Microsoft Licensing Update: Business Premium vs Office 365 E3 Compared

Microsoft 365 Business Premium and Office 365 E3 are often compared because they now sit at nearly the same price point. Despite that similarity, they deliver very different security and management outcomes. 

The decision is not really about productivity apps. It comes down to whether the licenses you are paying for align with how identity, devices, email, and data are protected inside your tenant.

With Microsoft pricing and feature changes taking effect on July 1, 2026, this comparison matters more than it did even a year ago. 

Microsoft 365 Business Premium bundles identity protection through Entra ID P1, device and app management with Intune, endpoint and email security using Defender for Business and Defender for Office 365 P1, and core data protection through Purview and data loss prevention. This makes it a strong default option for organizations under 300 users. 

Office 365 E3 focuses primarily on productivity. It typically requires separate licenses to reach comparable security and management coverage. It remains a better fit for larger tenants, environments with advanced compliance needs, larger mailbox requirements, or organizations using non-Microsoft security platforms. 

On July 1, 2026, Office 365 E3 adds Defender for Office 365 Plan 1. Its price also increases to about $26 per user per month. Business Premium remains priced at $22 per user per month. This widens Business Premium's value advantage. 

The right choice depends on where you want security and management controls to live. Business Premium delivers them as part of the base license. Office 365 E3 requires those controls to be assembled separately. 

How Microsoft 365 Business Premium Compares to Office 365 E3

In this episode of "What’s New with Microsoft," Wade Walker (VP, Microsoft Alliance at Sourcepass MCOE) compares Microsoft 365 Business Premium and Office 365 E3.

The discussion focuses on three areas: 

• How Microsoft defines each license

• Where security and management capabilities differ

• How those differences affect real-world licensing decisions

Timestamped Key Moments

• 00:00 - Introduction and comparison context

• 01:10 - How Microsoft frames Office 365 and Business Premium licensing

• 01:35 - Business Premium security and management features

• 02:00 - Identity security with Microsoft Entra ID Plan 1

• 02:35 - Device and application management with Intune

• 03:01 - Endpoint protection with Defender for Business 

• 03:20 - Email security and phishing protection

• 03:47 - Data loss prevention and information protection

• 04:15 - July 1, 2026 pricing changes

• 04:57 - When Office 365 E3 is still the better option

• 05:38 - Decision framework for choosing the right license

What is the Core Difference Between Business Premium and Office 365 E3?

Office 365 E3 is a productivity focused license. It delivers email, collaboration tools, and desktop applications. Security, identity controls, and device management are expected to be added separately.

Microsoft 365 Business Premium is designed as a bundled baseline. It combines productivity with built-in identity protection, endpoint security, device management, and data protection.

Microsoft positions Business Premium as the next step for organizations that want security controls enforced by default rather than layered over time.

How Business Premium Address Identity Based Attacks

Identity based attacks remain the most common entry points into Microsoft tenants.

Common examples include: 

• Password spray attacks

• MFA fatigue

• Token theft

Business Premium includes Microsoft Entra ID Plan 1. This enables conditional access, consistent MFA enforcement, and modern access controls across the tenant.

Office 365 E3 does not include Entra ID Plan 1 by default. It must be licensed separately to reach the same baseline. This distinction matters because identity protection cannot be selectively applied without creating gaps. 

Device and Application Management Differences

Endpoint and Email Security Comparison

Business Premium includes both Microsoft Defender for Business and Microsoft Defender for Office 365 Plan 1.

Together, these tools protect against: 

• Endpoint threats 
• Phishing attacks
• Malicious links
• Malicious attachments

Microsoft has announced that Defender for Office 365 Plan 1 will be added to Office 365 E3 beginning July 1, 2026. While this narrows one gap, endpoint protection and device management remain separate considerations under E3. 

Data Protection Capabilities in Business Premium vs Office 365 E3

Business Premium includes Microsoft Purview Information Protection and foundational data loss prevention capabilities.

These controls allow organizations to: 

• Classify sensitive data
• Apply encryption
• Reduce accidental data leakage across email and files

This approach shifts protection away from user behavior and toward platform enforced guardrails. Office 365 E3 supports more advanced compliance scenarios, but Business Premium covers the core controls many environments need without additional licenses.

Pricing Changes After July 1, 2026

Today, Business Premium is priced at $22 per user per month. Office 365 E3 is priced at $23 per user per month on an annual commitment.

After July 1, 2026:

• Office 365 E3 increases to approximately $26 per user per month

• Business Premium remains unchanged

This makes Business Premium the lower cost option while still bundling identity, device, endpoint, email, and data protection capabilities that often require multiple add-ons under E3.

Office 365 E3 remains the better option in specific scenarios.

Business Premium is capped at 300 users per tenant. This makes E3 the practical choice for larger environments or organizations approaching that limit. 

E3 is also relevant for environments with:

• Large mailbox storage requirements

• Advanced compliance needs

• Security platforms that are standardized outside Microsoft native tooling.

How to Decide Between Business Premium and Office 365 E3

Business Premium is a strong starting point for environments under 300 users. It includes identity controls, device management, endpoint protection, phishing defense, and basic data protection included by default.

Office 365 E3 remains appropriate when scale, storage, or advanced compliance requirements are the primary drivers and security tooling is handled elsewhere. 

• Microsoft 365 Business Premium and Office 365 E3 Frequently Asked Questions

  • What is the main difference between Microsoft 365 Business Premium and Office 365 E3?

    The main difference is how security and device management are delivered.

    Business Premium includes built-in identity protection, device management, and endpoint security.  

    Office 365 E3 focuses on productivity and requires additional licenses to reach a similar security baseline. 

  • Does Microsoft 365 Business Premium include Intune and Defender?

    Yes. Business Premium includes Microsoft Intune Plan 1, Microsoft Defender for Business, and Microsoft Defender for Office 365 Plan 1. 

  • Does Office 365 E3 include the same security features as Business Premium?

    No. Office 365 E3 does not include Intune or endpoint protection by default. Comparable capabilities require additional licenses. 

  • Is Microsoft 365 Business Premium limited to 300 users?

    Yes. Business Premium is capped at 300 licensed users per tenant. 

  • When do the Office 365 E3 pricing changes take effect?

    Microsoft has announced pricing updates effective July 1, 2026. 

  • Who is Microsoft 365 Business Premium designed for compared to Office 365 E3?

    Business Premium is designed for small and mid‑sized organizations that need integrated security and device management. Office 365 E3 is designed for larger environments that prioritize scale, advanced compliance, or enterprise licensing flexibility.

How to Evaluate Licensing Without Overbuying

Choosing the right Microsoft license depends on where security and management controls are expected to live inside the tenant.

Some environments rely on security being bundled by default. Others assemble controls through separate licenses. Understanding that distinction helps reduce overlap and unnecessary spend. 

For ongoing updates that affect Microsoft licensing and platform capabilities, the Demystifying Microsoft podcast covers changes that influence how work gets done