Microsoft 365 license management: manual vs automated

Microsoft 365 licenses are one of those line items that creep up quietly. Someone left 18 months ago, their license is still open. Multiply across 200 employees and you can be structurally overpaying thousands per year. This post shows how to find that waste and build a process around removing it.

TL;DR

• Manual license management leaves many organizations overlicensed; industry surveys put unused SaaS licenses somewhere between a third and a half of seats.
• The core leak is the gap between an assigned license and a used one.
• ServiceChanger reads the real sign-in activity from Entra ID and reports which seats go unused. The actual SKU assignment and revocation stays in Microsoft.
• Sign-in activity covers all M365 SKUs, plus add-ons like Power BI, Power Automate, and Intune.
• The business case is usually strong, because every reclaimed seat is a direct, recurring saving.

The problem

A typical scenario at 200 to 1000-employee companies:

• 12 people left in the last six months. Licenses never cancelled.
• 8 people got promoted and received an additional E5 license. Their old E3 is still active.
• 15 people were temporary contractors with E3 licenses. Gone for two years now.

As an illustration, that is 35 unneeded licenses. At roughly €20 per month that comes to about €8,400 per year, before counting the admin time to unpick it. Your exact mix of SKUs and prices will differ; the point is the size of the leak, not these specific numbers.

What you can map, and what stays in Microsoft

A clean license model starts by writing down which SKU belongs to which role. For example:

Role	License SKU	Extras
Standard employee	M365 Business Standard	-
Engineer / Developer	M365 E3 + Power BI Pro	Intune
Manager	M365 E5	Teams Phone
Contractor	M365 F3	-

That mapping makes it visible when reality drifts: an engineer still on E3 long after becoming a manager, a contractor still holding E3 two years after leaving. ServiceChanger does not assign or revoke SKUs; the actual license change happens in the Microsoft admin surface. What ServiceChanger does is read the real sign-in activity from Entra ID, compare it against your assigned seats and the intended model, and report where the two no longer match.

Which SKUs this covers

Sign-in activity exists for any licensed account, so the approach covers the common Microsoft licenses:

• M365 Business Basic / Standard / Premium
• M365 Enterprise E1 / E3 / E5
• M365 Frontline F1 / F3
• Power BI Pro and Premium Per User
• Power Automate Per User and Per Flow
• Intune Plan 1 and Plan 2
• Teams Phone (Standard and Premium)
• Defender, Purview, and Entra Suite modules

The numbers

The leaks below are illustrative ranges, not measured ServiceChanger figures. They give a sense of where the money usually sits for a 200 to 500-employee org:

Leak	Typical scale	Annual cost
Leaver licenses still open	5 to 10 percent	€3,000 to €8,000
Duplicate SKUs (E3 + E5)	2 to 5 percent	€2,000 to €6,000
Contractors not cancelled	1 to 3 percent	€1,000 to €3,000
Manual admin	4 hours per week	€8,000 to €12,000
Total		€14,000 to €29,000

Because reclaimed seats are a recurring saving, the business case usually pays back quickly.

Pitfalls

1. Mind the OneDrive retention window. Microsoft only starts the OneDrive cleanup clock when the account is deleted, not when you remove the license, and the default retention is 30 days (configurable from 30 to 3650 days in the SharePoint admin center). Plan the timing so you do not lose data you still need.
2. Watch license pools. A growing team can suddenly hit a SKU shortage. Keep an eye on the pool so you are not caught short.
3. Downgrade vs upgrade. Downgrading E5 to E3 can remove features someone genuinely uses. Check usage before you move anyone down.

FAQ

What happens to data when a license is revoked? Removing a license unlinks services from the user, but the cleanup clock for OneDrive only starts when the account itself is deleted. After Microsoft's retention window the data can be permanently removed, so handle the timing deliberately as part of your offboarding process.

Can I set manual exceptions? Yes. Some executives keep E5 for a while after retirement, for instance. Your role-to-SKU model can carry deliberate exceptions, and the actual seat stays whatever you set it to in Microsoft.

What about multi-tenant setups? Each tenant is connected separately. Pushing licenses across tenants is not possible (Microsoft restriction), but you can track usage per tenant.

Want to focus on the unused licenses specifically? Read Reclaim unused Microsoft 365 licenses with Entra sign-in activity for a 90-day policy, and Find inactive users in Entra for the sign-in activity behind it.

Next step

Want to see how much you're overpaying on M365 licenses? ServiceChanger reads the sign-in activity from Entra ID and shows which seats go unused. Book a demo or read the License Management docs.