User Profiling for Improved Microsoft License Optimization

As organizations and their executives place an even greater emphasis on resiliency, IT leaders face growing pressure to reduce costs while ensuring their users have the necessary tools to work efficiently. One of the most overlooked, yet high-impact, strategies in Microsoft 365 license management is user profiling. Establishing a scalable license governance strategy early on can lead to substantial cost savings, increased operational efficiency, and a stronger return on investment. 

Why You Need User Profiling for Effective License Management 

User profiling is the practice of categorizing employees based on job functions, software usage patterns, and business needs. This classification guides licensing decisions, ensuring the right individuals receive the appropriate Microsoft 365 license. 

Why Skipping Microsoft 365 User Profiling Leads to Overspending 

Many smaller organizations make the costly mistake of purchasing blanket enterprise licenses, such as M365 E3 or E5, without fully understanding their users' needs. For companies with fewer than 300 users, Business Premium or Business Standard SKUs often provide adequate functionality at a significantly lower cost. 

For example: 

• A company with 250 employees might default to assigning E3 licenses across the board. 

• However, 1/3 of these employees might only need Business Standard. 

• This oversight could result in thousands of dollars being wasted each month. 

As organizations scale, these inefficiencies multiply. While each company has unique needs and business cases, generally speaking, companies with 500 users should have at least two user profiles. Companies with at least 1,000 users should likely have three or more user profiles tailored to job roles and usage patterns to optimize license costs effectively. 

Avoid These Common M365 Licensing Mistakes 

Mistake #1: Never using or reviewing Licensing User Profiles 

Organizations with fewer than 300 users often skip profiling entirely, resulting in blanket licensing where all users, regardless of their specific needs, are provided with the same license. Or if user profiles are used, they’re not revisited based on changing user needs. It’s important to start planning and strategizing months ahead of your EA renewal to take advantage of smart user profiling based on usage data. The growing recommendation is to start preparing 9 months before signing your license agreement.  

Mistake #2: One-Size-Fits-All Microsoft Licensing (Overbuying) 

Growing companies default to enterprise SKUs, bypassing user analysis. For example, a 12,000-employee enterprise may use a single user profile to purchase licenses, ensuring access is available ‘just in case’ their users need a capability available in an E5 license. In reality, only a third of the organization’s users are knowledge workers who need premium functionality. The rest could have used more affordable frontline  F1 or F3 licenses. 

Mistake #3: Avoiding Complexity 

Companies often resist user profiling due to its perceived complexity. The result? A recurring overspend of thousands of dollars. But the truth is, avoiding user segmentation only increases workload and costs over time. 

A Strategic Blueprint for User Profiling 

Creating a successful user profiling and license management strategy starts with cross-functional collaboration. Here’s how to lay the foundation:

1. Evaluate Roles & Requirements

Begin by evaluating the various roles across your organization. Determine the specific application and service requirements for each function, whether it’s collaboration, productivity, or security. This foundational assessment enables the development of well-defined user personas that guide licensing and access decisions.  

2. Align with HR and Onboarding/Offboarding Processes

Assigning a user profile should begin during onboarding, be adjusted based on any role changes, and continue until a user exits the company.  

• HR identifies the role. 

• IT assigns the appropriate license based on a governance blueprint. 

• IT reclaims licenses through the offboarding process. 

Example User Groups: 

• Group 1 (Knowledge Workers): Directors, VPs, Finance (requires full desktop apps like Excel, rather than Online-only versions). 

• Group 2 (Sales/Field): Remote, light users who may only need web-based apps. 

• Group 3 (Factory/Frontline): Minimal digital needs; eligible for F1 or F3 licenses.
  

3. Create a Governance Framework

Establish clear governance policies: 

• License requests for tools like Project or Visio must include justification. 

• Use Microsoft Forms to create a simple intake process for requests. 

• Set license expiration or review dates. 

• Implement ongoing monitoring and regular reviews to continuously reassess needs.  

4. Enforce Accountability & Ownership of Overspend

Department managers who own their license budgets or are involved in the planning process tend to be more accountable for optimizing license spend.  

It’s also beneficial to have clear roles and responsibilities in writing, which are agreed upon by each department and stakeholder. Here’s a use case of what we’re talking about. Imagine the Sales & Customer Success team owns their license budget. They request a Project license for an ad-hoc Customer engagement and provide a specific justification and expiration date of the project, instructing the IT team to reclaim the license at that date. They are charged for that license for that specific period of time. It then falls to IT to actually reclaim that license as requested. If IT fails to do so, the surcharge should impact the IT budget, not the Sales budget. On the other hand, if Sales did not provide an end date and was not responsive to IT’s requests to reclaim the license, then Sales should be accountable for covering the cost of that license until they do so. This type of FinOps model can promote accountability and good governance across the organization. 

5. Regular Audits and License Reviews

Implement quarterly or bi-annual user profile audits: 

• Are licenses still aligned with current job roles? 

• Can any SKUs be downgraded? 

• Is there software redundancy (e.g., two apps with overlapping features)? 

• Have there been any patterns amongst license requests? 

Leveraging Tools to Automate User Profiling 

Manual user profiling can be daunting and overwhelming for IT teams. However, SaaS license optimization tools like ENow License Optimization provide visibility into usage and license data, allowing IT to: 

• Identify inactive or underused licenses. 

• Map user activity to optimal license tiers. 

• Surface users whose licenses can be optimized with minimal user impact.  

• Easily provide charge-back and usage data to Business Units.  

Overcoming Resistance: Incentivizing IT Teams 

IT teams are often too busy managing daily fires to prioritize license optimization. But when they are shown the ROI, attitudes can shift: 

• Savings from right-sizing licenses can free up budget to fund future IT initiatives. 

• Incentive programs or bonuses tied to license cost optimization can drive momentum. 

FinOps Strategy: Shared License Ownership 

A mature FinOps strategy spreads licensing responsibility across departments: 

• HR governs role definitions. 

• Department managers approve license needs and monitor costs. 

• IT operationalizes the process, enabling cleanup and tracking. 

This structure prevents over-provisioning, reduces shadow IT, and creates clear accountability. 

Specialized Licenses: Handle with Care 

Licenses such as Microsoft Project and Visio are often required for time-bound initiatives. Unfortunately, many are never reclaimed after the project. Consider this: 

• Many users who request a Project license will never use it again. 

• Without governance, these idle licenses become recurring waste. 

Another example of specialized licenses these days includes Copilot. Coming in at $30/month/user, it’s critical to ensure these costly licenses aren’t assigned to users that aren’t using them, especially if there’s high demand for Copilot licenses from other more likely ‘power users.’  

Best Practices: 

• Require all Project/Visio requests to include project timelines. 

• Tie the license duration to project end dates. 

• Build license expiration into your provisioning workflow. 

• Continually monitor usage of Microsoft licenses with high demand to ensure they’re not sitting idle.  

Start Early to Avoid Pain Later 

Restructuring license governance becomes increasingly complex as your organization scales. Establishing a foundation of user profiling early enables: 

• Predictable license budgeting. 

• Scalable governance. 

• Tangible cost savings. 

The longer a company waits to clean up licensing, the more difficult and expensive it becomes. Don’t wait until you have 1,000 users or a bloated IT budget to act. 

License Optimization Begins with User Profiling 

Optimizing Microsoft 365 licenses isn't about cutting corners—it's about aligning technology investments with actual business needs. User profiling is a practical and strategic approach to achieving just that. 

By implementing user profiles early, integrating with HR processes, enforcing license governance, and leveraging FinOps accountability, companies can unlock significant SaaS license savings. Most importantly, they can ensure the right users have the right tools, without breaking the bank. 

Ready to optimize your Microsoft 365 licensing?  

Start by scheduling a License Optimization demo and consultation to see how our M365 License Management, Optimization, and Negotiation Services can drive significant cost savings for your organization. Your budget—and your CFO—will thank you.