Microsoft Security Solutions Licensing: Navigating Defender and Sentinel Costs

Microsoft Security Solutions Licensing

Introduction: Microsoft’s Expanding Security Licensing Portfolio

Microsoft’s security licensing has become a maze of bundles, add-ons, and usage-based costs. The Microsoft Defender suite and Microsoft Sentinel provide powerful protection, but understanding their licensing can be complex.

IT procurement teams often struggle to decide between a full E5 security bundle and picking individual add-ons. Hidden costs – like Sentinel’s consumption-based fees – can catch organizations off guard.

This guide cuts through the jargon with a straight-shooting look at how to optimize Microsoft security licensing while avoiding common cost traps.

Microsoft Defender Licensing: Bundles vs Standalone SKUs

Microsoft Defender products can be licensed via bundles (like Microsoft 365 E5) or as standalone SKUs. The key is knowing what each approach entails and its associated cost implications.

An E5 license (or the E5 Security add-on for E3 users) bundles the major Defender components under one per-user price.

This bundle includes the full Defender suite: advanced Defender for Endpoint, Defender for Office 365, Defender for Identity, Defender for Cloud Apps, and Azure AD Premium P2 (Entra ID P2). In essence, E5 delivers a comprehensive security umbrella without needing separate licenses for each component.

By contrast, you can buy standalone Defender licenses for specific needs – for example, just Defender for Endpoint or just Defender for Office 365. Standalone SKUs make sense if you truly need only one or two protections for a subset of users.

However, cost traps abound when piecemeal approaches are used. Purchasing multiple Defender components individually often ends up more expensive than the bundle.

For instance, buying Endpoint and Office 365 protection separately (at a few dollars per user each) quickly approaches the cost of the E5 Security bundle, which covers those plus more. Managing numerous individual licenses can also be complex and reduce your discount leverage with Microsoft.

E3 vs E5: Many organizations weigh sticking with Microsoft 365 E3 plus add-ons versus upgrading to E5. E3 by itself has limited advanced security – you might get baseline protection and some Plan 1 Defender features, but not the full suite. Add-ons like the E5

The Security bundle bridges the gap for E3 customers, providing all the Defender tools and Azure AD P2 without requiring the full E5 (which also includes compliance and voice features).

Generally, the E3 + E5 Security add-on is cheaper than a full E5 license if you only need the security enhancements. But if you also require Microsoft’s advanced compliance tools or analytics that come with E5, a full M365 E5 license might justify its higher price.

Beware of overlaps: If you opt for standalone security SKUs, check your existing Microsoft subscriptions. You don’t want to buy Defender for Cloud Apps or Azure AD Premium P2 separately if they’re already included in another bundle you own.

In short, use bundles to cover broad needs and avoid one-off licenses unless necessary. This maximizes value and simplifies license management.

Sentinel Licensing: Log Ingestion and Cost Control

Microsoft Sentinel is a cloud-native SIEM, but its licensing is entirely different from per-user Defender licenses. Sentinel is charged based on data ingestion – essentially a pay-per-GB model for the logs you send to it.

This consumption-based pricing can lead to unpredictable costs: ingesting large volumes of logs (from firewalls, servers, etc.) will inflate your bill.

At pay-as-you-go rates, Sentinel can cost on the order of several dollars per GB of data ingested. That might sound negligible, but multiply it by thousands of GBs per month, and costs skyrocket.

Microsoft offers capacity reservation (commitment tiers) for Sentinel to help control spend. With a commitment tier, you agree to pay a fixed fee for a certain daily volume of data (e.g., 100 GB per day), and in return, you get a lower effective per-GB price.

Large enterprises with steady log volumes should consider these reservations – discounts can be significant (30-50% savings compared to pay-as-you-go). It also provides cost predictability, which is useful for budget planning.

To optimize Sentinel costs, you need to be proactive. Filter the logs you ingest: not all telemetry is equally valuable for security. Ingest only high-value security logs and exclude verbose data that isn’t needed for threat detection.

Set sensible retention policies – Sentinel includes a default retention (e.g., 90 days), and keeping data longer can incur additional charges. You might offload older logs to cheaper storage or use “Basic Logs” and archive options for data you rarely query.

Also, leverage free data sources: certain logs, like Microsoft 365 audit logs, can be ingested at no charge in Sentinel, so utilize those for necessary monitoring.

Negotiation is also key.

Sentinel’s usage-based costs can be a topic in your Microsoft enterprise agreement discussions. If you expect heavy Sentinel use, negotiate Sentinel credits or discounts as part of your Azure commitment.

Microsoft may offer incentive discounts for security adoption, especially if you bundle Sentinel with Defender in your overall deal.

In summary, treat Sentinel like a utility – monitor its usage closely and employ all available tools (filters, commitments, free ingestion sources) to prevent runaway charges.

Azure Defender for Cloud and Resource-Based Security Costs

Microsoft’s cloud workload protection (formerly Azure Defender, now Microsoft Defender for Cloud) adds another layer of licensing complexity. Unlike per-user licensing, Defender for Cloud is enabled per Azure resource and billed per resource unit.

For example, Defender for Servers is priced per VM instance, Defender for SQL is priced per database or server instance, Defender for Storage is priced per storage account, and so on. Enabling these protections means you’ll pay a monthly fee for each resource protected (e.g., a fixed cost per VM per month for Defender coverage).

The cost pitfalls here come from indiscriminate enablement. It’s easy to turn on “Defender for Cloud” across your entire Azure environment with a few clicks – and suddenly be paying for every VM, database, and container registry in your cloud.

Those costs add up fast, often surprising teams who assumed security was simply built-in. The reality is that advanced cloud threat protection isn’t free, even if you have E5 licenses (E5 covers user-based services, but not Azure resource protection).

To avoid bleeding money, enable cloud defenders selectively. Identify which workloads are truly critical or exposed and target those for Defender protection. For less critical systems, you might rely on native basic protections or third-party tools you already use.

Always compare the value and price: in some cases, a third-party cloud security tool might cover multiple cloud platforms at a lower overall cost.

Or if you already run a robust endpoint agent on your VMs (like Defender for Endpoint, which E5 includes for client OS and can be extended to servers with a separate license), you might not need the full Azure Defender for those machines.

In practice, organizations often pilot Defender for Cloud on a subset of resources first. They monitor the alerts and the monthly costs, then decide if the improved security justifies expanding it.

Microsoft does provide an Azure cost calculator for these services – use it before toggling everything “On”.

The goal is to achieve the right coverage without paying for protection on low-risk assets. Selective enablement and regular cost reviews are crucial to maintaining control over Azure security spending.

Compliance and Identity Add-Ons (AAD P2 and Overlap Risks)

Security licensing doesn’t exist in a vacuum – it overlaps with compliance and identity licensing.

A prime example is Azure AD Premium P2 (now part of Microsoft Entra ID). Azure AD P2 offers advanced identity security features, including Identity Protection and Privileged Identity Management. It’s included in Microsoft 365 E5, in the E5 Security add-on, and in Enterprise Mobility + Security (EMS E5) suites.

Yet some organizations accidentally pay for it twice. They might purchase Azure AD P2 as a standalone add-on for some users, not realizing those same users are covered by E5, which they also have. This kind of overlap is a waste of budget.

Always review which identity and compliance features your current licenses include before buying separate add-ons. For instance, if you have E5, you already have advanced eDiscovery, data loss prevention, and other compliance tools.

There’s no need to also buy a separate “Compliance E5” add-on or a third-party solution with similar capabilities unless you’ve confirmed a gap.

Similarly, Microsoft Defender for Identity (which monitors on-prem AD traffic) is part of the E5 security suite – don’t accidentally pay for an older standalone Azure ATP license on top of that.

A good practice is to maintain a simple spreadsheet that lists all major security and compliance features and maps which licenses provide them. This makes it easier to spot duplicate entitlements.

Microsoft’s licensing documentation and the admin portal can help identify overlaps, too (for example, assigning an E5 Security license to a user who already has EMS E5 will show a conflict). By pruning out redundant licenses, you free up budget for truly needed investments.

Also, be mindful of bundled suites. If you have Microsoft 365 E5, you likely don’t need separate EMS or separate Office 365 E5 licenses – E5 is all-inclusive for enterprise.

If you’re on E3 plus add-ons, ensure you’re not double-paying for something like Azure AD Premium P, which might also be in another bundle you own.

The motto here is: know what you own, and fully utilize those subscriptions before layering more on top.

Cost Optimization Strategies for Microsoft Security Licensing

Optimizing Microsoft security licensing requires a strategic approach. First, evaluate bundle vs add-on: buying the Microsoft security bundle (like the E5 Security add-on) often yields better value than accumulating individual licenses.

Use Microsoft’s own pricing to your advantage – they price bundles to incentivize adoption of more products, which can save you money if you truly need those products.

Don’t be afraid to push your Microsoft rep for a better deal on an add-on if it prevents you from switching to a competitor’s tool.

Next, always cross-check existing entitlements.

Before adding any security SKU, confirm that it’s not already included in something you have. This prevents paying twice and gives you a chance to deploy the feature under an existing license.

A common example is skipping separate MFA or CASB purchases if your Microsoft security suite covers those capabilities.

For larger enterprises, use your buying power to negotiate. If you aren’t going full E5 suite, you can still negotiate discounts on E5 Security add-ons or other components.

Microsoft often provides flexibility in enterprise agreements – especially if you commit to multi-year terms or broader cloud usage, they might reduce the per-user cost of security add-ons.

When it comes to usage-based services like Sentinel or Azure security, consider capacity commitments. It’s similar to getting a bulk rate: commit to a certain level of usage for a term to lower the unit cost.

If your security team plans to ingest a steady stream of logs into Sentinel, a capacity deal will almost certainly pay off. Likewise, track Defender for Cloud charges and consider reserved instances or longer-term plans if available for certain resource types.

Finally, adopt a continuous review process.

Microsoft licensing and your environment both change over time. Conduct periodic license audits to catch overlapping licenses, underused high-tier licenses, or escalating Sentinel data volumes.

Optimization isn’t a one-time set-and-forget; it’s an ongoing practice. By staying vigilant and informed, you can cut through Microsoft’s complex licensing model and ensure you’re paying only for what you truly need.

Comparison Table – Microsoft Security Licensing Options

Note: E5 includes everything in the E5 Security add-on, plus compliance and other tools. E3 + Security add-on covers the main Defender suite but excludes E5 compliance features. Standalone products might seem cheaper individually, but can exceed bundle costs when combined. Sentinel is a separate animal – a service cost, not a per-user license.

Checklist: Optimizing Microsoft Security Licensing Costs

• Review current licenses: Map out your coverage under E5 vs E3 + add-ons. Identify which Defender and compliance features you already have.
• Eliminate duplicate entitlements: Check for overlapping licenses (e.g., Azure AD Premium P2 in two places). Remove or reassign redundant licenses to stop double-paying.
• Optimize Sentinel usage: Tune log ingestion – send only necessary logs and set retention limits. Regularly review the Sentinel bill and adjust data connectors to control cost.
• Selective Defender for Cloud: Only enable Microsoft Defender for Cloud on high-value resources. Avoid blanket enabling on every Azure resource without a cost-benefit analysis.
• Negotiate and plan: For predictable workloads, use capacity reservations (commitment tiers) for Sentinel and other Azure services. Negotiate these in your contract for better rates.
• Benchmark alternatives: Periodically compare Microsoft’s security bundle costs vs third-party solutions. Ensure that staying within the Microsoft ecosystem is cost-effective for your needs.

FAQ: Microsoft Security Licensing

Q1: Is Microsoft Defender included in E5?
A1: Yes. Microsoft 365 E5 (and the E5 Security add-on for E3) includes most Defender components: Defender for Endpoint, Defender for Office 365 (Plan 2), Defender for Identity, Defender for Cloud Apps, plus Azure AD Premium P2 for identity security.

Q2: How is Microsoft Sentinel priced?
A2: Microsoft Sentinel is priced per gigabyte of log data ingested. It’s a cloud service, not a per-user license. You can pay-as-you-go for each GB or choose a capacity tier (commitment) for a discounted rate if you have predictable log volumes.

Q3: Do I need Azure AD Premium P2 separately if I have E5?
A3: No. If you have Microsoft 365 E5 (or the E5 Security bundle), Azure AD Premium P2 is already included. You shouldn’t buy a separate AAD P2 license for those users – that would be duplicative.

Q4: Can I mix standalone Defender SKUs with E3?
A4: Yes, you can add individual Defender products to an E3 environment. For example, you might buy Defender for Office 365 Plan 2 for certain users on E3. However, if you find yourself needing multiple standalone Defenders (like endpoint + email protection), it’s often cheaper and simpler to go with the E5 Security add-on for those users.

Q5: What drives Microsoft Sentinel costs the most?
A5: The volume of data you ingest drives Sentinel costs. High log volumes (from detailed diagnostics or verbose logs across many sources) will spike costs. Retaining data for long periods can also increase the bill. Controlling what data you send to Sentinel is the primary lever to manage its cost.

Q6: Can Defender for Cloud be enabled selectively?
A6: Yes, you can enable Microsoft Defender for Cloud for specific resources or resource types. For example, you might turn it on for critical production VMs and databases, but leave it off for test environments. This selective approach helps control costs while protecting your most important assets.

Q7: Which is cheaper: going full E5 or using E3 with add-ons?
A7: Generally, an E3 license with the E5 Security add-on is cheaper if you only need the security features. It gives you the advanced Defender suite at a lower cost than a full E5. A full Microsoft 365 E5 is only worth the higher price if you also need its additional features beyond security (like advanced compliance, analytics, or voice). In other words, don’t pay for full E5 if your main goal is security – E3 + security add-on usually offers better value.

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