What is license rightsizing?
Also known as
Definition
Many organizations don't know what they're actually paying for. Licenses from mergers years ago are still assigned to people who left. Teams changed roles without the licenses changing with them. In a typical mid-size environment, 8–15% of all assigned licenses sit completely unused. That's the part IT teams usually spot first. It's not the biggest part.
The highest-leverage problem is usually fit: users on E5 who only ever use Word, Excel, and Outlook; users on E3 who genuinely need Purview compliance tools or Power BI. The result is paying for capabilities that aren't being used while underserving the people who actually need them. Add duplicate third-party tools that overlap with what's already included in the Microsoft 365 license, and add-ons distributed without any offboarding process, and the real cost of not rightsizing becomes clear.
tip
Do a license audit. Most organizations absorb price increases on top of existing waste. The time to find and fix it is before the contract renews.
Why it matters
Microsoft 365 pricing increased 5–33% in July 2026, depending on the SKU. But for most organizations, the bigger issue is the waste that’s already there.
- Governance & security: The wrong tier creates waste or leaves users without the controls they need.
- Visibility gap: You can't fix what you can't see and Microsoft's native reports don't clearly connect user activity to assigned licenses.
- Cost accountability: You're paying monthly for licenses nobody's using.
What we see out there
Licenses handed out with no process to take them back.
Add-on licenses for products like Planner and Visio get assigned without any structured onboarding or offboarding, so licenses accumulate. The native Microsoft 365 usage reports aren't granular enough to fix it.
Unused seats cleaned up. Everything else ignored.
IT teams run a license cleanup, feel good about reclaiming inactive seats, and stop there. The role mismatches, duplicate assignments, and premium features nobody uses stay in place. The real cost reduction was never reached.
M&A creates recurring license headaches.
Every acquisition creates new licensing questions: duplicate accounts, users on the wrong plan, tools that overlap with what was already in place. Organizations managing frequent acquisitions find themselves re-quoting and re-evaluating licensing every time.
No real-time visibility across the tenant.
In large tenants with hundreds of users and workspaces, unused or over-provisioned licenses often go unnoticed because Microsoft's native reporting doesn't clearly connect user activity with assigned licenses.
Frequently asked questions
How is rightsizing different from license reclaim?
License reclaim removes licenses from inactive or former users. It's one part of rightsizing. The other parts are: reviewing whether active users are on the right tier for the work they do, identifying overlapping SKUs where you're paying for the same capability twice, and auditing add-ons that were assigned without a clear reason.
What signals show license waste?
Five patterns drive most Microsoft 365 license waste:
1. licenses still assigned to inactive or former users
2. paying for the same capability in two different SKUs
3. users on a tier that's higher or lower than what their role actually needs
4. add-ons distributed without any onboarding or offboarding process
5. premium features that are included in a plan but never activated.
Any one of these is worth investigating. All five together usually add up to more than the price increase itself.
How often should licenses be reviewed?
At minimum, before each renewal. But a point-in-time review only catches waste that's visible at that moment. Licenses assigned after the review, users who become inactive between reviews, and add-ons distributed informally all add up in between. A review cadence tied to key events works better: renewal, M&A activity, large-scale headcount changes, and Copilot rollouts, where license tier directly affects what AI capabilities users can access.
What happens to licenses during a merger and acquisition?
M&As create licensing complexity fast. Duplicate accounts from both tenants may end up assigned licenses. Users change roles during integration and may end up on the wrong tier. Tools and add-ons from the acquired organization may overlap with what was already in place. A license review is part of migration planning, not an afterthought. Without it, organizations often pay for the same user in two places during the transition period.
