Microsoft 365 Price Increases Hit July 2026: How to Audit Your Licenses Before You Overpay

Microsoft is raising prices across multiple Microsoft 365 plans on July 1, 2026. At the same time, the company launched a new top-tier bundle, Microsoft 365 E7 “Frontier Suite,” on May 1 that packages E5 with Entra Suite, Copilot, and Agent 365. For SMBs that already struggle to track what they’re paying for across their Microsoft subscriptions, these changes add urgency to a task most companies put off too long: a proper license audit.

The average company wastes 20 to 30 percent of its Microsoft licensing spend on unused seats, over-provisioned plans, or features nobody has enabled. With prices going up, that waste gets more expensive every month you ignore it.

What’s Changing and When

Microsoft announced two major shifts that affect mid-market businesses in the second half of 2026.

New bundle (May 1, 2026): Microsoft 365 E7 “Frontier Suite” combines E5 with Entra Suite, Copilot, and Agent 365 into a single SKU. It’s aimed at organizations that want the full Microsoft stack without managing separate add-on licenses.

Price increases (July 1, 2026): Microsoft is raising prices on several M365 Business and Enterprise plans. The exact increases vary by plan, but even a few dollars per user per month multiplies quickly across a 100-person company. According to Microsoft’s Partner Center announcements, the changes affect both new subscriptions and renewals after the effective date.

Here’s a rough comparison of per-user monthly costs across the main plans:

Prices are approximate based on published announcements and partner guidance. Your actual pricing depends on agreement type, volume, and reseller terms.

The E7 bundle may look expensive at first glance, but for organizations that were already paying for E5 ($57) plus Copilot ($30) as a separate add-on, the combined pricing of E7 could actually reduce total cost. The math only works if your team is actually using those features, which brings us to the real problem.

The Ghost Seat Problem

License waste at most SMBs falls into a few predictable categories.

Departed employees still consuming licenses. When someone leaves, their account gets disabled but the license often stays assigned for months. At $36 to $62 per user per month, ten ghost seats cost your company $4,300 to $7,440 per year for nothing.

Over-provisioned plans. Your reception staff and your security team probably don’t need the same license tier. A company that puts all 100 employees on E5 when 60 of them would be fine with E3 is spending an extra $15,000 per year on features those employees will never open.

Unused add-ons. Power BI Pro, Visio, Project, Copilot, and other add-ons are often purchased during an initial rollout and then forgotten. If only three people use Visio licenses you’re paying for twelve, that’s money you can recover this quarter.

Duplicate coverage. Some organizations purchase standalone security tools that overlap with what’s already included in their M365 plan. If you’re on E5 and paying separately for a third-party email security gateway, you may be duplicating capabilities that Microsoft Defender for Office 365 already covers.

How to Run a License Audit

You don’t need special tools to get started. Microsoft 365 admin center has the reporting built in. Here’s a five-step process any business can follow.

1. Pull Your Current License Inventory

Go to the Microsoft 365 Admin Center and navigate to Billing > Licenses. Export the full list of subscriptions, quantities purchased, and quantities assigned. This gives you the baseline: what you’re paying for and how many seats are allocated.

Compare assigned licenses against your current headcount. If you have 95 employees and 112 assigned licenses, you already know where to start looking.

2. Check Usage Reports

Under Reports > Usage in the admin center, Microsoft provides activity data for Exchange, Teams, OneDrive, SharePoint, and individual apps. Look for users who haven’t been active in 30 or 60 days. A user on an E5 license who hasn’t opened anything except Outlook and Teams in six months probably doesn’t need E5.

Pay particular attention to Copilot usage if you’re paying for it. Microsoft’s Copilot Dashboard shows adoption metrics per user. If you bought 50 Copilot licenses and only 12 people used it last month, you’re spending over $1,100 per month on unused AI features. That number is worth knowing before you consider upgrading to E7.

3. Right-Size by Role

Not every employee needs the same license. Create a simple mapping between job functions and the license tier that matches their actual work:

• Frontline and reception staff: M365 Business Basic or M365 F3 (email, Teams, web apps)
• Standard knowledge workers: M365 Business Premium or E3 (full Office suite, device management)
• IT, security, and compliance teams: M365 E5 (advanced security, eDiscovery, analytics)
• Power users with AI needs: M365 E7 or E5 + Copilot add-on

This step alone can save thousands per year. A company with 100 employees that moves 30 frontline workers from E3 ($36/user) to F3 ($8/user) saves $10,080 annually before the price increases even take effect.

4. Audit Add-Ons and Standalone Licenses

Pull a separate list of add-on subscriptions: Power BI Pro, Visio, Project, Defender for Endpoint (standalone), Intune (standalone), and any Copilot licenses purchased outside of E7. For each add-on, verify that the people assigned to it are actively using it. If they’re not, reclaim the license.

Also check whether your current plan already includes the capability you’re paying for separately. E5 includes Defender for Endpoint P2, Defender for Office 365 P2, Entra ID P2, Intune P2, and Purview compliance tools. If you’re on E5 and still paying for standalone versions of any of those, you’re paying twice.

5. Decide on Timing

If your annual agreement renews after July 1, you’ll be on the new pricing regardless. But if your renewal is before July 1, you may be able to lock in current rates for the next term. Talk to your Microsoft partner or managed IT provider about renewal timing. Even a one-month acceleration of your renewal date could save meaningful money across a full year.

For organizations considering the move to E7, the timing calculation is different. E7 bundles went live May 1 at the new pricing, so the question is whether the bundled rate is cheaper than what you’re currently paying for E5 plus individual Copilot and Entra add-ons.

Should You Upgrade to E7?

E7 makes financial sense in a narrow set of circumstances. If your organization already runs E5 and has deployed Copilot to most or all users, bundling into E7 consolidates your licensing and may reduce per-user costs compared to buying the components separately.

If you’re on E3 or Business Premium, jumping to E7 is a large cost increase that only pays off if your team will actually adopt Copilot and Agent 365 at scale. Most SMBs are better served by staying on E3 or E5 and adding Copilot selectively to the roles where it delivers measurable productivity gains, rather than paying for AI tools across the entire organization.

The honest answer for most 50 to 200 person companies: E7 is overkill. Get your current licensing right-sized first, then evaluate AI add-ons based on actual adoption data, not Microsoft’s marketing materials.

What a License Optimization Review Should Include

If you work with a managed IT provider, your provider should be able to run this audit for you and deliver specific recommendations. A thorough review includes:

• Complete license inventory with costs mapped to individual users
• Usage analysis showing which features each user actually touches
• Right-sizing recommendations by role with projected savings
• Add-on audit identifying duplicate or unused subscriptions
• Renewal timing analysis with cost projections under old and new pricing
• Security gap check to ensure downgrading licenses doesn’t remove protections you need

Infonaligy performs license optimization reviews as part of our managed IT services. We typically find 15 to 25 percent savings for companies that haven’t audited their Microsoft licensing in the past year. With the July price increases approaching, the savings from a review done now will compound every month going forward.

Act Before July, Not After

The July 1 deadline isn’t a crisis, but it is a clear trigger to stop ignoring license waste. Every unused E5 seat that rolls into the new pricing costs you more per month for features nobody touches. Every ghost license for a departed employee gets more expensive. The math only moves in one direction from here.

Block two hours this month to pull the reports outlined above. If the numbers surprise you, or if you’d rather have someone who manages Microsoft 365 environments daily handle it, bring in your IT partner before renewal conversations start.