Microsoft 365 E3 vs E5
Complete Enterprise License Comparison: Security, Compliance, Pricing & Features
Microsoft 365 E3
~$36/user/month
- Full Office apps + Teams
- Exchange, SharePoint, OneDrive
- Basic security & compliance
- Windows 10/11 Enterprise
- No advanced threat protection
- No Phone System
- No Power BI Pro included
Best for: Organizations with basic security needs
Microsoft 365 E5
Recommended~$57/user/month
- Everything in E3, plus:
- Microsoft Defender for Office 365
- Advanced eDiscovery & compliance
- Phone System included
- Power BI Pro included
- Audio Conferencing included
- Insider Risk Management
Best for: Security-conscious enterprises, regulated industries
Table of Contents
Microsoft 365 E3 vs E5: Full Comparison (2026 Pricing)
TL;DR: Microsoft 365 E3 costs $36/user/month. E5 costs $57/user/month. The $21 difference buys advanced security (Defender for Endpoint P2, Defender for Cloud Apps), compliance (Insider Risk, eDiscovery Premium), Phone System, and Power BI Pro. For regulated industries, E5 is almost always the better value when two or more add-ons are required.
- E3: $36/user/month. E5: $57/user/month. Difference: $21/user/month.
- Buying E5-exclusive features as E3 add-ons costs roughly $35/user/month extra — making E5 the better value.
- Insider Risk Management, Communication Compliance, and eDiscovery Premium are E5-only.
- E5 includes Phone System (PBX replacement) and Power BI Pro at no additional cost.
- EPC Group recommends E5 for any enterprise in a regulated industry deploying Microsoft 365 Copilot.
E3 vs E5: At a Glance
| Feature | M365 E3 ($36/user/mo) | M365 E5 ($57/user/mo) |
|---|---|---|
| Office apps + Exchange + SharePoint + Teams | Yes | Yes |
| Entra ID P1 (Conditional Access, MFA) | Yes | Yes (P2 upgrade) |
| Intune device management | Yes | Yes |
| Defender for Office 365 | Plan 1 | Plan 2 |
| Audit log retention | 90 days | 10 years (Premium) |
| eDiscovery | Standard | Premium (review sets) |
| Defender for Endpoint | No | Plan 2 |
| Defender for Cloud Apps (CASB) | No | Yes |
| Defender for Identity (on-prem AD) | No | Yes |
| Entra ID P2 (PIM, Identity Protection) | No | Yes |
| Insider Risk Management | No | Yes |
| Communication Compliance | No | Yes |
| Customer Lockbox | No | Yes |
| Phone System (Teams PBX) | No | Yes |
| Audio Conferencing | No | Yes |
| Power BI Pro | No | Yes |
What's the Difference Between E3 and E5?
Both E3 and E5 include the full Microsoft 365 productivity suite. All Office apps, Exchange Online, SharePoint, Teams, and OneDrive are identical across both licenses.
E5 adds on three fronts: security, compliance, and voice.
Security Differences
E5 upgrades several security components that E3 includes at a lower tier:
- Defender for Endpoint Plan 2 (advanced EDR, threat hunting, automated investigation)
- Defender for Office 365 Plan 2 (attack simulation, automated remediation)
- Defender for Cloud Apps (shadow IT discovery, cloud app governance)
- Defender for Identity (on-premises Active Directory threat detection)
- Entra ID P2 (Privileged Identity Management, risk-based Conditional Access)
Compliance Differences
E5 compliance goes well beyond E3:
- eDiscovery Premium: review sets, predictive coding, advanced analytics for large legal matters
- Insider Risk Management: detects data theft and security anomalies from internal users
- Communication Compliance: monitors Teams and email for FINRA, SEC, or healthcare violations
- Customer Lockbox: requires your approval before Microsoft accesses your data
- Audit Premium: 10-year log retention and breach investigation events
Voice and Analytics
- Phone System: cloud PBX for Teams calls, voicemail, and auto-attendants
- Audio Conferencing: dial-in numbers for Teams meetings
- Power BI Pro: full Power BI reporting and sharing for every user
The Cost Math
The E5 premium is $21/user/month over E3. Buying just Defender for Endpoint Plan 2, Defender for Cloud Apps, Insider Risk Management, Communication Compliance, Customer Lockbox, and Audit Premium separately as add-ons costs roughly $35/user/month extra. E5 saves money the moment you need two or more of these capabilities.
The integrated experience is also better. Microsoft Defender products share signals across endpoints, email, identity, and cloud apps. Point solutions do not deliver the same cross-signal detection that the E5 integrated stack provides.
Who Should Choose E3
- Organizations without regulatory compliance requirements
- Companies with low data sensitivity and minimal insider threat exposure
- Organizations already using a mature third-party EDR and CASB solution they are not replacing
- Budget-constrained environments that can add specific add-ons as needs grow
Who Should Choose E5
- Healthcare organizations subject to HIPAA
- Financial services firms under FINRA, SEC, or PCI regulation
- Government contractors with CMMC or FedRAMP requirements
- Any organization replacing their PBX with Teams Phone System
- Organizations deploying Microsoft 365 Copilot in a regulated environment
- Legal and professional services firms with significant eDiscovery workloads
E5 and Copilot for Microsoft 365
Copilot for Microsoft 365 works with E3 as the base license. E5 is not required. However, E5's security and governance capabilities make a safe Copilot deployment significantly easier.
E5 adds the sensitivity label auto-classification, DLP coverage, Insider Risk detection, and Audit Premium retention that regulated industries need before Copilot goes live. For any HIPAA, financial services, or government Copilot deployment, EPC Group recommends E5 as the base license.
Frequently Asked Questions
What does M365 E5 add over E3?
E5 adds advanced security (Defender for Endpoint Plan 2, Defender for Cloud Apps, Defender for Identity, Entra ID P2), advanced compliance (Insider Risk Management, Communication Compliance, eDiscovery Premium, Customer Lockbox, Audit Premium), Phone System for Teams calling, Audio Conferencing, and Power BI Pro.
Is the E5 upgrade worth the $21 per user per month?
Yes — for most regulated enterprises. Buying Defender for Endpoint Plan 2, Defender for Cloud Apps, Insider Risk Management, Communication Compliance, and Audit Premium as individual E3 add-ons costs roughly $35/user/month. E5 bundles all of these at $21 extra. The integrated security stack also provides better detection than separate point solutions.
Can I buy E3 for most users and E5 for a subset?
Yes. Microsoft supports mixed E3/E5 licensing within a single tenant. Most organizations assign E5 to security-sensitive roles — Legal, Finance, HR, Executives — and E3 to the general workforce. EPC Group identifies which roles benefit most from E5 as part of our license optimization assessments.
Does E5 include Copilot for Microsoft 365?
No. Copilot for Microsoft 365 is a separate $30/user/month add-on. It is not included in E5. E5 serves as an eligible base license for the Copilot add-on, but purchasing E5 does not automatically include Copilot.
What is Customer Lockbox and why does it matter?
Customer Lockbox requires Microsoft to get explicit approval from your designated administrators before accessing your M365 data for support or troubleshooting purposes. It is an E5 feature. It matters for industries with strict data sovereignty requirements — healthcare, financial services, and government — where unauthorized access by a vendor has regulatory consequences.
Does EPC Group help with the E3 vs E5 decision?
Yes. EPC Group conducts license optimization assessments for enterprise M365 tenants. We analyze your compliance requirements, existing add-on costs, security posture, and total cost of ownership. We model E3 + required add-ons versus E5 at your user count and give you a clear recommendation with the numbers.
Get Expert M365 License Guidance
EPC Group's license optimization assessments have helped enterprise clients avoid overpaying for M365 licenses and ensure they have the security and compliance capabilities their industry requires. We give you the data to make the right decision for your organization.
Need Help Choosing E3 or E5?
EPC Group has 29 years of Microsoft licensing expertise. We'll analyze your requirements and recommend the optimal licensing strategy.
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Microsoft 365 Strategy: 2026 Considerations for Microsoft 365 E3 Vs E5
Microsoft 365 GCC High vs Commercial tenant in 2026 governs whether a contractor can hold Controlled Unclassified Information (CUI) for federal work under CMMC Level 2 (110 NIST 800-171 controls) or Level 3 (134 controls). GCC High costs roughly 2x the commercial equivalent ($23-$57/user/mo) but is non-negotiable for any DoD prime or sub-prime handling CUI. Migration from Commercial to GCC High is a 14-22 week project at $350K-$950K all-in.
Microsoft 365 E5 vs E3 in 2026 is fundamentally a security and compliance decision. E5 ($57/user/mo) bundles Microsoft Defender for Endpoint Plan 2, Microsoft Defender for Cloud Apps, Insider Risk Management, Communication Compliance, Microsoft Sentinel-fed audit logs, Customer Lockbox, and Audit (Premium) 6-year retention; the full set is roughly $35/user/mo of additional value if purchased as E3 plus add-ons. For regulated industries, the E5 bundle is typically less expensive than the equivalent E3 stack.
Decision factors EPC Group evaluates
- Customer Lockbox + Audit (Premium) configuration for regulated tenants
- Microsoft Purview Compliance Manager assessment baseline (HIPAA, SOC 2, GDPR, NIST AI RMF)
- E5 vs E3 + add-ons total-cost analysis at organization scale
- Microsoft Defender for Endpoint Plan 2 deployment versus Plan 1 + add-ons
- GCC High vs Commercial tenant decision for federal contractors
See related EPC Group services at /services or schedule a discovery call at /contact.