Microsoft 365 E3 vs E5

Microsoft 365 E3 vs E5: What's the Difference?

Choosing between Microsoft 365 E3 and Microsoft 365 E5 is one of the most important licensing decisions for enterprise organizations. Both licenses provide the full Microsoft 365 productivity suite, but E5 adds significant security, compliance, voice, and analytics capabilities that can be essential for regulated industries and security-conscious organizations.

The Microsoft 365 E5 license (also known as M365 E5 or Office 365 E5) is Microsoft's most comprehensive enterprise offering, designed for organizations that need:

• Advanced threat protection and security analytics
• Comprehensive compliance and eDiscovery tools
• Cloud-based phone system (Teams Phone)
• Power BI Pro for enterprise business intelligence
• Audio Conferencing for dial-in meeting access

Microsoft 365 E3 vs E5 Pricing (2025)

For a 500-user organization, the annual difference between E3 and E5 is approximately $126,000. However, this comparison doesn't account for the add-on costs you'd incur to get E5-equivalent features with E3:

Security Features: E3 vs E5

Security is where the Microsoft 365 E5 license truly shines. E5 includes Microsoft's complete security stack, while E3 provides only baseline protection.

E5-Exclusive Security Features

• Microsoft Defender for Office 365 Plan 2: Advanced anti-phishing, safe attachments, safe links, attack simulation training, and threat investigation
• Microsoft Defender for Endpoint Plan 2: Endpoint detection and response (EDR), automated investigation, threat analytics
• Microsoft Defender for Identity: Identity threat detection, compromised credential detection, lateral movement path analysis
• Microsoft Defender for Cloud Apps: Cloud app discovery, data protection, threat detection across SaaS apps
• Azure AD Premium P2: Identity Protection, Privileged Identity Management, access reviews
• Microsoft Sentinel (limited): SIEM capabilities with Microsoft 365 data

Security Included in Both E3 and E5

• Microsoft Defender Antivirus
• Exchange Online Protection (basic)
• Azure AD Premium P1 (Conditional Access, MFA)
• Data Loss Prevention (basic)
• BitLocker and Windows Information Protection

Compliance and eDiscovery Features

For regulated industries (healthcare, finance, legal, government), E5's compliance features are often the deciding factor.

E5-Exclusive Compliance Features

• Advanced eDiscovery: Legal hold, case management, predictive coding, review sets
• Advanced Audit: Longer retention (10 years), crucial events, high-bandwidth API access
• Insider Risk Management: Detect and respond to internal threats and policy violations
• Communication Compliance: Monitor and remediate communication policy violations
• Information Barriers: Restrict communication between groups (ethical walls)
• Customer Lockbox: Control Microsoft support access to your data
• Privileged Access Management: Just-in-time admin access with approval workflows

Teams Phone System and Audio Conferencing

Microsoft 365 E5 includes full cloud voice capabilities that would cost $12+/user/month as add-ons to E3:

E5-Included Voice Features

• Teams Phone System: Cloud PBX, call queues, auto attendants, call transfer, voicemail
• Audio Conferencing: Dial-in numbers for Teams meetings (toll numbers in 90+ countries)
• Note: Calling Plan (PSTN connectivity) is still an additional cost for both E3 and E5, or you can use Direct Routing with your existing telephony provider

For organizations planning to replace their traditional phone system with Teams, E5 provides significant value by including Phone System at no additional cost.

Power BI Pro: Included in E5

Power BI Pro ($10/user/month standalone) is included with Microsoft 365 E5, providing:

• Full Power BI Pro license for all E5 users
• Share dashboards and reports with other Pro users
• Create and publish apps and workspaces
• Data refresh up to 8x per day
• 10 GB storage per user

For data-driven organizations that need business intelligence for most employees, E5's included Power BI Pro can justify the upgrade cost alone.

Full Feature Comparison Table

Which License Should You Choose?

Choose Microsoft 365 E3 If:

• You have basic security requirements without advanced threat protection needs
• Your organization is not in a heavily regulated industry
• You don't need cloud-based phone system or dial-in conferencing
• Power BI is only needed by a small subset of users (buy Pro licenses separately)
• Budget is the primary constraint

Choose Microsoft 365 E5 If:

• You're in a regulated industry (healthcare, finance, legal, government)
• Advanced threat protection is a priority (phishing, ransomware, zero-day attacks)
• You need advanced eDiscovery for legal or compliance purposes
• You're planning to deploy Teams as your phone system
• Most employees need Power BI Pro for business intelligence
• You want a unified security dashboard (Microsoft 365 Defender)

Frequently Asked Questions