Microsoft 365 Licence Management: How NHS Trusts Cut Costs by 20% UK 2026

The hidden cost draining NHS IT budgets

Every NHS trust pays for Microsoft 365 licences. Most also overpay for them. The numbers are striking: a typical mid-sized trust with 1,500 active users runs a Microsoft 365 estate worth between £150,000 and £250,000 per year. Of that, 15 to 25 percent typically sits unused, wasted on inactive accounts, over-provisioned user roles, or licences assigned to staff who don't actually need them.

That's not a small amount. For a trust with a £200,000 annual M365 spend, that's between £30,000 and £50,000 vanishing every single year. Money that could fund additional nursing shifts, IT support staff, or equipment upgrades instead gets burned on ghost accounts and excess capacity.

The good news is that this waste is fixable. Many trusts don't realise how much they're losing because they've never looked. Once you start auditing your licence estate and aligning actual usage to actual need, the savings surface quickly. This article walks through exactly how to do it, and why NHS IT leaders are treating licence management as a serious operational priority in 2026.

Why NHS trusts overspend on Microsoft 365

Before you can fix the problem, you need to understand where it comes from.

Lack of visibility. Most trusts inherit their M365 setup from migrations or legacy deployments. IT teams assign licences reactively (someone requests access, IT grants it), not proactively. Six months later, you can't easily answer: who has what, who actually uses it, and who doesn't?

Staff churn. NHS staff move departments, go on extended leave, or leave the organisation entirely. In many cases, their M365 licences remain active. A departing nurse retains her Teams, Exchange, and SharePoint seat for months after she's gone because there's no formal offboarding checklist.

Role creep. A receptionist gets assigned an Enterprise E3 licence because "we might need advanced features later". A clinician in a low-usage ward gets the same tier as someone managing a large clinical team. Roles and licence needs change, but assignments don't.

Lack of usage data. Without proper auditing tools, trusts don't actually know whether a licence is being used. Exchange mailbox size, Teams adoption metrics, SharePoint activity: these are all visible in Azure, but many trusts don't look at them. So they renew licences automatically, assuming they're all needed.

Competitive licensing. Enterprise agreements and bulk deals can obscure the true cost per user, especially when licences are bundled. A trust might not realise it's paying premium prices for features entire departments will never touch.

All of these feed into a culture where Microsoft 365 is treated as a "set and forget" commodity, not a managed asset. The result: waste, often hidden in plain sight.

How to audit your M365 licence estate

Fixing the problem starts with measurement. You can't optimise what you don't measure.

Map current spend and usage. Log into your Microsoft 365 admin centre and extract a user report. Note every active and inactive user, their assigned licence tier (E1, E3, E5, etc.), their department, and their last sign-in date. Then cross-reference with Azure AD activity reports to see actual usage of core services: how many days in the last 90 has each user logged into Teams, accessed Exchange, or used SharePoint? This takes a few hours but gives you your baseline.

Segment users by actual need. Don't assume everyone in the same role needs the same tier. Instead, look at what they actually do. A clinical admin might need only Teams and Outlook (E1 or E3). A consultant managing a research project might need the advanced analytics in E5. A remote worker who only checks email needs Exchange only. Segment your user base into logical groups based on genuine functional requirements.

Identify dormant accounts. Flag any user with no sign-in activity in the last 180 days. These are usually former staff, people on extended leave, or test accounts. Removing these alone typically saves 5 to 10 percent of spend.

Review add-ons and overages. Many trusts don't know they're paying separately for extras like advanced threat protection, information rights management, or phone system add-ons. These stack up fast and often duplicate features already included in higher tiers.

Use Microsoft's own tools. The Microsoft 365 admin centre includes built-in licence reports. Azure AD provides usage metrics. Microsoft Copilot Pro includes insights on adoption across your estate. If you haven't looked at these dashboards, do it now.

Practical strategies for NHS cost savings

Once you have visibility, here's how to cut costs without cutting functionality.

Right-size your licence portfolio. If you've segmented users by need, you should see clear cohorts. For example, if 800 staff only need email and basic Teams, migrate them from E3 (about £6.50 per user per month) to E1 (about £4 per user per month). For a trust with that profile, that's £2.50 per user per month saved, or £24,000 per year across 800 staff. Multiply that across a whole trust, and the maths changes quickly.

Retire dormant licences immediately. If someone hasn't used their M365 account in six months and isn't on approved extended leave, remove their licence. This is both a cost saving and a security win.

Consolidate duplicative add-ons. If you're paying for three separate threat protection products because they were added piecemeal, stop. Often the highest tier of M365 includes most of what you need anyway. One coherent add-on strategy always beats an archaeological dig through licensing decisions made over five years.

Centralise licensing management. Assign responsibility to one person or team (even part-time) to review usage quarterly and recommend rightsizing. This alone often generates 10 to 15 percent savings because it prevents drift.

Negotiate with your EA provider. If your trust has an Enterprise Agreement with Microsoft (most large trusts do), the contract renewal is an opportunity to renegotiate terms. Bring actual usage data to those conversations; Microsoft often has room to move if you can demonstrate need and commitment.

Many NHS IT leaders treat licence management as a technical chore. But with budgets tight and every pound fighting for frontline impact, this is genuinely strategic work.

If you're moving into NHS IT from another field, or you're currently in an NHS IT role and want to develop stronger skills around cloud infrastructure and cost management, the SmoothOps 365 Microsoft 365 Administrator Programme gives you hands-on experience with exactly these scenarios. You'll learn licence management, user provisioning, security, and compliance across real-world NHS-like configurations. Join the waitlist for the M365 Administrator Programme to be notified when enrolment opens, or if you're still exploring your options, grab a free AI-powered career roadmap designed for NHS staff moving into tech.

Frequently asked questions

What's the easiest way to find unused M365 licences in our trust?

Go to the Microsoft 365 admin centre, export the user list, and check the last sign-in date against Azure AD activity logs. Any user with zero activity in the last 180 days is a strong candidate for licence removal. Most trusts find between 5 and 15 percent of their user base meets this criterion.

Can we really save 20 percent, or is that optimistic?

Yes, but it depends on your starting position. If you've been assigning E5 licences to everyone by default, or you have significant staff churn without offboarding, 20 percent is realistic. Most trusts see 10 to 15 percent savings from a proper audit and rightsizing exercise within the first year.

Who should own licence management in our trust?

Ideally, a dedicated person (or team in larger trusts) within IT operations, not ad hoc across different departments. This person should review usage data quarterly and make rightsizing recommendations. Even 2-3 hours per month pays for itself many times over.

Does reducing licences affect compliance or security?

Not if you do it properly. You're reducing unnecessary licences, not removing features your users genuinely need. In fact, a properly segmented licence estate with clear ownership is more secure because it's easier to audit and harder for rogue accounts to hide.

What if staff complain about losing access to features they "might need later"?

Explain the reality: E1 covers email, Teams, and basic cloud storage. E3 adds advanced analytics, compliance tools, and more storage. E5 adds AI-powered security and advanced threat protection. Most staff don't need E5. Be clear about what's included at each tier and focus on actual use cases, not hypothetical future scenarios.