Microsoft’s approach to enterprise software licensing has evolved substantially over the past decade. What began as a relatively straightforward system of tiered subscriptions—anchored by E1, E3, and E5 offerings—has now morphed into a more fragmented, complex, and increasingly expensive model. The latest industry speculation points toward the possibility of a new premium SKU, tentatively dubbed E7, which could consolidate several high-value add-ons into a unified license.
While Microsoft has not confirmed any such plan, patterns in its current packaging strategy, pricing model, and product releases suggest the idea may not be far-fetched. Organizations today are facing an ever-growing array of modular services, each with its own price tag, layered atop the core Microsoft 365 offerings. This raises important questions about affordability, integration, and the long-term trajectory of Microsoft’s licensing philosophy.
The Rise of Add-On Culture: “Batteries Not Included”
The phrase “batteries not included,” once reserved for children’s toys and kitchen gadgets, now finds a home in enterprise IT circles—especially among analysts at Directions on Microsoft. This phrase captures the growing frustration of organizations that purchase what they assume are comprehensive Microsoft 365 plans, only to discover essential features are available only as paid add-ons.
This trend is not new, but it has gained significant momentum in recent years. Critical services such as Entra ID Governance, Microsoft Defender Vulnerability Management, and the Intune Suite are not bundled into existing plans like E3 or even E5. Instead, they require separate licenses. For enterprises managing thousands of users, these incremental costs quickly become substantial.
The message seems clear: the future of Microsoft licensing is modular. Rather than offering monolithic bundles, Microsoft appears to be shifting toward a micro-licensing model, wherein organizations pick and choose exactly what they need—at a price. But this raises a key question: if so many services are now excluded from E5, what exactly does E5 represent?
Breaking Down the Modern Add-Ons
A closer look at Microsoft’s most impactful add-ons reveals the scale of this evolution—and the financial implications for customers. Here are a few noteworthy examples:
- Entra ID Governance: Previously considered part of Azure Active Directory, this is now marketed as a standalone service. When layered onto Entra ID P2, it costs $4 per user per month. When added to Entra ID P1, the cost rises to $7. The service includes access reviews, lifecycle workflows, entitlement management, and privileged identity insights—critical for identity governance in large enterprises.
- Microsoft Defender Vulnerability Management: This offering enhances endpoint security by scanning for known vulnerabilities and misconfigurations. For customers already paying for Microsoft Defender for Endpoint P2, it adds an extra $2 per user monthly. When used with a third-party endpoint detection system, the cost increases to $3. While not prohibitively expensive in isolation, at scale, it can represent a significant budget line item.
- Teams Premium: At $10 per user per month, Teams Premium includes features such as advanced meeting protection, intelligent recap summaries, and live translation. Several of these tools were previously expected to be part of standard Teams subscriptions, but have now been reclassified into this premium tier.
The pricing strategy for these services seems designed to prompt reconsideration of the existing bundles—and to spark conversations about the need for a new one.
Could a New E7 Bundle Solve the Problem?
Wes Miller, an analyst at Directions on Microsoft, believes the market is moving toward the introduction of a new, top-tier Microsoft 365 SKU. If Microsoft follows its established naming conventions, such a plan could be labeled “E7.” The rationale is simple: as more vital functionality becomes splintered into standalone products, the argument for a comprehensive bundle grows stronger.
An E7 plan could potentially integrate:
- All features currently included in E5
- Microsoft Entra ID Governance
- Microsoft Intune Plan 2 or the full Intune Suite
- Microsoft Defender Vulnerability Management
- Teams Premium
- Microsoft 365 Copilot (once it is generally available)
This would streamline procurement, reduce per-service negotiations, and provide budget predictability for organizations tired of constantly evaluating new licensing lines. It would also reassert Microsoft’s role as a provider of integrated productivity ecosystems—something that’s become blurred amid the rapid expansion of individual SKUs.
The Role of Copilot: A Defining Factor
Perhaps the most intriguing candidate for inclusion in a future E7 plan is Microsoft 365 Copilot. Positioned as the company’s flagship AI productivity tool, Copilot promises to revolutionize how users interact with apps like Word, Excel, and Teams by automating content creation, data analysis, and real-time summarization.
Currently available in a limited preview, Copilot carries a rumored price of $50 per user per month for early access customers. Microsoft has stated that the general availability version will cost $30 per user per month—making it one of the most expensive additions to the Microsoft 365 ecosystem. Even at this rate, many organizations are expected to adopt it due to its potential to save time, improve efficiency, and enhance user satisfaction.
Including Copilot in a bundled offering like E7 could soften the sticker shock and widen adoption. It would also help Microsoft set a new baseline for enterprise productivity, anchored in AI-first workflows. For now, however, Copilot remains a wildcard—its licensing future not yet clearly defined.
Enterprise Reactions: Balancing Value and Cost
The feedback from Microsoft’s enterprise customers has been a mix of enthusiasm and exhaustion. On one hand, the company continues to innovate at a remarkable pace, introducing tools that improve security, enhance collaboration, and integrate cutting-edge AI. On the other hand, the increasingly fractured pricing model has created a perception of “death by a thousand licenses.”
Organizations that once relied on predictable, flat-rate pricing for comprehensive bundles are now juggling dozens of license types. Procurement and IT teams must constantly assess whether a feature justifies its cost—and whether it should be purchased now or deferred to a future fiscal cycle.
This licensing sprawl not only burdens budgets but also strains administrative overhead. Tracking which users have which licenses, managing renewals, and ensuring compliance across departments has become a full-time job for many IT departments. A bundled solution like E7 could offer welcome relief.
Why Microsoft Might Delay a New Bundle
Despite mounting evidence that an E7 SKU could fill a critical market gap, Microsoft has remained silent on the topic. There are several strategic reasons for this:
- E5 Still Has Room to Grow: Microsoft is actively encouraging customers to move from E3 to E5. Earlier this year, E3 saw a price increase, but E5’s price remained steady at $57 per user per month. By widening the price gap, Microsoft is attempting to make E5 appear more valuable. Adding E7 too soon could cannibalize this growth effort.
- Competitive Pressure Isn’t Intense Enough: According to Directions analyst Rob Helm, Microsoft typically introduces bundles in response to competitive threats. For example, the bundling of Teams into Microsoft 365 was a direct response to Slack’s growth. Until a similar threat emerges—perhaps in the AI or identity governance space—Microsoft may see more value in keeping services separate and maximizing per-feature revenue.
- Incremental Gains Are More Profitable: From a financial perspective, charging separately for Entra ID Governance, Defender Vulnerability Management, and Copilot creates multiple revenue streams. While bundles promote user satisfaction, unbundled services often generate higher revenue per user—especially in large enterprises.
The Visio Lesson: A Case Study in Bundling
The history of Microsoft Visio offers insight into the company’s bundling philosophy. For years, Visio remained a standalone product, despite calls for integration into Microsoft 365. Only when web-based competitors like Lucidchart gained traction did Microsoft begin offering lightweight versions of Visio in its enterprise plans.
This example supports the theory that Microsoft only bundles when it sees a real risk of customer churn. Until another vendor begins offering a tightly integrated, AI-powered suite that rivals Microsoft’s ecosystem, the incentive to create a comprehensive E7 bundle may remain low.
Navigating the Future of Microsoft 365
As the Microsoft 365 platform continues to expand, IT leaders must remain agile. The current licensing landscape rewards those who stay informed, negotiate strategically, and think long-term. While no E7 SKU exists today, its eventual arrival would not surprise most observers. Whether it emerges in 2025 or further down the road, its success will depend on Microsoft’s ability to balance innovation, value, and customer trust.
In the meantime, organizations must make tough decisions about which features are essential and which can be deferred. The modularization of Microsoft 365 is both a blessing and a burden—it offers flexibility, but at a cost. For many enterprises, the ideal solution would be a new, all-in-one bundle that eliminates guesswork and restores simplicity to the licensing process.
The Psychology Behind Microsoft’s Modular Pricing
The transformation of Microsoft 365 from a relatively simple licensing system into a labyrinth of modular options is not a random occurrence. It is a deliberate strategy rooted in behavioral economics and modern enterprise purchasing trends. By offering dozens of small, targeted services as separate add-ons, Microsoft can appeal to different buying personas within a single organization.
This pricing structure capitalizes on the willingness of decision-makers to approve incremental expenses rather than major price hikes. A $2 or $4 monthly charge per user is often easier to justify and escape scrutiny compared to a blanket 15% increase in a bundled subscription. Over time, these microcharges compound—yet they often fly under financial radars.
Moreover, modularity allows Microsoft to better target feature rollouts. Security teams might lobby for Defender enhancements, while HR departments push for tools like Viva or Entra. This internal segmentation within enterprise buyers reinforces the value of granular licensing.
The Financial Win-Win for Microsoft
From Microsoft’s perspective, the shift toward fragmented services is financially advantageous. Instead of offering high-value tools as part of existing bundles like E3 or E5, which are sold at fixed prices, Microsoft can now upsell targeted capabilities at premium rates. This not only increases the average revenue per user but also deepens customer lock-in by tying more business processes into the Microsoft ecosystem.
Take Teams Premium, for example. By placing several AI-enhanced meeting and collaboration features behind a $10 per user per month paywall, Microsoft creates a lucrative tier for customers already heavily reliant on Teams. Likewise, tools like Intune Suite or Entra ID Governance, essential for managing complex environments, fetch $5 to $7 per user per month—costs that quickly scale in enterprise deployments.
This piecemeal approach also future-proofs Microsoft’s roadmap. As new services are developed—especially those using generative AI—Microsoft can introduce them as standalone offerings, test pricing models, and later decide whether to roll them into future bundles or keep them independent.
Customer Strain and the Perception of Erosion
The downside to this approach is the growing sense among enterprise customers that the value proposition of Microsoft 365 is deteriorating. Organizations that once saw E3 or E5 as “all-you-need” bundles are now forced to navigate a growing catalog of separately-priced services. This has led to increased complexity in budgeting, procurement, and user management.
IT leaders often report confusion about what’s included versus what’s not. Even Microsoft’s own documentation sometimes lacks clarity, particularly when services evolve or rebrand. The recent transition from Azure Active Directory to Entra ID is a prime example—many customers found themselves reevaluating identity services mid-contract.
Customers also express frustration with shifting goalposts. Features initially promised as included in baseline products are reclassified as premium. Teams Premium drew particular ire when Microsoft moved functionalities such as meeting transcripts and real-time translation out of standard Teams and into the new tier.
Strategic Implications for CIOs and Procurement Teams
This evolving ecosystem demands new strategies from CIOs and procurement officers. Rather than locking into long-term enterprise agreements and assuming predictability, organizations must adopt a more modular evaluation process. Every new Microsoft tool should be scrutinized individually—not just for price, but for deployment implications, support needs, and user readiness.
Scenario modeling is now essential. What happens if Copilot is deployed only to executives? What if Defender Vulnerability Management is rolled out to specific business units instead of across the organization? These decisions can no longer be made on autopilot.
Procurement teams also need to leverage greater negotiation power. With Microsoft introducing services at a steady clip, the ability to bundle strategically or seek concessions is key. Vendor management should become a collaborative, ongoing process—not a once-a-year discussion.
What a Future Bundle Could Solve
The idea of a new Microsoft 365 E7 SKU is enticing precisely because it offers a solution to many of these emerging challenges. If designed correctly, E7 could:
- Consolidate fragmented licensing into one predictable cost structure
- Eliminate ambiguity about what is included in premium offerings
- Provide cost advantages through bundling, especially at scale
- Restore customer confidence in the Microsoft ecosystem
It could also serve as a vehicle for Microsoft to showcase its newest innovations, particularly in AI and cybersecurity, without risking backlash from piecemeal upcharges. Customers tend to accept higher prices when the value is obvious and the experience is unified.
For example, a customer paying $90 per user per month for a theoretical E7 plan that includes E5, Copilot, Teams Premium, and Defender Vulnerability Management might feel more satisfied than paying $57 for E5 and managing a patchwork of four or five additional SKUs.
Lessons from Past Licensing Shifts
Microsoft has a long history of gradually evolving its licensing model in response to market trends and internal goals. The shift from perpetual Office licenses to Microsoft 365 subscriptions was initially met with resistance. However, the benefits of cloud integration, regular updates, and collaboration eventually won over customers.
Similarly, when Microsoft bundled Teams with Microsoft 365, it did so to stave off the threat posed by Slack. The company not only retained market share—it dominated the workplace collaboration space. The lesson here is clear: when Microsoft bundles strategically, it wins.
That’s why industry watchers believe that a future E7 SKU is not just possible—it’s probable. The only questions are when it will arrive and what it will include.
The AI Catalyst: Copilot’s Inevitable Inflection Point
One development likely to accelerate this evolution is the full release of Microsoft 365 Copilot. Currently priced at $30 per user per month (rumored to be as high as $50 for preview participants), Copilot could quickly become one of the most transformative—and expensive—add-ons in Microsoft’s history.
Early feedback from test users highlights impressive productivity gains: automatic content drafting in Word, intelligent analysis in Excel, and real-time summarization in Teams meetings. Yet these benefits are not universally accessible, and most organizations cannot afford to deploy Copilot across all users at its current price.
Bundling Copilot into a future high-end plan would address this issue, drive broader adoption, and help Microsoft maintain its leadership in AI-enhanced productivity. If E7 includes Copilot by default, it would establish a new gold standard for knowledge work.
Waiting for Competitive Footsteps
According to Directions analyst Rob Helm, Microsoft historically waits for competitive pressure before releasing new bundles. When Slack began to capture enterprise interest, Teams became “free” for Microsoft 365 users. When web-based Visio alternatives emerged, Microsoft included a lightweight Visio version in Office 365.
Unless a similar challenge arises in the AI productivity or cybersecurity space, Microsoft might prefer to continue maximizing revenue through separate SKUs. Still, the company’s internal strategy could shift quickly. The tech industry is moving fast, and customer fatigue with licensing complexity is rising.
Outlook: Preparing for What Comes Next
Whether or not E7 is introduced this year, organizations must prepare for further segmentation of Microsoft’s ecosystem. The pricing structure is unlikely to return to its older, simpler form. Instead, CIOs must stay ahead by:
- Conducting regular audits of Microsoft licensing usage
- Engaging with account representatives to forecast upcoming licensing changes
- Developing internal frameworks to assess the ROI of each Microsoft add-on
- Educating teams about the trade-offs of adopting versus deferring premium services
Ultimately, Microsoft’s licensing direction reflects a broader shift across the tech sector—from bundled, all-you-can-eat plans to targeted monetization of specialized tools. Understanding this trend, and responding strategically, will be critical for enterprise success.
A future E7 plan might bring clarity and integration, but until then, navigating the current landscape with precision and intention remains the only option.
Toward a Smarter Licensing Future
As the market shifts, enterprise buyers and Microsoft alike are at a strategic crossroads. Licensing models that once seemed set in stone have now become fluid and variable. Microsoft’s decision to fragment capabilities into premium add-ons is both a reflection of market demand and a tactic to extract greater value from its customer base.
However, this trajectory is not without consequences. Many organizations feel stretched thin—fiscally and operationally—by the sheer number of choices. While modularity allows for customization, it also burdens IT departments with complexity, procurement teams with negotiation fatigue, and finance departments with escalating costs.
An eventual unified license—whether it be dubbed E7 or something else—could correct course. By consolidating AI, security, compliance, and advanced collaboration tools into one streamlined offering, Microsoft would not only simplify purchasing decisions but potentially restore goodwill among enterprise customers.
The value equation must be rebalanced. If Microsoft wants to champion the mantra of “empowering every person and every organization,” then easing the burden of endless SKU selection may be the next logical step. It is no longer enough to offer capabilities; they must be accessible, predictable, and strategic.
As digital transformation continues to reshape industries, a license that packages modern essentials in one cohesive vision might not just be welcome—it may be essential. Customers are watching. Competitors are evolving. And Microsoft, as always, has the opportunity to redefine the enterprise standard once again.
The Psychology Behind Microsoft’s Modular Pricing
Microsoft’s evolving approach to licensing isn’t just about maximizing profit—it’s a carefully calibrated business maneuver rooted in psychological pricing and enterprise procurement trends. By breaking up what once were consolidated features into piecemeal add-ons, Microsoft subtly lowers the friction of customer approvals. Incremental charges of $2, $4, or $10 per user per month often get greenlit more easily than a broad subscription price jump.
This atomized model also enables a new kind of internal selling. IT security teams might advocate for Defender enhancements, while HR may push for Viva features. Each stakeholder sees value in their corner, leading to broader acceptance of cumulative costs across an organization. Over time, what was once viewed as overcharging is reframed as customized efficiency.
The Financial Strategy Behind Fragmented Services
For Microsoft, this is a clear economic win. Offering standalone services allows pricing flexibility, avoids discount dilution, and drives up average revenue per user (ARPU). Rather than reworking the core Microsoft 365 E5 bundle, the company tacks on specialized tools—Microsoft Defender Vulnerability Management, Entra ID Governance, or Teams Premium—that serve specific operational needs at a premium.
Consider the mathematics of scale: a $3 add-on for an enterprise with 10,000 users generates $30,000 in additional monthly revenue—or $360,000 annually—from just one SKU. Replicate this with multiple features, and the upsell becomes a major profit engine.
This method also grants Microsoft product agility. If an add-on flops, it can be quietly revised or discontinued. If it succeeds, it may become a cornerstone feature in a future bundle—possibly something like a prospective E7 license.
Growing Discontent Among Enterprise Buyers
Despite the financial upsides for Microsoft, many enterprise customers are signaling fatigue. What was once a streamlined licensing experience is now an intricate matrix of SKUs, permissions, and overlapping services. IT administrators, CIOs, and procurement specialists express rising frustration with the complexity and opacity of Microsoft’s licensing playbook.
Critical capabilities—such as advanced threat detection, mobile device management, or AI-assisted collaboration—are increasingly locked behind new paywalls. These were once seen as table stakes for an E3 or E5-level product. The shifting baselines confuse teams and make budgeting unpredictable.
The lack of transparency also creates risk. Features may be deployed without full licensing in place, leading to compliance issues. Or, worse, critical business functions get tethered to trial SKUs that later expire or balloon in cost.
The Case for a Consolidated Licensing Tier
This landscape has set the stage for speculation around a new top-tier SKU: Microsoft 365 E7. Such a bundle could unify the fractured pieces and restore a sense of predictability. If introduced, E7 might include:
- Everything in E5 (currently $57 per user/month)
- Microsoft 365 Copilot (expected to cost $30 per user/month)
- Teams Premium ($10 per user/month)
- Microsoft Defender Vulnerability Management ($2–$3 per user/month)
- Entra ID Governance ($4–$7 per user/month)
- Intune Plan 2 or Suite ($4–$10 per user/month)
Individually, these add-ons can bring the real-world cost of Microsoft 365 well above $100 per user per month for feature-complete setups. Bundling them into a consolidated SKU—perhaps at $85 to $95 per user—would offer meaningful savings and much-needed clarity.
Strategic Timing and Competitive Cues
Analysts agree: Microsoft is unlikely to release a new tier like E7 unless provoked by market competition. This is a play the company has used before. When Slack threatened Teams, Microsoft bundled Teams at no additional cost with Microsoft 365. When web-based diagramming apps gained traction, Visio finally got bundled into enterprise plans.
Unless a rival emerges with a well-structured, AI-driven productivity suite at an accessible price, Microsoft has little incentive to consolidate its pricing model. As it stands, its modular licensing system is a strong revenue driver. Still, if an E7 emerges, it will be because Microsoft sees strategic value in preempting competitors or stabilizing customer churn.
The AI Frontier: Copilot’s Role in Future Licensing
The most likely accelerant for a new Microsoft bundle is Copilot. As the generative AI assistant prepares to go fully public, the industry is watching closely. Currently in limited release at a rumored $50 per user per month, Copilot brings immense productivity enhancements to Office applications, Teams, and enterprise workflows.
However, few organizations can justify this steep, standalone cost across entire workforces. Early adopters have reported value, but also anxiety about sustainability. The logical path forward? Make Copilot a foundational piece of a broader license, accessible to a wider audience but controlled via bundled pricing.
Including Copilot in a new high-end SKU would ensure consistent revenue for Microsoft, broader market penetration, and faster normalization of AI across industries.
Enterprise Tactics in a Fragmented Ecosystem
Until such a bundle materializes, CIOs and procurement officers must adopt a more proactive stance. Traditional three-year enterprise agreements (EAs) are no longer sufficient. Organizations must:
- Regularly review active SKUs and usage metrics
- Audit for underutilized licenses or redundant services
- Engage with Microsoft account managers for roadmap visibility
- Negotiate inclusion of critical add-ons into their enterprise agreement
- Build internal guidelines for which add-ons deliver genuine ROI
The stakes are high. Licensing is no longer just a budgeting issue—it’s a strategic priority that impacts cybersecurity, innovation, and competitive agility.
What Customers Are Asking For
At the heart of these shifts is a simple ask from enterprise customers: predictability. They want to know what they’re paying for, why it matters, and how pricing will evolve. Today’s add-on model undermines that clarity. A future E7 offering—carefully designed and transparently communicated—could restore faith in Microsoft’s commitment to enterprise partnership.
Organizations also seek support navigating this maze. Microsoft’s documentation and training often lag behind licensing changes, leaving internal teams to interpret dense PDFs and community posts. A smarter, AI-assisted license advisory system, or even Copilot for Licensing, could significantly improve customer experience.
Imagining the E7 Value Proposition
If and when E7 arrives, what should it represent? Ideally, it would be more than a bloated bundle—it would be a strategic toolkit. E7 could provide:
- Unified endpoint security with Defender
- End-to-end compliance with Purview and Entra
- Advanced device management through Intune Suite
- Integrated AI tools for creativity and collaboration
- Exclusive automation and analytics services
- Simplified licensing administration tools
Such a SKU wouldn’t just respond to pain points—it would set a new standard for what a modern digital workplace license should deliver.
Beyond Pricing: Rebuilding the Enterprise Relationship
More than anything, Microsoft faces a relationship challenge. The perception that the company is nickel-and-diming its most loyal customers is a long-term reputational risk. Value-driven pricing is one thing. Strategic obfuscation is another.
Reintroducing a sense of mutual commitment—where Microsoft helps customers grow without burying them in new fees—could reshape that dynamic. A single, high-value license would signal Microsoft’s intent to simplify, not complicate, the enterprise journey.
As organizations become more reliant on Microsoft for AI, cloud infrastructure, data governance, and workplace communication, the stakes grow even higher. License clarity and cost certainty become vital.
Conclusion:
Microsoft’s gradual shift toward a modular, add-on-based licensing model reflects a broader transformation in how digital productivity and enterprise software are monetized in the cloud era. What began as bundled solutions—convenient, predictable, and seemingly comprehensive—has fragmented into a mosaic of specialized SKUs, layered enhancements, and premium services. This evolution has opened new doors for enterprise customization, but it has also complicated procurement strategies, budget forecasting, and overall trust in vendor relationships.
Through the lens of Microsoft 365, customers are increasingly faced with a paradox: the core E3 and E5 bundles no longer represent the entirety of what organizations need to operate securely and competitively. Mission-critical capabilities like AI assistants (Microsoft 365 Copilot), advanced endpoint defense, or sophisticated identity governance now reside outside these already-premium tiers. The result is not merely financial inflation, but a growing sense of ambiguity around value and scope.
Ultimately, the evolution of Microsoft 365 licensing underscores a larger trend: the future of enterprise software lies in personalization, but personalization must not come at the cost of transparency. CIOs, procurement teams, and IT administrators must be as agile in their licensing strategies as they are in deploying technology.
The question isn’t whether Microsoft will launch an E7 SKU, but whether organizations are prepared to navigate whatever comes next. Whether through a new consolidated bundle or a more refined à la carte strategy, the imperative remains the same: make smarter, clearer, and more strategic decisions in a landscape where digital capabilities—and their costs—are growing faster than ever.