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Microsoft 365 E3 vs E5 — what's worth the upgrade

Av Emil Björk · Microsoft-ekosystemskonsult, Göteborg

A practical comparison of Microsoft 365 E3 and E5 plans — what E5 adds, where the value sits, and step-up patterns.

The difference between Microsoft 365 E3 and E5 is dramatic — both in cost (E5 is roughly 60–70% more expensive) and capabilities. Knowing which features actually justify the step-up, and how to mix the tiers, lets you get E5 value without paying for everyone.

What E3 includes (the baseline)

Microsoft 365 E3 covers the productivity core plus a basic security and identity layer:

This is enough for most knowledge workers in most organisations.

What E5 adds

E5 adds substantial capabilities across four areas:

Security

  • Defender for Office 365 Plan 2 — Safe Links, Safe Attachments, AIR, attack simulation, Threat Explorer.
  • Defender for Endpoint Plan 2 — full EDR, advanced hunting, TVM, Live Response.
  • Defender for Identity — AD / Entra ID attack detection (sensor-based).
  • Defender for Cloud Apps — SaaS posture management, CASB.

Compliance

Identity

Analytics and communications

  • Power BI Pro — sharing rights for Power BI reports.
  • Teams Phone Standard — full phone-system features (Calling Plan minutes separate).

When E5 is worth it for everyone

  • Regulated industries — financial services, healthcare, defence — where the compliance and security tooling is essentially required.
  • High-risk-profile organisations — frequent targets of attack, valuable IP, public-sector targets.
  • Heavy Power BI users — many users authoring and consuming reports.
  • Teams Phone deployment — Phone Standard is bundled, replacing separate Teams Phone licensing.

For these, E5 across the tenant is the right call.

When E5 is overkill for everyone

  • Smaller organisations without sophisticated security needs.
  • Light Power BI usage — Pro can be bought per-user as needed.
  • No Teams Phone plans — Phone Standard's value isn't realised.

For these, E3 with selective add-ons is more cost-effective.

The step-up pattern

Many tenants run E3 as the base with E5 step-up SKUs for specific users:

  • Security team and SOC — full E5 for the tooling.
  • Executives — E5 for advanced threat protection and PIM.
  • Compliance officers — E5 for Premium eDiscovery, Insider Risk.
  • Finance / Legal — E5 for sensitive-content handling.
  • Heavy report authors — E5 for Power BI Pro.
  • High-risk roles — anyone with payment authority or sensitive data access.

Microsoft offers specific step-up SKUs:

  • E5 Security — adds the Defender stack on top of E3.
  • E5 Compliance — adds the Purview compliance stack.
  • Entra ID P2 — adds PIM and Identity Protection.
  • Defender for Office 365 P2 — adds advanced email protection.

Each step-up costs less than the difference between E3 and E5, so you can build E5 capability for specific roles cheaper than upgrading everyone.

Operational considerations

  • Track per-user licensing with periodic audit. Step-up SKUs get accidentally assigned then forgotten.
  • Communicate clearly what each tier gets — users with different licences experience Microsoft 365 differently.
  • Renew strategically — negotiate at EA / MCA renewal with actual usage data.

For most enterprises, the right answer is mixed: E3 broadly, E5 (or step-ups) for the roles that genuinely benefit. The cost difference between "E5 for everyone" and "E5 where needed" is often tens or hundreds of thousands per year for a medium-to-large tenant — worth getting right.