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How Mismanaged Office 365 Licensing Can Hurt Your Enterprise

Jul 24, 2020 by Chris Cahill

Empty seats representing mismanaged Office 365 licenses

Imagine you’re hiring out a theater to put on a show, and you have to pay a fee for every seat in the house. To maximize profits, you want to ensure it’s a sell-out success, as empty seats represent wasted money.

When it comes to software licensing, this is a good metaphor to bear in mind, as it’s all-too-easy to overestimate the number of seats you need. 

We recently conducted an Office 365 license management study analyzing 3.4 million users, and found a staggering 18% of licenses were unassigned. The seats were empty.

Office 365 License Management Mistakes

For an average company of 10,000 users with a typical E3 licensing deal, this would amount to roughly $150,000 in wasted expenditure – money you may as well be setting fire to.

In many cases, instead of reassigning old licenses to new employees, organizations simply purchase new licenses during the onboarding process. If you’re running a large enterprise, and you’re not actively tracking your O365 licenses, there’s a pretty good chance you’re overpaying right now.

Underutilized Apps within Office 365

Office 365 is a powerful suite of tools, yet it’s severely underutilized in most organizations. 

Most people will tell you about Outlook, Word, Excel, Teams, and PowerPoint, but they may not be familiar with – or even aware of – SharePoint, OneNote, OneDrive, Stream, Delve, and Planner. 

Thus, you may be overpaying for licenses you don’t need, or at least underutilizing the software you already have.

How Office 365 Licensing Works

Microsoft Office 365 comes in a variety of packages depending on the suite you want and the way your business operates. Having a transparent license management process will help you determine which tier you need.

Enterprise businesses licenses come in three packages, with the following list prices:

  • Microsoft 365 E3: $32.00 per user/month
  • Microsoft 365 E5: $57.00 per user/month
  • Microsoft 365 F3: $10,00 per user/month

Enterprise licenses allow you to install Office desktop apps on up to five PCs or Macs, five tablets, and five smartphones per user. Each offering has different capabilities and access.

However, have you ever considered whether you need all of this access for all of your users? You may well be paying for desktop apps for staff who don’t have desk jobs, and who only ever require mobile access to a limited number of apps.

The licensing agreements themselves may be mind-numbing and lengthy documents written in confusing legalese, but you need to make sure the people enforcing your IT policies abide by them. Failing to do so can be a costly mistake.

Office 365 Audits and Hefty Fines

In essence, you’re renting Office 365 from Microsoft, not buying it. If they find out you’re using it without paying the appropriate fees, it’s a big issue. Part of the license agreement requires you to verify compliance by a third-party auditor upon request from Microsoft.

If you fail an Office 365 license audit, things can get ugly. 

If you were to receive a notice from Microsoft requesting a Microsoft Software Asset Management (SAM) audit, you need to take it seriously. Ignoring the notice can lead to potential legal action and fines in the six-figure and even seven-figure range.

If Microsoft finds you have been using their software without paying for it in every installation, that amounts to software piracy. The penalties are up to $150,000 per infringement.

It can force small businesses to shut down and burden enterprise operations with large fines and significant legal fees.

The Business Software Alliance (BSA) is a trade group that represents companies such as Microsoft, Apple, Cisco, IBM, Oracle, Salesforce, Hewlett Packard, and Adobe. 

They contact companies regularly and ask them to perform a software self-audit and threaten legal action on behalf of their representatives. They warn of fines in the millions of dollars, and they’re pretty good at what they do. BSA claims they have recovered more than $400 million from businesses using unlicensed software over the past decade.

Office 365 License Management Efficiency

Ensuring employees are sufficiently trained and using Office 365 to its fullest will improve productivity, bringing everyone together on the same platform with a suite of tools you’re already paying for. 

Being efficient with your Office 365 license management will also save you money. You just need an easy way to manage your licenses and stop wasteful spending.

One of the key features of Nova, our Office 365 management software, is the ability to manage licenses more effectively than native tooling. Nova provides immediate insight into license usage, allowing you to better drive adoption, or plan to downgrade licenses and save money when it comes to renewal time.

Quadrotech can help ensure you only pay for the licenses you need with a platform of integrated services to help you master the Microsoft cloud. To learn more, please contact our Office 365 management experts today.