Clever Microsoft licensing – save more, achieve more
Optimizing Microsoft licenses – the most important strategies for M365 and Azure.
How can IT and purchasing contribute to cost reduction, optimization and sustainable management of the Microsoft landscape?
1. Why the Microsoft software portfolio is a strategic issue
In many companies, Microsoft accounts for more than 30 percent of software costs. And the trend is rising. This makes the monopolist from Seattle a central budget item in every IT department. Those who do not actively manage this expenditure risk losing hundreds of thousands of euros every year – through licenses that are not used, bundles that are too large and contract structures that restrict scope instead of opening it up.
We see the following challenges:
- Lack of transparency: It is often unclear which Microsoft services are actually being used – or which third-party solutions are running in parallel.
- Technology instead of strategy: Many cloud and workplace projects are primarily implemented technically – there is no control based on business objectives.
- Missed savings potential: Renewals are extended, not negotiated. Azure resources are not optimized and M365 licenses remain unused.
The goal is clear: those who take a strategic view of their Microsoft software portfolio today can not only reduce costs. They can create structures that enable planning security, open up scope for innovation and avoid unnecessary dependencies.
This is another reason why the greatest potential for optimization lies in the two currently most relevant Microsoft technologies: Microsoft 365 and Azure. Because the digital workplace and the cloud are in constant motion. This is where the greatest inefficiencies arise – but also the greatest potential for savings.
2. Microsoft 365 – The digital workplace under cost pressure
Microsoft 365 is the standard solution for email, collaboration, Office and security in many companies. With some major challenges for software asset management: Microsoft 365 is one of the largest single items in the IT budget of many organizations – and one of the least transparent.
2.1 Typical cost traps in the M365 environment
Most companies do not exploit the full economic potential of their M365 landscape. Typical weaknesses are:
- E3/E5 standardization without differentiation according to user profiles: Employees receive packages that they do not need – e.g. reporting, security or compliance features that are never used.
- Lack of deprovisioning: Accounts of former employees or external users remain active, licenses continue to be paid for.
- Duplicate tools and shadow IT: Third-party providers such as Zoom, Dropbox or Trello are also used, although equivalent functions are included in M365.
- Untested co-pilot introduction: Licenses for AI functions are purchased for fear of being left behind – without a valid business case or rollout plan.
- Incomplete internal processes: There is a lack of regulated processes for license allocation, tracking and review – especially in onboarding or role changes. The Microsoft Admin Center is often not sufficient for effective license management.
One thing is immediately apparent: These cost traps are not caused by wrong decisions – but by a lack of control. M365 is perceived as a product, not as something that needs to be actively managed.
2.2 Optimization strategies for Microsoft 365
If you want to control M365, you need more than just a usage report. Typically, the M365 Admin Center only shows which products are in use. What is missing, however, is the counter question: What is not being used? This is about more than just transparency, it is about demand management and clear processes. This can help:
- Establish a persona-based license strategy: Define user profiles that reflect actual requirements – e.g. “standard workstation”, “field service”, “technical team”, “administration”. Derived from this: suitable license packages for each role.
- Systematically analyze usage (Effective License Position): Determine which licenses are actively used – and above all: which are not!
- Consolidate third-party applications in a targeted manner: Where functions such as video conferencing, file sharing or task management are already included in M365, external tools can be replaced.
- Automate processes for provisioning & deprovisioning: Integrate license allocation into onboarding processes, anchor regular reviews, automate decommissioning. A focus on employees on garden leave or parental leave can also be useful.
- Introduce semi-automated optimization cycles: Take a targeted look two to four times a year: What can be deleted, streamlined or reallocated?
These measures not only reduce running costs – they also create clarity about actual usage and open up new scope for negotiation in renewals.
2.3 Active use of the scope for negotiation
Microsoft 365 licenses can not only be optimized technically – there is also often much more to be gained economically. Provided you take a structured approach.
The biggest levers in negotiations:
- Realistically derive license requirements: Do not take the current inventory as a starting point, but the adjusted demand from usage analysis and personas.
- Present a new Bill of Materials (BOM): Design an adapted license portfolio before renewal – with clear quantities and package cuts.
- Actively unbundle bundles: E5 is not without alternative. If you can do without security functions or cover them in another way, you should negotiate specific E5 partial services.
- Use price benchmarking & market comparison: Discount levels at E3/E5 can be 20-35% with good preparation – depending on the type of contract (CSP or EA) and term.
Negotiating here does not mean hoping for discounts – it means going into talks well prepared with validated demand figures, alternative scenarios and a clear target picture.
3. Azure – from cost driver to innovation engine
The cloud was once introduced with the promise of making IT more flexible, scalable and cheaper. However, many companies are now sobered by the reality. With Microsoft Azure, costs are rising – also due to a lack of control. Resources are provided without clear governance. Commitments are negotiated without reliable project planning. And potential savings remain untapped because responsibilities are lacking.
Azure has long been more than just infrastructure – it is a dynamic platform with over 200 services, complex billing models and considerable growth ambitions on Microsoft’s part. If you want to use this platform successfully, you need to understand how to actively shape costs – not just react to them
3.1 Typical cost drivers in Azure environments
Systematic weaknesses can be found in almost every Azure project – regardless of industry or company size:
- Oversized resources: VMs run at excessive performance levels, storage is provided in reserve – often “for security”, but without actual need.
- Lack of shutdown mechanisms: Test and dev environments run around the clock. Automated shutdown or autoscaling management is not established.
- Pay-as-you-go instead of planning: Resources are created ad hoc, without RI/savings plan strategies or long-term utilization concepts. Blueprints to standardize resources and provision are not used.
- Tagging chaos and no cost transparency: Without clean tagging (e.g. by cost centers, projects, environments), there is no basis for forecasting, control and optimization.
- Parallel operation of on-premises systems: The cloud is operated in addition, not as a replacement – resulting in unnecessary duplication of costs.
These patterns mean that Azure is often perceived as a “cost trap” – even though, with the right approach, it can be an enormously effective tool for IT transformation.
3.2 Optimization through FinOps and governance
Azure management doesn’t start with technology – it starts with structure. If you want to operate Azure efficiently in the long term, you need clarity about goals, usage and responsibility. Successful companies rely on five central levers:
- A well thought-out cloud service operating model: Cloud costs must be managed like a controlling process: with responsibilities, forecasts and reporting.
- Use Reserved Instances & Savings Plans: Depending on the workload, this can reduce costs by up to 60% – provided that resources are planned for the long term.
- Define and implement tagging strategies: Standardized tagging is a basic requirement for cost control, project evaluations and governance. This should not be left to IT, but should be defined centrally.
- Transferring the joiner-mover-leaver principle to resources: every resource needs a defined end of life. Automated processes for decommissioning save massive costs.
- Establish a Cloud Center of Excellence: interdisciplinary team from IT, finance and operations that sets guidelines, supports projects and enables controlling.
A well-managed Azure setup is not a product of chance – it is the result of disciplined, well-founded processes. And this is where the real savings potential lies.
3.3 MACC – between commitment and risk
The Microsoft Azure Consumption Commitment (MACC) is one of the most effective, but also one of the riskiest contractual instruments in the Azure cosmos. Basically, it is a volume discount model: the higher the volume committed over three years, the more attractive the conditions. However, the rules of the game have recently become stricter:
- Only high-growth customers receive significant discounts: those who can demonstrate 25-40% annual growth receive attractive conditions.
- Flat-growth customers lose negotiating power: Many medium-sized companies are classified as “not relevant for strategic conditions” when contracts are extended – with clear consequences for pricing.
- MACC commitments without a project roadmap are dangerous: those who commit to volumes without securing migration, innovation or growth bear the full financial risk in the event of underutilization.
- Less flexibility, more pressure: Microsoft is increasingly linking other conditions to MACC – e.g. support, CoPilot budgets or security discounts.
Recommendation: MACC can be useful – but only as the result of a strategic Azure roadmap, not as an entry point for negotiations. Companies need to clearly calculate which workloads will actually be migrated, what consumption they will realistically achieve – and whether alternatives would make more sense.
4. Best Practice: Microsoft Portfolio Management
The Microsoft software portfolio is not a static inventory, but a dynamic portfolio. If you want to manage this economically, you need more than just selective analyses – you need a clear, repeatable process. This is exactly where our approach comes in.
Based on our experience, we have developed a method that creates transparency, quantifies potential savings and enables your organization to manage Microsoft in terms of costs, licenses and contracts in the long term.
Our approach is divided into four successive phases. Each of these phases is clearly defined, comprehensible and designed for Microsoft-specific license mechanics.
1. Collect & normalize data
Objective: To create a complete and clean image of the installed, booked and used Microsoft services.
- Discovery & Inventory: Capture users, devices, VMs, workloads and access paths.
- Proof of Entitlement: Collection and validation of all relevant contract documents, orders, portal data (EA, CSP, MACC etc.).
- Transaction history & source consolidation: Merging data from purchasing, accounting and software portals.
Result: A structured, normalized database as a starting point for all further steps.
2. Apply license rules & determine position
Objective: To create a complete and clean picture of the installed, booked and used Microsoft services and to compare the actual license consumption with the contractual usage rights – taking into account the specific Microsoft license metrics.
- Consumption Analysis: Mapping of actual usage – by products, user types and workloads.
- Entitlement analysis: Which rights of use are covered by existing contracts and license conditions?
- Apply rules logic: Microsoft-specific conditions such as Hybrid Use Benefit, multiplexing or downgrade rights.
Result: Determination of the actual license situation – differentiated according to on-prem, SaaS and cloud.
3. Comparison of the license situation (Effective License Position)
Objective: Determine the difference between use and license entitlement – and translate it into action scenarios.
- Identify over-licensing: Where are too many licenses being paid for – e.g. through E5 packages with low feature usage?
- Recognize underlicensing: Where are compliance risks – e.g. incorrectly assigned Azure workloads?
- Document scope for action: Where can licenses be returned, bundled or shifted?
Result: A complete ELP (Effective License Position) as a basis for optimization and contract negotiations.
4. Optimize, negotiate & implement
Goal: Implement the most economically viable option – with a clear savings strategy and organizational anchoring.
- Risk & Opportunity Assessment Report: Structured evaluation of all options for action according to savings potential, risk and feasibility.
- Bill of Materials (BOM): Derivation of a new license requirement – based on usage reality and optimization targets.
- Develop negotiation strategy: Evaluate contract model (EA vs. CSP), utilize renewal timing, prepare MACC negotiations.
Result: Implementation of savings measures, targeted preparation for negotiations and clear internal responsibilities.
Fazit: Controlling Microsoft economically instead of just managing it
In many companies, Microsoft is the largest single item in the software budget – and at the same time one of the least actively managed areas. The reasons for this are not a lack of will, but the complexity of the contracts, the dynamics of the cloud and the lack of integration between IT, procurement and management.
This article has shown how companies can use a structured approach to gain transparency, identify potential savings and significantly improve their negotiating position – without being dependent on tools or audit pressure.
Three key findings:
- Many costs are not caused by usage – but by a lack of transparency.
Anyone who does not regularly analyze M365 and Azure is paying too much in the long term. - Contracts can be shaped – but only with a clear position.
Microsoft contracts offer leeway, but only if you go into the negotiations prepared. - Optimization is not a project – it is a control process.
A repeatable cycle such as the management approach creates the basis for sustainable cost reduction and control.
Those who strategically manage their Microsoft portfolio today not only create economic advantages – but also scope for real innovation.
Are you interested in the topic in more detail and would like to talk to an expert? Then get in touch with us!
The author
Philipp Garra, Microsoft Practice Lead bei SAMtoa GmbH
