Microsoft 365 licensing is one of the most common sources of confusion — and overspending — for UK businesses. The difference between E3 and E5 isn't just a price jump; it's a fundamentally different set of capabilities. Choosing the wrong licence means either paying for features you'll never use or missing critical tools your business needs.
The Licence Confusion Problem
Microsoft's licensing structure has grown increasingly complex over the years. Between Business Basic, Business Standard, Business Premium, E1, E3, E5, F1, and F3, it's no wonder that many businesses end up with the wrong licence — often because they were sold the most expensive option without a proper needs assessment. The E3 vs E5 decision is the one we see businesses struggle with most, and it's where the stakes are highest.
What Microsoft 365 E3 Includes
E3 is the workhorse licence for most medium-sized businesses. It includes the full suite of desktop Office applications (Word, Excel, PowerPoint, Outlook), Microsoft Teams, Exchange Online with 100GB mailboxes, SharePoint, OneDrive with unlimited storage, and core security features like data loss prevention and Azure Information Protection.
For compliance, E3 provides eDiscovery, litigation hold, and basic audit capabilities. Device management through Intune is included, as is Windows Enterprise with advanced deployment tools. For many organisations, this covers everything they need to operate productively and securely.
What E5 Adds to the Picture
E5 builds on everything in E3 and adds advanced security, compliance, and analytics capabilities. The headline features include Microsoft Defender for Office 365 Plan 2 (advanced threat protection with automated investigation and response), Microsoft Defender for Endpoint Plan 2, Azure AD Premium P2 for advanced identity protection, and Microsoft Purview for advanced compliance management.
On the analytics side, E5 includes Power BI Pro for every user and Microsoft Viva for employee experience insights. For telephony, E5 bundles a Phone System licence, making it easier to integrate Teams-based calling without additional per-user costs. These additions represent significant value — but only if your organisation will actually use them.
Which Licence Do You Actually Need?
The honest answer is: it depends entirely on your business. If you're a 20-person company without a dedicated security operations team, the advanced threat hunting capabilities in E5 may go largely unused. However, if you handle sensitive data, operate in a regulated industry, or need advanced compliance controls, E5 could save you money compared to buying those capabilities separately as add-ons to E3.
A practical approach is to start with E3 and add specific E5 features as add-ons only where needed. Microsoft allows you to add Defender for Office 365, Phone System, and Power BI Pro individually. This “E3 plus add-ons” approach often costs less than a full E5 licence while giving you exactly the capabilities you need.
Getting It Right the First Time
The key to choosing the right Microsoft 365 licence is a thorough assessment of your actual requirements — not a sales pitch. At Outright IT, we review your current workflows, security needs, compliance obligations, and growth plans before recommending a single licence.
Our Microsoft 365 licensing service includes expert consultation, full migration, and ongoing licence management. We'll make sure you're on the right plan — and we'll keep reviewing it as your business evolves. No overspending. No missing features. Just the right tools for the job.