Stop paying for Microsoft 365 licenses

Over time, this adds up to thousands in unnecessary costs.

In this article, we’ll explain:

• Why Microsoft 365 makes it difficult to offboard users without data loss

• What happens to a user’s data when their license is removed

• How to stop paying for ex-employee licenses while retaining access to critical data

• A simpler, automated solution using Chipmunk

The Problem: You’re Still Paying for Departed User Licenses

When an employee leaves, their account is typically:

• Disabled in Entra ID (formerly Azure Active Directory)
• But the Microsoft 365 license remains assigned

Why? Because once the license is removed, Microsoft begins deleting that user’s data.

That means IT teams often keep licenses active just to preserve data — even if that data may never be used again.

If you’re paying $30/month for each departed user’s license, that’s:

• 100 users = $3,000/month

• 100 users = $36,000/year

And this is just to hold onto data that should already be safely archived.

What Happens to Microsoft 365 Data When a License is Removed?

Unless you’ve set up retention policies or manually archived the data, Microsoft will begin deleting user data after a license is removed.

Here’s what typically happens:

If you remove a license and haven’t backed up the data, you could permanently lose important files, emails, or conversations needed for handovers, audits, or legal compliance.

Why This Is a Costly Problem?

Microsoft offers tools like retention policies and inactive mailboxes, but they are:

• Difficult to configure correctly

• Don’t cover everything (Teams chat is a common gap)

• Often still require the license to remain in place

This means many organizations choose to keep paying for the license instead of risking data loss.

Over time, this becomes a hidden cost — one that can run into tens or hundreds of thousands of dollars per year, depending on your organization size and turnover rate.

The Right Way to Handle Offboarding: Archive Then Delete

The best solution is simple:

Archive all of the user’s data when they leave, then safely remove their license.

That means:

• Downloading and saving their OneDrive data

• Exporting all Exchange emails

• Capturing Teams conversations

• Storing the data securely for future reference

Doing this manually is time-consuming and error-prone. It also requires different tools for each data type, making it difficult to maintain consistency or ensure compliance.

Introducing Chipmunk: Automated Offboarding for Microsoft 365

Chipmunk is a purpose-built solution to solve this problem.

It automates the entire offboarding process by:

• Detecting when a Microsoft 365 user is disabled in Entra ID

• Automatically backing up their:

  • OneDrive files (with full folder structure)

  • Exchange emails (saved in .eml format)

  • Microsoft Teams messages (including private chats and attachments)

• Uploading the data to your own Azure Blob Storage

• Logging every action for full auditability

Once Chipmunk completes the archive, you can safely remove the license — no risk of data loss, no ongoing Microsoft billing.

How It Works (Step by Step)

• A user is disabled in Microsoft Entra ID
• Chipmunk automatically detects the change
• It backs up OneDrive, Email, and Teams data
• The archive is securely stored in your Azure Blob Storage
• You delete the Microsoft license with confidence that nothing has been lost

No scripts. No retention policies. No risk.

Built for Compliance and Peace of Mind

Chipmunk helps your organization meet data retention and compliance requirements across multiple regulatory frameworks, including:

• ISO 27001

• GDPR

• HIPAA

• SEC 17a-4

• Microsoft Purview compatibility

By automatically archiving all content from disabled Microsoft 365 users and storing it securely in your own Azure tenant, Chipmunk ensures your data is fully retained, auditable, and under your control — without reliance on ongoing Microsoft licensing or complex configurations.

Summary: Don’t Let Data Loss or Licensing Waste Sneak Up on You

What Chipmunk Does That Manual Offboarding Cannot

Manual offboarding requires IT teams to identify departed users, download their OneDrive files, export their Exchange mailbox, capture their Teams data, verify everything has been saved correctly, and only then remove the licence. For enterprises processing dozens or hundreds of departures per year this is time consuming, error prone, and inconsistent.

Chipmunk replaces this entire process with a single automated workflow. The moment a user account is disabled in Microsoft Entra ID, Chipmunk detects the departure event and begins archiving their OneDrive, Exchange Online mailbox, and Teams data automatically. When archiving is complete your IT team receives a confirmation notification and can immediately remove the Microsoft 365 licence — with complete confidence that nothing has been lost.

For large enterprises processing high volumes of departures, Chipmunk scales without any additional IT effort. Every departure is handled consistently, every archive is complete, and every licence removal is safe.

The Cost of Delayed Licence Removal

For a 1,000 person enterprise with 10% annual staff turnover, that is 100 departures per year. If each departed user’s licence is kept active for an average of three months while IT manually handles offboarding, the unnecessary licence cost for a Microsoft 365 E3 plan is over $10,000 per year — just from the delay.

Chipmunk reduces that delay from weeks to hours. The archiving completes automatically and IT is notified to remove the licence the same day the account is disabled.

Ready to Save on Microsoft 365 Licensing?

If your organization is still paying for ex-employee licenses just to preserve their data — it’s time to stop.

Chipmunk gives you a fully automated, secure, and cost-effective way to archive departed user data across OneDrive, Teams, and Exchange — and safely delete the license.

Frequently Asked Questions About Microsoft 365 Licence Removal

Q: What happens to OneDrive data when a Microsoft 365 licence is removed? A: Microsoft retains OneDrive data for 93 days after an account is disabled. After that it is permanently deleted. If the licence is removed before that period ends and no retention policy is in place, the data may be deleted sooner. Chipmunk archives all OneDrive data before the licence is removed so nothing is at risk.

Q: Can I remove a Microsoft 365 licence without losing the employee’s emails? A: Yes, if you archive the Exchange Online mailbox first. Chipmunk automatically captures the full Exchange Online mailbox including sent items, calendar, and contacts before the licence is removed, so all email history is preserved in your own Azure Blob Storage.

Q: How long do I need to keep a departed employee’s Microsoft 365 data? A: This depends on your regulatory obligations and internal policy. GDPR requires data to be kept only as long as necessary. Financial services regulations may require seven years for certain communications. Employment law varies by jurisdiction. Chipmunk stores archived data for as long as your policy requires at a fraction of the cost of keeping an active Microsoft 365 licence.

Q: What happens to Microsoft Teams data when an employee leaves? A: Teams channels the departed user participated in continue to exist for other team members. However, the departed user’s personal Teams chats and any files they uploaded to their own OneDrive are at risk once their account is disabled. Chipmunk captures Teams chat history and associated files as part of the automated archiving workflow.

Q: Is there a way to automatically archive departed user data without manual IT work? A: Yes. Chipmunk monitors your Microsoft Entra ID continuously and automatically starts the archiving workflow the moment a user account is disabled. OneDrive, Exchange Online, and Teams data are all captured without any manual trigger from your IT team. You receive a confirmation notification when archiving is complete and the licence can be safely removed.

Q: How much does it cost to keep a Microsoft 365 licence just to retain data? A: Microsoft 365 E3 costs $36 per user per month. For 100 departed users kept on licence for three months while IT handles manual offboarding, that is $10,800 in unnecessary licence costs. Chipmunk archives the data automatically so licences can be removed the same day the account is disabled.