount of comparison content still circulating. Treat any comparison table as a starting point that needs verifying against current Microsoft licensing on the day you decide, including ours. It is also the honest reason to revisit licensing periodically rather than deciding once, because the correct answer genuinely moves.
Can we reduce licences mid-term?
It depends entirely on the agreement you signed, and this is where the money usually is at renewal rather than during a term. Annual commitments generally hold you to the seat count for the term, monthly arrangements are more flexible and cost more per seat for that flexibility. The practical approach is to establish the true picture now, decide what the right position is, and time the change to the renewal. We will tell you when the honest answer is that nothing can usefully change for another eight months.
You sell licences. How is your advice impartial?
It is a fair question and the right one to ask any partner. The test we would suggest is to ask what we would recommend if you bought the licences somewhere else entirely, because the answer should be identical. The written recommendation is yours to keep and act on without us, and it regularly says that the answer is to stay on your current tier and switch things on rather than to buy anything. If a supplier's advice shifts depending on who supplies the licences, you have learned what the advice was worth.
Microsoft 365 licensing review is delivered UK-wide from our office in Brough, East Yorkshire, with on-site support across the county where it helps. We work with businesses in Scarborough, Bradford, Hull, Leeds, York and Sheffield and 6 more Yorkshire towns and cities, and remotely with clients right across the UK.
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