Microsoft 365 Mixed Licensing Strategy

Mixed licensing is the practice of assigning different Microsoft 365 license types to users within the same organization based on their specific needs and roles. For example, administrative staff might have Business Basic licenses for email and basic Office apps, while executives receive E5 licenses for advanced security and analytics features.

Pros

Microsoft officially supports mixed licensing, offering cost optimization by matching license costs to user needs and providing strategic flexibility to scale different license types independently based on job functions.

Cons

The License Trap

Definition: Microsoft 365 activates certain security features at the tenant level when ANY user has the appropriate license, meaning expensive features become available to ALL users regardless of their individual license type.

Example: Your organization has 1,000 users with 999 Business Basic licenses ($6/month) and 1 E5 license ($57/month). Microsoft automatically enables E5 security features like Advanced Threat Protection and Azure Identity Protection for all 1,000 users, meaning 999 users benefit from premium security they’re not paying for.

Compliance Risk: Microsoft’s licensing terms require proper licenses for users benefiting from these services. During an audit, you could face massive back-billing - potentially $600,000+ ($51 difference × 999 users × 12 months) to retroactively license all affected users.

Other Considerations

• Service degradation - Some services perform worse in mixed environments. For example, if you have both Business Premium licenses (with Defender for Business) and Enterprise E5 licenses (with Defender for Endpoint Plan 2), the entire tenant defaults to the lower-tier Defender for Business experience, limiting advanced security features even for users who paid for premium licenses

• User confusion - Inconsistent feature access creates support challenges and different user experiences within the same organization

Conclusion

If implementing mixed licensing, organizations should carefully document which users are licensed for which features and implement technical controls to prevent unlicensed users from accessing premium services. Regular licensing audits and compliance reviews are essential to avoid costly penalties during Microsoft licensing reviews.