Common Pitfalls of Microsoft Licensing and Their Business Consequences

Microsoft licensing covers a wide range of products, services, and usage rights across its ecosystem — and they don’t come cheap.

According to Forrester, a typical organisation using Microsoft 365 for business could spend US$81,000 on subscriptions, US$58,000 on implementation and training, and US$143,000 on ongoing management over a three-year period. That’s a total of US$282,000 — a substantial investment that only covers part of Microsoft’s full suite of offerings

Without proper licence management, a good portion of that spend could be going to waste. Whether it’s unused premium licences, duplicate subscriptions, or accounts that haven’t been touched in months, these inefficiencies quietly drain budgets and reduce ROI.

When licensing isn’t optimised, businesses not only lose money but also miss out on the full value of the tools being paid for. In this blog, we’ll explore the most common Microsoft licensing pitfalls and how they can impact your business.

The True Scale of Microsoft Licensing

When people think of Microsoft, they often picture Word, Excel, and PowerPoint. But Microsoft 365 also includes:

• Teams for communication and collaboration
• SharePoint and OneDrive for file storage and sharing
• Exchange Online for email
• Defender for Business for endpoint security
• Intune for device management
• Power Platform for automation and analytics

Each of these services has its own licensing tiers, usage limits, and integration requirements — and that’s just one product suite.

Microsoft’s licensing covers many environments across cloud, on-premises, and hybrid setups. Whether your organisation is running virtual machines on Azure, managing databases with SQL Server, or deploying customer relationship management (CRM) solutions through Dynamics 365, each environment comes with its own licensing rules and cost structures.

Azure services are typically billed based on consumption, offering flexibility but making budgeting less predictable. On-premises software, like Windows Server or SQL Server, often requires perpetual licences and Software Assurance (SA) to stay compliant and up to date. Developer platforms such as GitHub Enterprise and Visual Studio add another layer of complexity, especially when used across different deployment models.

Furthermore, Microsoft offers several licensing frameworks tailored to different business needs:

• Enterprise Agreements (EA) are designed for large organisations with predictable usage.
• Cloud Solution Provider (CSP) programme offers flexible monthly or annual subscriptions through Microsoft partners.  
• The Microsoft Customer Agreement (MCA) allows for direct purchases.
• Open Value options are better suited for SMEs and government entities.

Again, each model has unique terms around billing, renewals, and feature access. With so many moving parts, managing Microsoft licences effectively requires a clear understanding of how each service fits into your IT landscape.

Where Companies Often Go Wrong with Microsoft Licensing

Many businesses unknowingly fall into common traps with Microsoft licensing, leading to poor budget control and operational inefficiencies. Below are seven frequent missteps and the real-world consequences they bring to your organisation:

1. Assuming Licensing Is Straightforward

Many companies assume that Microsoft licensing is as simple as buying a few seats and activating the software. As mentioned earlier, Microsoft’s licensing structure is layered with different tiers, entitlements, and usage conditions that vary across products. For example, Microsoft 365 Business Premium includes Intune and Defender for Business, while Business Standard does not — yet many businesses don’t realise the difference until it’s too late.

Business Consequence: Underestimating the complexities of Microsoft’s licensing can lead to missing critical features, unexpected costs, or even non-compliance. Organisations may end up paying more to add services they thought were included, or worse, operate without essential security tools, exposing themselves to unnecessary risk.

2. Over-Licensing and Poor Licence Oversight

Many organisations end up over-licensing simply because no centralised system is in place to track usage. Licences are often purchased independently by different departments, and when staff leave or change roles, their licences aren’t revoked. On top of that, businesses sometimes pay for third-party tools (like antivirus or conferencing software) even though similar features are already included in their Microsoft 365 plans. Without visibility across the organisation, these overlaps go unnoticed.

Business Consequence: Poor licence oversight leads to significant budget waste and operational inefficiencies. Fragmented management also makes it harder to respond to audits, track renewals, or scale licensing as the business grows — resulting in compliance risks and missed opportunities for cost optimisation.

3. Non-Compliance and Audit Risks

Microsoft reserves the right to audit its customers, and many organisations are caught off guard due to misassigned licences, missing documentation, or unlicensed usage. Common violations include using software on more devices than permitted or failing to assign Client Access Licences (CALs) correctly.

Business Consequence: Failing an audit can be costly. Companies may be forced to pay full retail price for unlicensed products, plus penalties and audit fees. In regulated industries, non-compliance can also lead to reputational damage and legal complications.

4. Ignoring Software Assurance Benefits

Software Assurance (SA) offers valuable benefits like upgrade rights, training vouchers, and licence mobility. However, many businesses either don’t purchase SA or fail to utilise its full potential. This often happens due to a lack of awareness or poor vendor guidance.

Business Consequence: Without SA, organisations may need to repurchase licences when upgrading or migrating to the cloud, adding unnecessary expense. They also miss out on training resources that could improve user adoption and productivity.

5. Overlooking License Renewal Terms

Auto-renewals and fixed-term contracts can lock businesses into outdated or overpriced plans if not reviewed regularly. Many organisations treat renewals as a routine task, missing the opportunity to reassess needs or negotiate better terms.

Business Consequence: Overlooking renewal terms can result in long-term overspending. Businesses may continue paying for licences they no longer need or fail to upgrade to more cost-effective plans.

6. Inadequate Training and Onboarding

Even with the right licences, users may not know how to fully utilise Microsoft tools. Features like Power BI, Teams, and SharePoint are powerful — but only if staff are trained to use them effectively. Many organisations skip onboarding or rely on generic tutorials that don’t match their workflows.

Business Consequence: Poor training leads to underutilisation, reducing the return on investment. Productivity gains and automation potential are lost, and IT teams may face increased support requests due to user confusion.

7. Reactive Licensing Decisions

Licensing decisions are often made reactively — renewing contracts without reviewing usage data or aligning with business goals. This short-term approach may work in the moment, but it rarely supports long-term growth or digital transformation.

Business Consequence: Reactive licensing leads to missed opportunities for strategic alignment. Businesses may end up with licences that don’t scale well, lack key features, or don’t support future initiatives like cloud migration or AI adoption.

Unsure About Your Microsoft Licensing? Let AvePoint Audit It for Free

Before committing to another licensing contract, take a step back and assess your organisation's needs. Microsoft’s licensing landscape is vast and constantly evolving, so it’s easy for businesses to overspend, miss entitlements, or fall out of compliance without realising it.

AvePoint offers a free Microsoft licence audit to help you gain clarity. Our experts will review your current environment, identify any gaps or inefficiencies, and recommend ways to optimise your spend and usage.

Take your first step towards efficient licence management today.