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Hidden Costs, Feature Limits and Other Microsoft 365 Licensing Pitfalls

• By Kurt Mackie
• April 02, 2021

A recent talk by independent consultancy Directions on Microsoft covered some of the most common licensing traps facing organizations with Microsoft 365 subscriptions.

The "Microsoft 365 Hidden Licensing Costs" webinar was helmed by Rob Horwitz, Directions on Microsoft's founder, CEO and research chair. He listed common trip-ups such as mixing Microsoft suites (F1, F3, E3 and E5), plus finding out that the suites don't include related capabilities that cost extra. The "F" suites are conceived by Microsoft for so-called "frontline workers," while the "E" suites indicate "enterprise" or knowledge workers, he explained.

Horwitz suggested that the complexity of Microsoft 365 licensing costs could be due, in part, to Microsoft's somewhat siloed software development practices, but it also means that licensing compliance for organizations can be iffy. The notion that licensing compliance will get enforced for organizations by Microsoft's own software is "not 100 percent absolute," he noted.

In general, organizations licensing Microsoft 365 services should adopt the following precautions:

• Address the hidden cost issues proactively.
• Focus on the big-ticket items.
• Research and develop strategies and tactics to navigate around or minimize the dangers (contractual, technological and administrative).

'Russian Doll' Licensing
Microsoft 365 licensing is sold in a nested fashion, "like Russian dolls," with the higher-level licensing (E5) encompassing lower-level capabilities. Prices range from $2.25 per user per month for the lower F1 suite to $59 per user per month for the top E5 suite.

The talk also broke down Microsoft 365 licensing into three broad categories: "personal and group productivity," "IT infrastructure" and "desktop OS." Detailed charts showing the capabilities associated with those Microsoft 365 suites and categories appeared throughout the presentation. The charts are far more comprehensive and easier to understand than descriptions in Microsoft 365 promotional materials, but the Directions on Microsoft team also mined Microsoft's dense and obscure publications to produce them.

Hidden IT Infrastructure Costs
Of the three broad categories of Microsoft 365 licensing highlighted by Directions on Microsoft, organizations are most likely to get surprised by hidden IT infrastructure costs, likely because a mixture of product suites were in use, Horwitz indicated:

In the personal and group productivity area, if your organization needs these extra cool premium capabilities to do certain forms of connectivity to data that lives outside of Microsoft 365, you'll be writing bigger checks to Microsoft. Similarly, if your organization bumps up against your monthly stipend, let's say storage or other resources that are included in your Microsoft 365 subscriptions, you'll also be writing checks for additional resource capacity. On the IT infrastructure side, the sorts of hidden licensing cost is different and perhaps more insidious. Here, the problem comes from mixing more than one suite level within your Microsoft 365 tenancy.

Organizations might mix the Microsoft 365 suites because it serves job roles or to save money. However, doing so can run afoul of Microsoft's licensing stipulations, and "usually, there's nothing to block this from happening," Horwitz explained. Microsoft doesn't provide sufficiently "granular controls" for IT pros to do their own license compliance monitoring either, he added.

Another licensing stumbling block on the IT infrastructure side that can incur costs is that Microsoft's compliance and security features in Microsoft 365 often "only make sense when applied everywhere." That concept, though, may be contrary to IT department thinking on how they want those features applied.

Horwitz advised organizations to be particularly sensitive to IT infrastructure licensing stipulations that use the word, "access." Microsoft doesn't define what it means by access, but it gets enforced in a broad fashion. He compared it to people standing outside the gates of an outdoor music concert, when just hearing the music bears costs. Typically, having access can mean that organizations will have to pay add-on licensing costs on top of their Microsoft 365 suite licensing costs.

Another licensing cost pitfall is that Microsoft 365 may have capabilities that are free to use, but they are also limited. Horwitz cited the example of the Azure Active Directory B2B service, which lets external users authenticate to a network at no cost but only to a limited extent. When that limit is met, extra costs accrue.

Power Platform Cost Perils
Particularly dangerous on the hidden costs front for organizations is Microsoft 365's Power Platform licensing, which gives access to low-code and no-code developer tools (Power Apps), workflow tools (Power Automate) and business intelligence tools (Power BI).

Organizations with top Microsoft 365 E5 suite licensing get a product called "Power BI Pro." It may seem adequate, because of its product name, but it has limitations.

"So once you bump up against [Power BI] Pro-level limitations, such as data volume or data refresh or query response times, then you'll be paying significantly large checks for upgrades to Power BI Premium," Horwitz noted.

Power Platform add-on costs can add up. "We've already come across one early-adopter customer with Power Apps- and Automated-related license add-on fees that have expanded to comprise half their Microsoft 365-related spend," Horwitz said.

He compared Power Platform tools to past Microsoft tooling like Visual Basic for Applications and Microsoft Access. Microsoft charged for those tools, but the difference with Power Apps and Power Automate is that Microsoft also charges organizations when they use those tools. While some use allocations are included in the Power Platform licensing, "it's very likely your users will quickly venture beyond those constraints," thus incurring add-on licensing costs.

"If you remember anything from this webinar, remember these nine words, 'You need a containment strategy for the Power Platform'," Horwitz said.