Reduce Microsoft license costs for external employees

Microsoft license costs for external employees are a hidden but expensive problem for many companies. Freelancers, consultants, and service providers are often provided with expensive full licenses even though they do not actually need them. The result: unnecessarily high costs and confusing access rights.

But it doesn’t have to be that way! With clever license management and modern tools, Microsoft license costs can not only be drastically reduced, but the administration of external users can also be made significantly easier and more secure. Find out how this works and how our IAM solution IDM-Portal really helps companies move forward in this article.

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Hidden cost trap: Microsoft licenses for external users

Many companies incur unnecessarily high Microsoft license costs, especially when dealing with external employees. There are various weak points, such as:

• Inadequate allocation of licenses: External employees are often given flat-rate Microsoft 365 E3 or even E5 licenses, even though they don’t need them.
• Lack of structure in license management: It’s easy to lose track of who really needs which license.
• Incorrect licensing: External users often bring their own Microsoft accounts with them but are also given a company license, which leads to double licensing.

Such license models can quickly cost between €30 and €50 per user per month. When extrapolated to many projects and external employees, the costs add up considerably—often without being questioned. Why not use the existing licenses of external employees?

The management of these access rights is also often unstructured. What happens when a project ends? If project employees remain activated, this not only leads to unnecessary costs, but can also result in unwanted access or problems. Wouldn’t it make sense to know at all times who currently has access to which resources?

High license costs also arise from incorrect licensing and a lack of distinction between internal and external users. Technical measures such as entries in Entra ID or the activation of additional security functions (e.g., MFA or conditional access) can also incur additional costs if they are not specifically controlled. How can expensive licensing and security mistakes be avoided?

💡Solution: Efficient license management with the IDM-Portal
Cost savings and greater transparency in administration can be achieved with an IAM solution such as the IDM-Portal from FirstAttribute. Through automated processes, the identity management system helps companies to use licenses in a targeted and efficient manner.

👉 Reduce Microsoft license costs with the IDM-Portal

Invite external employees as guests – instead of purchasing expensive licenses

Use Entra ID B2B instead of issuing full licenses

A key lever for reducing Microsoft license costs for external employees is the use of B2B collaboration with Microsoft Entra External ID (referred to as Entra ID B2B in this text). This feature allows you to securely invite external users as guests to your own M365 without assigning them expensive full licenses.

How does Entra ID B2B work?
Instead of issuing external employees a separate, costly company license, they can be integrated as guest accounts using their own Microsoft accounts. This allows them to access shared resources such as SharePoint documents, Teams channels, or other collaboration tools without needing their own M365 license. The prerequisite is that external users only access shared content and do not require advanced features that require a full license.

The advantages are obvious:

• Cost savings: External users do not need additional, company-owned full licenses.
• Minimized administrative effort: The administration of user accounts, passwords, or license assignments is largely eliminated, as the identity and licensing of external users is handled by your own provider.
• Improved security: Guest access allows you to control exactly who has access to which data. In addition, security features such as multi-factor authentication (MFA) and conditional access can be set up specifically for external access.

Regular license monitoring and automated offboarding

In addition to correctly integrating external users, it is crucial to continuously maintain an overview of active licenses and access rights. Many companies struggle with outdated, unused, or even inactive accounts that often remain in place simply because no one has an overview.

💸 The fact is that orphaned licenses cause unnecessary costs.

 It is therefore advisable to introduce automated processes for license control and offboarding, whereby access rights are automatically revoked and user accounts are deactivated or deleted at the end of a project. This not only saves money, but also ensures greater transparency in the management of external employees.

FirstWare IDM-Portal: How to reduce Microsoft license costs

In practice, assigning external employees is often difficult due to a lack of information:

• Who is responsible for the external colleague?
• What project are they working on?
• How long have they been working for our company?

This is where the FirstWare IDM-Portal comes into play. The portal is a comprehensive identity and access management (IAM) system that has been specially developed for Microsoft environments. It helps companies manage users, permissions, and license assignments centrally, automatically, and securely, while reducing Microsoft license costs.

The IDM-Portal uses FirstAttribute’s my-IAM platform in the background. With the RealIdentity service, you can not only use the identity of external employees, but also add attributes and information without having to manage the identity itself in M365. You are not the owner of the identity and will never become the owner. You simply add the required attributes to the desired employee object. These attributes allow you to automate processes relating to external employees or guests.

Core functions of the IDM-Portal:

• Automated onboarding and offboarding:
  Users are created automatically, and licenses and group memberships are assigned accordingly. During offboarding, users are removed from all authorization groups, deactivated, or deleted.
• Guest management:
  External employees can be invited directly as guests. Who is allowed to invite external guests is determined in advance.
• Hybrid identity management:
  Local Active Directory and M365 (Entra ID) are managed together – perfect for hybrid IT structures.
• Delegated administration:
  HR or specialist departments can also manage access—without IT knowledge, via a simple web interface.
• Transparency to reduce Microsoft license costs:
  Companies maintain an overview of which users have which licenses – and whether they are actually being used.
  The result: lower costs, fewer errors, and greater security.

Summary

Microsoft license costs for external employees can be reduced through targeted measures and are not an unavoidable expense. This requires conscious handling of licenses, the use of Entra ID B2B, and a user-friendly IAM system. The FirstWare IDM-Portal provides companies with a solution that standardizes and automates these tasks. If you want to manage Microsoft licenses efficiently, modern IAM systems are a must.

Important: Even when saving on licenses, IT security must not be neglected. Guest access should be secured with multi-factor authentication and restricted by conditional access—for example, through device checks or location-based approvals.

More about the FirstWare IDM-Portal

FirstWare IDM-Portal by FirstAttribute is an integrated Identity and Access Management (IAM) solution that enables automated user and permissions management, whether on-premises or in the cloud.

This portal integrates all facets of identity and access management and provides centralized access to identity and directory services.

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