Overview
License optimization in Tenant Manager means finding Microsoft 365 licenses you pay for but do not use, and acting on them in a controlled way. This article describes the practices that keep recommendations accurate, savings priced, and license changes safe.
Business value
Following these practices keeps your savings figures believable and stops you from removing a license that someone needs. An approved change applies in Microsoft 365 immediately, so a short review before each approval is worth the time.
How it works
Tenant Manager works out recommendations from the data of the last sync, not from live Microsoft 365 data. Each tenant syncs automatically every 6 hours. A recommendation changes nothing by itself. You add it to tasks, an approver decides, and only an approval changes a license in Microsoft 365.
Two automations skip this approval step. They remove licenses from disabled or inactive accounts on a daily run, so they need more care than manual tasks. Savings depend on seat prices. Tenant Manager takes a price from the tenant's billing account or from a custom price in the Global price catalog, and it shows a dash when it has neither.
Approving a license task applies the change in Microsoft 365 immediately, and you cannot undo it from Tenant Manager. To reverse it, raise the opposite change as a new task.
The practices below follow this flow. You check the data, review before you approve, protect the people who must keep a license, price the savings, and bring in automation in stages. For the rules behind each recommendation, see Recommendations and savings. For the tabs and settings, see Optimization overview.
Key practices
These seven practices cover the full cycle, from reading a recommendation to automating its removal. Work through them in order the first time you optimize a tenant.
1. Check the last sync before you act on a recommendation
Recommendations come from the last sync, so they are not live. A person may have signed in, or an account may have been enabled again, since then. Look at Last synced in the page header, and fix a failing sync first. See Syncing a Microsoft 365 tenant. Also select the information icon next to the Optimization page title. If it lists missing permissions, some recommendations are not made until your Microsoft Entra administrator grants them.
2. Review a recommendation before you add it to tasks, and again before you approve it
Open the row, read the reason and the last activity, and clear any change you do not want under Changes to raise. Approving applies the change in Microsoft 365 immediately. Enter a note or ticket reference so the task records why. Inactive and Never signed in come from sign-in data. If the tenant has no sign-in data, which Microsoft provides with Microsoft Entra ID P1, both lists are empty and usage reports do not stand in. A person who uses only another service, such as Teams Phone, Power BI, or Defender, can look inactive, so confirm they do not need the license first.
3. Exclude people who must keep a license before you turn on automation
Open the record of the user in Explore, select Actions > Exclude from removals, and enter a Reason, such as a break-glass admin account or a service account. No task or automation then removes a license from that person. An automation has no approval step, so set exclusions first. See Explore users.
4. Set seat prices so that savings are not NA
A saving counts only when Tenant Manager knows the seat price. Prices come from the tenant's Microsoft Customer Agreement billing account, or from a custom price set in the Global price catalog. Under Enterprise Agreement, MOSA, and CSP billing, Microsoft reports no seat prices, so a custom price is the only option.
5. Ignore a recommendation with a reason when you decide not to act on it
Check the rows, select Actions > Ignore, choose Ignore always or Ignore until, and optionally enter a Description. The recommendation is hidden for everyone in the account, and nothing changes in Microsoft 365. Find it under the Ignored filter, and select Restore to bring it back.
6. Start automation with the disabled accounts automation
Switch on Remove licenses from disabled accounts first. A disabled account cannot sign in, so removing its licenses affects no active user. Check Who this would act on in Configure automation, set a recipient or a notification channel (required before the switch turns on), and read the run history after the first runs before you switch on the inactive automation. Leave Keep licenses that include a mailbox ticked, because removing a mailbox license starts Microsoft's 30-day mailbox deletion, unless the mailbox is on hold. See Automating license removal.
7. Check group license changes before you approve them
On the Groups tab, the License changes filter judges only the members who get a license through that Microsoft Entra ID group alone. Members who also get it directly or through another group keep it, so read Members affected before you add the change to tasks. A swap is blocked when the cheaper license has too few unassigned seats.
Example scenario
Granite Bay Insurance pays for Microsoft 365 under an Enterprise Agreement, and Ritu Banerjee looks after its licenses. She opens the Optimization overview of the Granite Bay tenant and sees that the savings show NA, because Microsoft reports no seat prices under Enterprise Agreement billing. She sets a custom price for each license in the Global price catalog, and the savings figures appear.
Before she adds anything to tasks, she checks Last synced in the page header. She opens the record of the shared break-glass admin account in Explore, selects Actions > Exclude from removals, and enters the Reason "Break-glass admin". She then reviews each recommendation, adds the ones she accepts to tasks, and leaves the approval to a colleague who has the Approve license tasks permission.
Once the first tasks have gone through, Ritu opens Configure automation, checks Who this would act on, sets a recipient or a notification channel, and switches on Remove licenses from disabled accounts. She reads the run history after the first runs before she thinks about the inactive automation.
Limitations
- Recommendations come from the last sync, not from live Microsoft 365 data, and each tenant syncs every 6 hours.
- An approved license task applies in Microsoft 365 immediately, and you cannot undo it from Tenant Manager. To reverse it, raise the opposite change as a new task.
- A saving shows only where Tenant Manager knows the seat price. Under Enterprise Agreement, MOSA, and CSP billing, Microsoft reports no seat prices, so a custom price is the only option.
- The disabled and inactive automations have no approval step and run on a daily schedule.