It’s no secret that Microsoft 365 licensing can be confusing. In this blog we’ll take a deeper look at the Business and Enterprise licensing options so you can gain some understanding and decide what option might be the best fit for your organisation.
The decision affects how secure your organisation is, how easy it is to manage devices and identities, and how productive your people can be. From Microsoft 365 Business and Business Premium to the Microsoft 365 E3 licence and the top-tier E5 licence, each option has a different role to play.
Firstly, let’s sort some possible confusion caused by Microsoft’s licence naming convention. Microsoft 365 (M365) is the suite of products that includes a Windows licence; Microsoft Office 365, which provides Exchange online, Outlook, Sharepoint online, Word, Excel, Powerpoint and other tools; and Microsoft’s Entra identity, Intune endpoint management, Defender security and Purview compliance tools. Microsoft Office 365 (O365) is the collaboration and application suite only. Please note since April 2024 Teams is no longer included within the O365 suite and needs to be separately licensed in the UK and throughout the EU. This article discusses the M365 suite options, all of which include a Windows licence, Office 365 plus tools and utilities.
What about smaller organisations with fewer than 300 users?
For smaller organisations with fewer than 300 users, the starting point is Microsoft 365 Business. Business Standard delivers the familiar Office apps along with OneDrive and SharePoint, but it lacks the stronger security and endpoint management tools larger companies often need. Business Premium adds these protections, including Windows 11 Business and Microsoft Defender, plus tools like Intune for device management, functionally it is pretty similar to the E3 licence with the specific limitation of 300 users and below. For many SMEs, that combination provides a solid foundation.
Things change when your business grows or you face stricter compliance needs. That’s where the enterprise plans come in, starting with the E3 license. This gives you full desktop and web versions of Office apps across multiple devices, Exchange Online with larger mailboxes, SharePoint, OneDrive and Teams, plus Windows Enterprise. On top of that, you gain enterprise-grade security with Microsoft Defender for Endpoint, identity and device management with Intune, Windows Autopilot, and Azure Active Directory P1. The E3 licence is popular because it strikes the right balance: strong enough for mid-sized organisations but without the cost of E5.
If you need to go further, the E5 licence builds on everything in E3 but adds advanced security, compliance and analytics. With E5 you get Microsoft Defender for Office 365, Defender for Identity, Defender for Cloud Apps, and Entra/Azure AD P2, which includes Role Based Access Control and Privileged Identity Management to complement Conditional Access in P1. It also brings in Power BI Pro for business intelligence and Microsoft Purview for compliance and risk management. For highly regulated industries or organisations dealing with sensitive data, E5 is the gold standard.
Of course, not everyone needs the full E5 package. That’s why Microsoft offers E5 Security and Compliance Add-Ons, plus the applications mentioned above can be licensed individually. These can be bolted onto Business Premium or E3 license subscriptions to unlock advanced features at a lower cost. The Security Add-On bundles Defender for Office 365, Defender for Endpoint P2 which includes Qualys security posture management, Defender for Cloud Apps and Defender for Identity, along with Entra ID P2. The Compliance Add-On covers advanced eDiscovery, insider risk management and information governance. Each costs about £12.50 per user per month, and many businesses find that combining E3 with one of the add-ons (normally E5 Security) provides almost everything E5 offers. If you require both add-on then the full E5 suite is more cost effective as you effectively get PowerBI Pro for free.
What’s more, Microsoft has recently opened the E5 Security and Compliance Add-Ons to Business Premium customers too. That means even smaller organisations can now access enterprise-level security without having to jump straight to E3 or E5. It’s a sign of how Microsoft is democratising access to advanced protection, recognising that cyber threats affect every business, not just the largest ones.
Looking ahead, there’s also a major pricing shift coming. From November 2025, Microsoft will standardise pricing for Enterprise Agreements. The familiar 6–12% volume discounts will disappear, affecting Microsoft 365, Dynamics 365, Windows 365 and related security and compliance tools. If your renewal is due around that time, it’s worth reviewing your current licensing strategy now to avoid paying more than you need to later.
So how do you decide which licence is right? For organisations under 300 users, Business Premium is often the best fit, especially when combined with the E5 Security or Compliance add-ons. For larger organisations or those that need unlimited user capacity and stronger IT controls, the E3 license is the most common choice. And for businesses where compliance, sensitive data handling and analytics are critical, E5 is the smartest investment.
Many people still have practical questions about licensing. What exactly is an E3 licence? In short, it’s Microsoft’s enterprise plan that delivers Office apps, Windows Enterprise, Intune, Azure AD P1 and Defender for Endpoint. How is it different from Business Premium? Business Premium is capped at 300 users and lacks Windows Enterprise and enterprise-scale identity management, while E3 lifts those limits. What’s included in Office E3 365? You get the full desktop and web versions of Office apps, Exchange Online, SharePoint, OneDrive, Teams and enterprise-level security. And do you really need E5? For some organisations yes, but for many, E3 with the right add-ons offers a more cost-effective way to reach almost the same level of protection and compliance.
In the end, Microsoft licensing can look complicated, but once you understand the tiers, the choice becomes easier. For many, the E3 licence is the sweet spot, providing flexibility, scalability and security without over-spending. Whether you choose Office E3 365, the full E5 licence, or a mix with add-ons, the right Microsoft corporate license gives you the foundation to work securely, stay compliant and plan confidently for the future.
