How to Prevent Microsoft 365 License Waste with Usage Analytics and Automation License waste is a common problem in Microsoft 365 environments. For SMBs and MSP-managed environments with constantly changing users, unused and underutilized licenses contribute to billions of dollars in wasted IT spending every year. The good news? Most of this license waste is highly preventable. In this video, we’ll show you how to reduce Microsoft 365 license waste using usage analytics and automation. Before we begin, be sure to subscribe to NinjaOne’s IT Video Hub and our YouTube channel for more tech content like this. Method 1: Identify Inactive Users via Microsoft 365 Usage Reports This method focuses on optimizing license usage by identifying users who haven’t accessed any Microsoft 365 services during the past 90 days. By finding and addressing inactive accounts, organizations can reclaim unused licenses and reduce unnecessary costs. Sign in to the Microsoft 365 Admin Center. Go to Reports > Usage > Active users – Microsoft 365 Services. Set the time range to Last 30/90 days. Filter by Microsoft 365 service such as Exchange, OneDrive, SharePoint, Teams, or Yammer. Export the report as a CSV. Review the data to find users with no activity across these services. Method 2: Automating License Cleanup With Microsoft Graph This method is helpful if you want to automate the removal of inactive licenses after 60 days. Make sure you’ve installed and configured the Microsoft Graph PowerShell SDK and required Microsoft 365 administration modules. Connect to Microsoft Graph by entering this command: Gather user sign-in activity with this command: Then, remove or downgrade the license with this command: Method 3: Use Group-based Licensing and Dynamic Groups This method helps ensure licenses are consistently assigned to the correct business roles. In the Entra Admin Center, go to Groups and create a dynamic Microsoft Entra ID group. Set the membership rule, such as: active users in the Sales department. Assign licenses to the group. Remove any manually assigned licenses from users. Method 4: User Registry to Disable Local Office Apps for Unlicensed Users This approach restricts access to Office applications by blocking users who don’t have a valid license. Navigate to the following Registry path: You can pair group-based licensing with scripts to automatically block apps when a user’s license no longer meets validation requirements. Usage analytics and automation are key to preventing Microsoft 365 license waste. Analytics show which licenses are being used, underused, or wasted, while automation streamlines how licenses are tracked, reassigned, and removed across tenants. Together, they help reduce unnecessary costs and keep license management efficient as your organization grows. For more information, check out our official blog post on preventing Microsoft 365 License Waste linked in the description below.