Microsoft 365 E3 vs E5: Is the Upgrade Worth It?

Q: When is the upgrade clearly worth it?

When you would otherwise buy two or more of the E5 components as add-ons, and when you will genuinely decommission what they replace. A third-party EDR that stays in place alongside Defender means you are paying for both — and that single decision usually outweighs the entire licensing comparison.

Microsoft 365 E5 adds security, compliance, analytics and telephony components on top of E3, for roughly twenty dollars more per user per month on Microsoft's list. The upgrade pays for itself when you would otherwise buy two or more of those components separately and you decommission what they replace. It does not pay for itself when it is rolled out uniformly to a population that never touches the premium components — which is the most common way E5 is deployed.

Updated 19 September 2026

What E5 actually adds

The third column is the one that decides it: who genuinely needs the component, not who is currently licensed for it.

Component	What it can replace	Who actually needs it
Defender for Endpoint P2 and Defender for Office P2	A third-party EDR and mail security product	The whole estate, if you adopt it. This is the component that most often justifies E5 on its own — but only if the existing tool is actually decommissioned.
Entra ID P2	Privileged Identity Management and risk-based conditional access	Administrators and privileged roles. Reviews routinely find that only a minority of licensed P2 seats use a single P2 feature.
Purview eDiscovery Premium and Insider Risk	External eDiscovery tooling and manual compliance work	Legal, compliance and HR. A small group, and one where the per-seat cost is irrelevant next to the cost of an external review.
Power BI Pro	A separately purchased Power BI Pro seat	Whoever builds or consumes reports. Easy to count, and often already purchased separately — which means it is being paid for twice.
Teams Phone	A PBX or a separate calling plan	Only where telephony actually moved to Teams. An unused Teams Phone entitlement is the clearest sign an E5 rollout was licensed but never adopted.

Read the middle column as a commitment, not a feature. E5 only becomes cheaper than E3-plus-add-ons if the replaced products are actually switched off. An estate running Defender alongside its previous endpoint tool has bought E5 and kept the cost it was meant to remove.

The decision, in one question

How many of those five components would you buy anyway? At two or more, E5 is usually the cheaper instrument. At one, an E3 base with that single add-on almost always wins. At zero, the question is not E3 versus E5 — it is why anyone is holding E5 at all. The answer has to come from per-service-plan usage, because every other signal (headcount, department, job title, last sign-in) will tell you the population is active, and that was never the question.

Questions, answered

What does E5 cost over E3?+

On Microsoft's published list, after the 1 July 2026 update, Microsoft 365 E5 runs roughly twenty dollars per user per month above E3 — call it around $250 per user per year. Treat that as the shape of the gap, not your number: Swiss customers buy against a separate CHF list, and your agreement's rates are what actually apply. The decision rarely turns on the list price anyway; it turns on how many add-ons you would otherwise buy.

When is the upgrade clearly worth it?+

When you would otherwise buy two or more of the E5 components as add-ons, and when you will genuinely decommission what they replace. A third-party EDR that stays in place alongside Defender means you are paying for both — and that single decision usually outweighs the entire licensing comparison.

Should everyone get the same plan?+

Almost never, and this is where most of the money is. A uniform E5 rollout pays premium rates for people who touch none of the premium components, while a uniform E3 leaves legal, compliance and administrators without tools they actually need. The usual answer is an E3 base with targeted add-ons — or E5 for a defined group and E3 for the rest. Either way the split has to be argued per user and per service plan, not per department.

We already have E5. How do we check it was the right call?+

Measure adoption of the components you are paying extra for, one service plan at a time: is Defender actually enrolling endpoints, is PIM in use, has telephony moved, is Power BI Pro being consumed. Where the answer is no across the board for a group of users, that group is an E3 population holding an E5 licence — and that is a downgrade candidate, not a compliance problem.

Can we downgrade mid-term?+

Usually not. Under the New Commerce Experience a quantity can only be reduced within seven days of a purchase, a renewal or a mid-term addition. A downgrade decision therefore has to be evidenced and agreed before the renewal date — otherwise the finding is correct and unusable for another full term.

Microsoft 365 E3 vs E5

What E5 actually adds

The decision, in one question

Questions, answered

Find out who really needs E5