Oversized and underutilized - How to save money on your Microsoft 365 investments

Let’s start by setting the scene. Cate works for a large multinational organization as an IT Leader. The Executive Leadership Team in her organization has requested all lines of business, including Information Technology to review their spend in an effort to save every penny possible. Wanting to make an impact, Cate assembles a team to review all software contracts due for renewal later this year. Their Microsoft Office365 is up for renewal and Cate realized that every employee was given a Microsoft E3 license regardless of their role in the organization. This was her “AHA” moment. Cate wondered whether there was any way to optimize their Office365 costs given they were on a ‘one size fits all’ approach previously.

Find yourself in Cate’s shoes? Buckle up, this post is for you.

Regardless of whether you are a multinational enterprise or a small-to-medium sized business, cost savings is always a  priority. It is imperative that organizations balance the risks and benefits of cost-cutting, in order to maximize the business outcomes of them. Similar to Cate, if the SaaS productivity suite of your organization’s choice is Microsoft Office 365, there may be an opportunity for you to reduce your spend via accurately profiling your user base to give them a license plan that fits their business needs.

Launched in 2001, Office 365 is Microsoft’s SaaS productivity suite which comprises of core applications ranging from the well-known Office suite (Word, Excel, PowerPoint) to storage (OneDrive) to collaboration (Teams). Understanding that there isn’t a ‘one size fits all’ approach, Microsoft launched an array of license plans that have varying price points depending on the number of applications bundled into that plan. This tiered structure, ranging from E1 to the E5 bundle, were built so that organizations could map employee profiles with the corresponding license package, ultimately reducing their spend.

However, the reality is that most organizations do not spend sufficient time and effort on building and maintaining these user profiles. The outcome of not engaging in such an activity would result in money wasted. According to research performed by CoreView, 56% of Microsoft Office365 licenses are inactive, underutilized,  oversized or unassigned. That’s over half of all investments.

Let’s take a closer look and apply Gartner’s framework to evaluate the sustained efficacy of Cate's cost saving proposal:

• Potential Financial Benefit: the cost of an E3 bundle is roughly $20 per user per month whereas the cost of an E1 bundle is roughly $8 per user per month. For example if Cate’s organization had 15,000 employees and her team identified that 4,000 of these users needed only an E1 bundle instead of an E3, that would be $576,000 in annual savings.
• Business Impact: The business impact for Cate’s organization is low. There would be no impact on day-to-day activities and operations. Cate would apply these changes when renewing her organization’s Microsoft 365 contract. Thereafter, Cate would assign the new license bundles to the relevant users.
• Time Requirement: Cate’s renewal is due later this year. Can she capture and realize cost savings within the desired time frame? She absolutely can. In order to move in a fast & agile manner, Cate realizes that a tool that tracks and measures Office365 usage across her Microsoft Tenant would aid tremendously. Leveraging tools such as SoftwareOne’s PyraCloud, Cate would be able to get the data required to build user profiles. These profiles could then be actioned on during renewal.
• Degree of Organizational Risk: The degree of organizational risk is measured by whether employees can adapt to the changes. In some instances, first-line workers or kiosk workers as they are known may not require a full-fledge Office365 E1 or E3 license plan. They would fit the bill of an F1 plan, which allows them to use the Office suite online only. Such changes may require further adoption & change management to ensure these users are comfortable but in general, the organizational risk is low.
• Degree of Technical Risk: The degree of technical risk would be measured by whether this change would cause delays in enterprise operations. Cate could make the license plan transition over the weekend to ensure that when her employees log in on a Monday morning, business is as usual.
• Investment Required: Does Cate’s initiative require a large, upfront investment before savings can be realized? No, it does not. The only investment required to achieve the outcome would be in a tool like PyraCloud, which provides the analytics required to accurately profile the user base. Therefore in Cate’s example the investment will be relatively small in comparison with the potential financial benefit.

Fast track to 6 months later, Cate’s initiative managed to save her organization close to a million dollars a year. These savings were then invested in her organization’s digital transformation efforts around big data and machine learning.