Microsoft 365 Licensing, in Plain English

Microsoft publishes a comparison table showing what’s included in each plan. It’s accurate, and it doesn’t help much, because it lists features rather than telling you which ones you’ll actually use.

The practical question isn’t “what does this plan include”. It’s “which plan do we need, and are we currently paying for things we don’t use or missing things we’re buying separately”.

This is a guide to that decision. Because Microsoft changes plan names, pricing and contents fairly regularly, treat the specifics here as a framework and check current details against Microsoft’s own site before committing.

The Basic Structure

Microsoft 365 splits into a few families.

Business plans are for smaller organisations and are capped at a maximum number of users. For most small businesses these are the relevant ones, and they’re generally better value than the enterprise equivalents.

Enterprise plans have no user cap and add more advanced security, compliance and analytics capability. They cost more, and much of what they add goes unused in a smaller business.

Frontline plans are cheaper licences aimed at shift-based and deskless staff who need limited access, typically web and mobile rather than full desktop applications.

Standalone options exist too, including plans that provide the desktop Office applications without email hosting.

There are also discounted arrangements for charities and educational organisations, which are worth asking about if you qualify.

The Distinctions That Actually Matter

Rather than working through every feature, there are four questions that determine which plan you need.

1. Do people need the desktop applications?

Some plans provide only the web and mobile versions of Word, Excel and Outlook. Others include the full desktop applications you install on a machine.

The web versions are genuinely capable and perfectly adequate for many roles. They’re less suitable for heavy Excel work, complex documents, or anyone who needs to work offline regularly.

This is the single biggest cost difference between the entry-level and mid-tier plans, so it’s worth answering honestly rather than defaulting to “everyone gets everything”.

2. Do you need device management and advanced security?

This is the distinction most businesses misunderstand, and it’s where money is most often wasted in both directions.

The higher business tier adds security and device management capability: managing and securing company devices, enforcing policies, controlling access, and more advanced threat protection.

Businesses frequently buy the mid-tier plan and then separately purchase antivirus, device management, or security tooling that the higher tier would have included. When you add those subscriptions together, the higher tier is often cheaper overall, and it’s certainly simpler to manage.

The reverse also happens: paying for the higher tier and never configuring any of the security capability, which means paying for something you’re not using.

Worth checking: list what you currently pay for separately in security and device management, then compare the total against the difference between tiers. This calculation surprises people regularly.

3. Does everyone need the same thing?

They almost certainly don’t, and mixing plans is entirely allowed.

A business might reasonably have full desktop-plus-security licences for office staff, lighter licences for people who mainly need email, and frontline licences for shift workers. Buying the same licence for everyone is simpler administratively and usually more expensive.

Shared mailboxes are also worth understanding here. A general enquiries or info address doesn’t necessarily need its own paid licence, depending on how it’s configured.

4. How are you being billed?

Microsoft has different pricing for annual and monthly commitments, with monthly flexibility carrying a premium. If your headcount is stable, an annual commitment is usually cheaper. If it fluctuates significantly, the flexibility may be worth paying for.

Worth knowing which you’re currently on, because the difference across a whole organisation is not trivial.

Where Money Usually Leaks

Licences for people who left. The most common and most straightforward. Licences don’t remove themselves, and a licence for a departed employee costs the same as one for a working one. Worth auditing at least annually, and ideally building into your offboarding process.

Buying separately what a higher tier includes. Covered above, and worth checking properly.

Over-licensing by default. Giving everyone the top plan because it’s easier than working out who needs what. Sometimes a defensible decision for administrative simplicity, but it should be a decision rather than an accident.

Under-using what you already pay for. Many businesses pay for capability they never switch on, particularly around security and device management. This isn’t a licensing problem so much as a configuration one, but you’re paying either way.

Duplicate tooling. Paying for a separate file sharing service, video conferencing tool, or password manager when your existing licence already covers the function.

A Note on Teams

Following regulatory changes, Microsoft altered how Teams is packaged in the UK and Europe, and it’s no longer bundled in the same way with all plans. Newer subscriptions and older ones may be structured differently.

If you’re unsure whether your Teams access is included or separately licensed, it’s worth confirming, particularly if you’re changing plans or renewing.

The 300 User Limit

Business plans are capped, and the cap catches growing businesses by surprise. If you’re approaching it, plan the move to enterprise licensing before you hit it rather than discovering the constraint mid-hire.

The transition is manageable but it isn’t instant, and enterprise plans are priced differently, so it’s worth modelling the cost in advance.

How to Review Your Own Licensing

1. List every licence you hold and who it’s assigned to. This alone often finds leavers.
2. Identify anyone whose usage doesn’t match their licence. Someone on a full desktop plan who only uses webmail is a candidate for a cheaper licence.
3. List your separate security and device management subscriptions. Compare the total against the cost of the higher-tier plan.
4. Check your billing term. Annual versus monthly.
5. Check what you’re paying for and not using. Particularly security features that were never configured.

Doing this once a year is usually enough, and it typically pays for the time it takes.

The Honest Summary

Microsoft 365 licensing isn’t complicated so much as poorly explained. The plans are broadly sensible; the difficulty is that the feature lists don’t map obviously onto what a business actually does.

Most small businesses land in roughly the right place. The savings tend to come from tidying up rather than restructuring: removing leaver licences, matching plans to actual roles, and checking whether you’re separately buying something you already own.

Want a Second Opinion?

CCSW supports businesses across Cardiff and South Wales with Microsoft 365, including licensing reviews. If you’d like someone to look at what you’re paying for and whether it matches what you need, get in touch or call 0333 014 4544.