How to sidestep surprises from Microsoft’s new hidden licensing audit

Microsoft 365 (M365) offers powerful protection to secure your data, with features like advanced threat protection, data encryption, and multifactor authentication. But this licensing sometimes offers unexpected surprises, too.

In many organizations, configurations meant to strengthen identity and access control are triggering risks around license compliance. These tenant-wide settings can quietly extend premium functionality to users without corresponding entitlements.

Unfortunately, the result tends to surface at renewal, when licensing mismatches become part of the conversation. And, while this isn’t a formal audit, for customers caught off guard, it can feel like one — especially when the cost lands well outside of budget.

How tenant-wide features create hidden exposure

Take Conditional Access. It’s a smart security feature, one that blocks sign-ins from outside approved locations or devices. It also happens to be part of M365’s E5 product set. However, once it’s turned on, it often applies to the entire tenant. That means everyone benefits, whether they’re licensed for it or not.

There’s no alert when this happens. No pop-up warning. Nothing in the admin center suggests that enabling the feature might carry broader licensing implications. Yet, for IT teams, it’s an easy decision. Apply the policy once, protect the entire environment, and move on. But that decision can quietly introduce a gap between what’s configured and what’s covered.

Because Microsoft 365 provides comprehensive usage data, licensing discrepancies may be identified during renewal reviews, even without an official audit process. And when licensing discussions come around — usually at renewal or anniversary — that usage is often part of the conversation.

This kind of exposure is easy to miss. According to Flexera’s 2025 State of ITAM Report, just 43% of IT teams feel they have complete visibility across their IT stack, down from 47% the year before.

Without clear guardrails, routine configuration choices can drift into enterprise-wide usage. Regrettably, the licensing conversation doesn’t happen when the setting is enabled. It happens later, when it’s too late to roll it back.

And that’s where the real cost begins to show.

The audit you don’t see coming

It starts with a renewal discussion, during whc where Microsoft presents a summary of how your environment has evolved and how your licensing needs to catch up. While not a formal audit, these talks can feel similar — especially when unexpected licensing gaps emerge.

The data shows what’s been configured and how many users have been affected. Security features tied to Microsoft 365 E5, like Conditional Access, Defender for Endpoint, or Privileged Identity Management, are now active across the tenant. However, the licensing record shows only partial coverage. That gap is the issue. And that gap needs to be closed before the contract can be renewed.

Again, it’s not framed as an audit, but the outcome looks and feels the same: a cost you didn’t plan for, tied to features you thought were safe to use.

By the time the conversation happens, your environment has already been shaped by those settings. The protections are in place. Users depend on them. And the licensing adjustment isn’t optional; it’s a condition of moving forward.

That’s why this hits so many teams unexpectedly. It just arrives as a line item, a delta, or a price change, and shifts the negotiation before anyone has time to regroup.

Quantifying the financial risk

Renewal conversations were supposed to bring savings, but many aren’t.

The 2025 Survey on Enterprise Software Licensing and Audit Trends revealed that 62% of organizations reported being audited by a major software vendor in 2025, up from just 40% the year before. These aren’t always formal audits. In many cases, license usage is reviewed during renewal, often without the word “audit” ever being used.

What follows can feel like one. Flexera’s report found that 45% of surveyed organizations spent over $1 million on software audits over the past three years, and 23% spent more than $5 million on audits in 2025 alone. These numbers don’t come from misuse or bad intent. They come from environment drift, features activated broadly, licenses stretched thin, and visibility gaps that only become clear too late.

Many organizations walk into renewals aiming to reduce their IT spend. They’ve right-sized workloads. They’ve reassessed licensing. They expect a leaner contract. Instead, they’re asked to explain unlicensed feature use and pay more than they budgeted for.

Regaining control before renewal

Avoiding that outcome requires an approach that’s grounded in feature-level visibility.

Organizations that can track where tenant-wide features have been enabled, who they impact, and whether those users are entitled can make informed decisions before costs become locked in. That level of insight doesn’t come from default compliance tools. It calls for purpose-built solutions that can map security configurations to license entitlements and surface drift before Microsoft does.

And that’s where we can help.

The SHI Environment Lockdown and Defense (SHIELD) platform is designed specifically to help organizations regain control over their M365 environments. From licensing complexity and security gaps to configuration sprawl, SHIELD gives IT leaders the clarity and confidence to address risk before it escalates.

SHIELD is built around three integrated modules:

• Discover provides deep, feature-level analysis of M365 usage, identifying which premium capabilities are in use, which users are benefiting, and how these map against current entitlements.
• Deploy streamlines complex M365 configurations using pre-built templates and automation powered by our Microsoft-certified architects. This “architecture as a service” model helps reduce configuration time by up to 50%, freeing teams to focus on strategic initiatives.
• Defend secures privileged access with Microsoft-recommended PAW privileged access workstation (PAW) configurations. The module is continuously updated to keep pace with evolving threats.

By revealing exactly how Microsoft tools are being used and where exposure may exist, SHIELD arms IT and procurement leaders with the data they need to control the narrative and the outcome.

Control the ‘audit’ before it controls you

Organizations that wait for renewal conversations to understand their true licensing position face the highest costs and the fewest options. Those who gain visibility into feature-level usage patterns before Microsoft presents the data can control the narrative and the outcome.

You can either react to surprise costs during renewal pressure or proactively assess your environment when you still have time to optimize.

The audit you don’t see coming is still an audit. But the difference between a surprise and a strategy is visibility.

Ready to look at your Microsoft licensing exposure with new eyes? Contact us to schedule a SHIELD assessment and discover what features are really being used across your environment.