When most business owners think about Microsoft 365, they think of productivity, collaboration, and security. Understandably so, given that it’s the backbone of so many organisations. But have you taken the time to think about whether the licences you currently have are helping or hindering you? If not, you’re not alone because licence sprawl is a common problem that remains largely unaddressed.
This issue quietly drains IT budgets, creates security and compliance risks, and hinders opportunities for growth and innovation. And the worst part is, most leaders don’t even realise it’s happening. As someone who works with businesses every day on their Microsoft 365 strategy, I can assure you that with the right approach, you can take control of licence sprawl.
In this article, we’ll unpack what licence sprawl is, why it’s an issue your SMB literally cannot afford to ignore, and what you can do to fix it.
Put simply, licence sprawl is when you’ve got licences in Microsoft 365 that you don’t actually need or use. That could mean unused seats, features that aren’t used, or licences that were once relevant but are no longer fit your business. There are many reasons behind it, but they all boil down to a lack of accountability: no one truly owns the responsibility for monitoring licences.
Let’s say the sales department is preparing for a new project and decides that they all need Dynamics to get it done, so they make a case for new licences. Three months later, the project fizzles out, but the licences are still there, quietly eating into your budget. Meanwhile, IT is none the wiser and assumes those licences are still being used because nobody told them otherwise, resulting in the business paying for licences that no one uses.
In Azure, it happens when teams spin up test environments or pilot projects. Those environments aren’t always clearly defined in budgets, so they linger in the background, silently wasting money.
On the surface, licence sprawl looks like “just an IT problem.” But the truth is, it’s a business-wide issue and can only be mitigated through clear communication and the end users having a sense of ownership of their licences.
The warning signs are subtle, but I’ve seen a few recurring causes:
Licence sprawl isn’t unique to Microsoft 365, but Microsoft’s model makes it especially easy for it to occur:
In addition to the unnecessary expenditure, licence sprawl leads to all kinds of risks and opportunity losses.
Licences are paid for monthly or annually, regardless of whether they’re used or not. It may not seem like much at first, but multiply unused licences across departments, projects, and ex-employees, then over a period of time, and you can be spending thousands on nothing.
Another common cause of sprawl is poor leaver processes. Someone leaves the company, but their licence remains active – which is a big cyber security concern. Unmanaged or unused active accounts could be hijacked, which would provide a back door into your systems and expose customer data. Even dormant mailboxes might still be receiving emails from customers, who would be anything but happy to have their emails continuously going unanswered.
Having active accounts with no clear owner is a compliance breach, especially in regulated industries like health and financial services. Regulators expect you to demonstrate control over who has access to what, and if you can’t, you can expect a hefty fine.
To me, this is the biggest problem. Every Pound spent on unused licences is a Pound you can’t invest elsewhere. Imagine if instead of paying for unused E5 licences, you’d redirected that budget into Microsoft Copilot. That investment could have delivered a real productivity boost — without costing you a penny more. And for SMBs especially, that can mean falling behind competitors who are putting their money to better use.
Licence sprawl in Microsoft 365 is more than just an IT housekeeping issue. It’s a financial drain, a security risk, a compliance concern and inhibits innovation. But with a clear plan, effective communication and a bit of discipline, you can get it under control.
Over the years, I’ve seen the challenges licence sprawl creates play out in organisations of all sizes. This is why I’ve shared practical ways to help you spot and tackle sprawl before it does lasting damage or your business misses out on more growth opportunities.
Start small by running a licence audit. Through SmartCheck, we’ve run these for customers and uncovered immediate savings – let’s do the same for you so you can rest assured that every Pound you’re spending is delivering value