M365 bills have a way of accumulating across the year, then surfacing all at once at renewal. In this Microsoft 365 Optimization guide, we‘ll show you how costs gradually pile up, not just through poor licensing management, but with mailbox growth, long-term retention policies, duplicated storage layers and vendor-controlled storage pricing.
And taking into account the Microsoft 365 price increase that is going to take effect on July 1, 2026, now is an especially good time to look closely at what you can optimize.
We are going to walk through four levers you can actually pull: shared mailbox hygiene, Online Archive usage, storage architecture, and deleted-user retention. Pull them in the right order and you reduce M365 spend and backup spend at the same time.
Table of Contents
Four Microsoft 365 Cost Optimization Levers
Lever 1: Shared Mailboxes
Shared mailboxes are one of the few genuinely cheap things in M365. Microsoft lets you run one without a license, as long as it stays under 50GB and has no Microsoft 365 license assigned. A lot of organizations already use support@, billing@, hr@, info@ – each one a free mailbox doing the work of a licensed user, allowing for optimization of M365 costs.
The problem starts when backup vendors don't honor the same model.
Some vendors charge a full backup license for every shared mailbox, count shared mailbox data aggressively against bundled storage quotas, enforce recovery and retention limits, or raise prices once a mailbox crosses a size threshold. You save on M365 licensing and pay it right back to the backup vendor.
A second problem is hygiene. Shared mailboxes have no clear owner. They accumulate years-old project threads, legacy project data, duplicate attachments, departments that no longer exist. Over time, they significantly increase backup storage consumption.
What can you do:
- Triage shared mailboxes by business importance, i.e. support@ matters more than project-2019@.
- Apply different retention policies. High-volume, low-value inboxes don't need seven-year retention.
- Archive inactive content and remove abandoned shared mailboxes before backing them up indefinitely.
- Check whether your backup vendor provides free or cost-efficient protection for shared mailboxes.
- Since shared mailboxes are not tied to a single individual owner, explore how you can transfer them between teams or users over time.
Lever 2: Online Archive Usage
Shared mailboxes solve one cost problem. Licensed user mailboxes create another. When user mailboxes start pushing against a similar 50GB cap – you have four options: delete data, upgrade the license, buy additional storage, or move older content into Online Archive.
Online Archive is Microsoft's built-in secondary mailbox. It moves older email out of the primary mailbox into a separate archive that doesn't count against the primary quota. Your data also stays accessible for compliance retention, audits, or just digging up an old vendor credential buried in a four-year-old thread. Online Archive lets you keep business-critical history without paying for premium primary storage to hold it.
But what Online Archive can’t do is serve as a backup. It lives inside the same M365 tenant. Same retention policies, same admin accounts, same threat surface. If a malicious admin wipes data, if a retention policy is misconfigured, if ransomware encrypts the tenant, if a user gets purged in error – Online Archive goes with it. Microsoft's shared responsibility model is explicit on this: data protection inside the tenant is your responsibility, not Microsoft's.
Online Archive alone won’t reduce backup costs. It can help move inactive data out of the primary mailbox, but if your backup platform stores that same data in a frequent-access tier, the retention bill can still grow quickly. When an employee leaves, their mailbox and archive may need to be preserved for years. Multiply that across turnover and the storage cost compounds.
What can you do:
- Move older, inactive content into Online Archive during the active lifecycle. This keeps primary mailboxes lean without deleting business-critical history.
- Apply different retention rules to active vs inactive data. Mailboxes that haven't received mail in six months don't need nightly backups.
- Use Online Archive to reduce pressure on mailbox limits before upgrading licenses. Mailbox growth doesn’t automatically mean every user needs a more expensive Microsoft 365 plan.
- Back up archived mailbox data according to recovery value, not just volume. If old email is kept mainly for compliance or reference, it may belong in a lower-cost long-term storage tier.
- Back up departing employee mailboxes once into a long-term archive tier, then remove the active license where possible.
Online Archive belongs to your data lifecycle strategy. Backup belongs to your recovery strategy. Don't conflate them.
Lever 3: Storage Architecture – BYOC vs Bundled storage
The biggest lever on long-term backup TCO is who controls the storage.
Backup vendors come in two camps. Bundled storage vendors include storage in the per-user price, sometimes labeled "unlimited." BYOC (bring your own cloud) storage vendors charge for the backup software and let you connect your own cloud storage account: AWS, Azure, Wasabi, Backblaze B2, or any S3-compatible target.
Both work. The economics diverge once retention gets longer, archive data gets bigger, or you start managing many tenants.
Bundled storage gives you fast onboarding and a single bill. Pricing is predictable in year one. "Unlimited" claims usually come with retention caps, fair-use clauses, or storage-tier restrictions buried in the contract. You can't tier cold data into archive storage. You can't move providers without a full data migration. And the storage line is a black box – you don't see what the vendor pays vs what you're charged.
BYOC gives you transparent storage pricing and a direct line to the storage provider, the ability to tier old backups into cold storage (Glacier, Azure Archive), geographic placement control for compliance, and lifecycle policies you define. The trade-off: more architectural responsibility. You set up buckets, IAM, lifecycle rules. It's less of a turnkey SaaS experience.
For small, single-tenant orgs that want simplicity, bundled storage often wins on convenience. For anyone with growing archive data, multi-year retention requirements, or many tenants – MSPs especially – BYOC pays off as data volume scales.
The hidden cost in bundled models isn't the storage itself. It's losing the ability to optimize when retention requirements grow.
Lever 4: Deleted User Retention
Organizations often keep paying Microsoft 365 licenses for inactive or departed employees just to preserve access to their mailbox and OneDrive data. The fear is reasonable: losing access to historical business data, HR records, old client correspondence, or anything legal might need later. The license stays active because nobody wants to be the person who deleted something important.
The cost adds up fast in environments with employee turnover, seasonal staff, and contractors. Across years, you end up with dozens of licenses paid for people who no longer work there – not for productivity, but for archival access.
What can you do:
- Identify inactive or departed users.
- Back up their mailbox and OneDrive data before removing the M365 license.
- Preserve the backup independently, in your own storage.
- Remove the M365 license – billing stops the next cycle.
- Restore the data when legal, HR, or audit needs it.
This separates your retention requirements from your active M365 licensing. The historical data stays preserved, recoverable, and compliant – without being held hostage to an active seat. Backup stops being insurance and becomes a direct licensing optimization tool.
What MSP360 Does for Microsoft 365 Cost Optimization
MSP360 offers SaaS backup for M365/Google Workspace. It is built around storage flexibility, not storage markup. You pay for the backup license and pick your own storage. Storage costs go directly to the cloud provider at their rates, not marked up through a backup vendor.
Four places this matters for the strategies above:
Shared mailboxes
Release 4.9 aligned MSP360's licensing model with Microsoft's. Shared mailboxes without an M365 license assigned and under 50GB don't require a backup license either. The system checks mailbox size on both the M365 side and the backup-side data on every user sync, so retention growth doesn't quietly push you over the threshold.
Independent archive layer
Online Archive isn't a backup, but MSP360 treats it as data worth backing up. Your archived mailbox content gets pulled into a separate, vendor-independent copy that survives tenant-side problems Online Archive can't – admin compromise, retention misconfiguration, ransomware, accidental purge. Push that copy into cold storage and the long-term economics stay manageable.
BYOC architecture
Storage-agnostic by design. Connect AWS, Wasabi, Backblaze B2, Azure, or any S3-compatible target. Lifecycle policies are yours – tier cold data into archive storage, set geographic placement for compliance, control what you pay per GB. For MSPs and cost-sensitive organizations with multi-year retention, this is where the long-term difference shows up: cold-storage rates for cold data, not a bundled rate that doesn't differentiate. Object Lock on S3-compatible targets means a ransomware compromise of your console doesn't reach your backups.
Further reading How proprietary backup storage requirements kill your ROI
Deleted user retention without the M365 license
Back up departing employees' mailbox and OneDrive data, then handle the M365 license in one of two ways. If you delete the user from M365, MSP360 automatically releases the backup license back to your pool on the next sync. If you only unassign the M365 license, you'll need to release the backup license manually. Either way, the data stays in your storage, governed by retention policy. Historical records cost you storage rates only, with no active M365 seat or backup seat attached. Retention policies are configurable per user, so inactive accounts can carry long retention while everyone else stays on standard.
Microsoft 365 Cost Optimization Wrap-Up
Four mechanisms, each doing different work. Shared mailbox hygiene stops you paying backup licenses on mailboxes Microsoft already lets you run free. Online Archive moves inactive email off your primary storage and out of the way of license upgrades. BYOC puts you in a direct billing relationship with the cloud provider, no markup in between. Decoupling deleted-user data keeps historical records accessible without paying an M365 seat to hold them.
None of them is dramatic on its own. Run all four and you've reshaped long-term Microsoft 365 backup economics without sacrificing recoverability or compliance. The vendors who built their margins on storage markup don't want you thinking about Microsoft 365 cost optimization this way – which is exactly why you should.
