Downgrading from Microsoft E5 to E3: is your security at risk?

Organisations across the world are being faced with difficult decisions daily. On one hand, they need to cut costs and focus spending on what really matters. On the other, they need to figure out what is truly important and what will not only support the business’s productivity but also drive innovation and growth. One of the first areas most companies are considering when it comes to cost saving revolves around licensing. To cut costs, some companies are opting to downgrade from a Microsoft E5 licence to an E3 licence. While Microsoft E3 provides essential security features, downgrading from E5 could leave your business exposed to critical vulnerabilities, increased risk, and higher long-term costs. Before deciding to downgrade, it’s essential to understand what the difference between the two licences is.

Advanced threat protection: a necessity, not a luxury

One of the most compelling reasons to keep the Microsoft E5 licence is the enhanced security and compliance features that come with it. E5 offers Microsoft Defender for Endpoint Plan 2, which includes automated threat investigation, response, and remediation — capabilities not available in E3. With threats like ransomware and zero-day attacks on the rise, these advanced security measures are crucial to reducing response times and preventing breaches before they cause damage. E3 provides Defender Plan 1, but without behavioural analytics, automated response, and endpoint detection and response (EDR), your security team will be left playing catch-up instead of stopping threats in real time

Comprehensive Identity and Access Management

Identity remains the number one attack vector. Microsoft E5 includes Microsoft Entra ID (formerly Azure AD) Premium Plan 2, enabling Identity Protection, Privileged Identity Management (PIM), and risk-based conditional access. These tools provide real-time monitoring, adaptive security policies, and automated threat mitigation for compromised accounts. Without them, businesses using E3 face greater risk from credential theft and insider threats, leaving their most sensitive data and critical systems exposed.

Insider risk management and compliance

Security threats aren’t just external. Insider risks, whether malicious or accidental, can be just as damaging. Microsoft E5 includes Insider Risk Management, Communication Compliance, and advanced Data Loss Prevention (DLP) capabilities to detect and mitigate risks before they escalate. Additionally, with increasing regulatory requirements like NIS2 and DORA, E5’s advanced compliance tools, such as Advanced eDiscovery and Advanced Data Governance, help streamline these requirements by automating data classification, retention policies, and the discovery of sensitive information. This way, organisations ensure they meet industry standards and avoid costly penalties. E3 lacks many of these proactive capabilities, putting your compliance efforts, and reputation, at risk.

Advanced threat analytics and AI-driven security

E5 brings AI-powered security enhancements with Microsoft Defender Threat Intelligence and Microsoft Defender XDR, delivering integrated protection across endpoints, identities, emails, and applications. Security teams gain deeper visibility, faster detection, and automated remediation – reducing dwell time for attacks. Organisations that downgrade to E3 lose out on these integrated, AI-driven defences, increasing their exposure to evolving cyber threats.

Additionally, E5 plays a crucial role in adopting Microsoft Copilot securely. It provides a range of security controls and measures to protect against data leaks, data oversharing, and unauthorised access. With built-in compliance and governance capabilities, organisations can ensure that AI-powered productivity remains secure and aligned with regulatory requirements.

Cost efficiency: security gaps are more expensive than E5

While E3 may seem like a cost-saving measure, the reality is that security breaches, downtime, and compliance failures cost exponentially more. The average cost of a data breach in 2023 exceeded $4.45 million, and threat actors continue to exploit weak security postures. E5 consolidates advanced security tools into one integrated package, reducing the need for third-party solutions and minimising operational complexity. Downgrading to E3 often leads to hidden costs — whether through additional licensing, security gaps, or the fallout of a successful attack.

Better value for growing businesses

As organisations scale, security and compliance requirements become more complex. Microsoft E5 provides an enterprise-grade security foundation that supports growth without adding operational overhead. According to the study Forrester conducted for Microsoft, businesses that invest in E5 experience reduced security incidents, improved compliance management, and increased productivity. Choosing E5 is not just about mitigating risks today — it’s about future-proofing your business against evolving threats and operational challenges.

The complexity of downgrading: a decision not to take lightly

If an organisation has already rolled out E5, downgrading is not a simple switch. It requires turning off security features and determining which ones are essential and which can be sacrificed. This process demands a thorough analysis of business risks, compliance obligations, and operational dependencies. Organisations need to invest time and expertise to understand what level of protection they truly require. This is not a trivial task. It requires either internal expertise or guidance from an external advisor to make an informed decision. Without this level of understanding, businesses risk making changes that could inadvertently expose them to cyber threats and compliance violations.