Alert: Microsoft 365 Customers can face Hefty Costs Starting January 27, 2025 Due to Unlicensed OneDrive Accounts

If you’re a Microsoft 365 customer, mark January 27, 2025, on your calendar. Why? Because unlicensed OneDrive user accounts in your organization will soon become a financial liability. Microsoft is rolling out a new policy that will automatically archive unlicensed OneDrive accounts after 93 days, and the costs to manage these archives could be staggering. This change is not just a minor update—it’s a wake-up call for IT administrators and business leaders to act now or face unexpected expenses.

What’s Changing?

Starting January 27, 2025, any OneDrive account that remains unlicensed for more than 93 days will be automatically archived. Once archived, the account and its data will be inaccessible to users and administrators unless specific actions are taken. Here’s what you need to know:

• Archiving Costs: Archived accounts will incur a monthly storage fee of 0.05 US$ per GB.
  For example, 100 unlicensed accounts with 1 TB each could cost 5.120 US$ monthly.
• Reactivation Fees: If you need to access an archived account, you’ll pay a one-time reactivation fee of 0.60 per GB. Reactivating a single 1 TB account would cost 614.40 US$.
• Retention Policies: Accounts subject to retention policies, litigation or legal holds will still be archived but cannot be deleted, meaning you’ll continue paying storage fees until the policy expires.

Why Is Microsoft Doing This?

Microsoft’s new policy aims to address several issues:

1. Security Risks: Unlicensed accounts can pose compliance and security risks, especially if they contain sensitive data. 
2. Storage Management: Many organizations have used unlicensed accounts as a loophole to store data indefinitely without paying extra. This change encourages better data management practices.
3. Simplified Compliance: By enforcing strict archival rules, Microsoft is streamlining compliance and reducing confusion around data retention.

Does Microsoft offer a grace period?

The 93-day grace period starts when an account becomes unlicensed. During this time, the account remains accessible, but if no action is taken (e.g., assigning a license or deleting the account), it will be automatically archived after 93 days.

important clarification from “Mr OneDrive” Hans Brender: these changes do not apply for OneDrive purchased through Family and Home Subscription due to missing SharePoint and Entra ID

The Financial Impact

The costs can quickly increase, especially for organizations with high employee turnover or large amounts of archived data. Consider this scenario:

• 100 Unlicensed Accounts: Each with 1 TB of data.
• Monthly Storage: $5,120.
• Reactivation Costs: $614.40 per account.
  If you need to reactivate multiple accounts or retain them for extended periods, the financial burden could be significant.

How to Prepare

To avoid these costs, organizations must take proactive steps before January 27, 2025:

1. Audit Unlicensed Accounts: Use the SharePoint admin center to generate a report of unlicensed OneDrive accounts. This report will show storage usage, last activity dates, and retention policies.
2. Assign Licenses: If the data is still needed, assign a Microsoft 365 or Office 365 license to the account before it’s archived. Bulk licensing can be done via the Microsoft 365 admin center or PowerShel.l
3. Delete Unnecessary Accounts: Delete accounts with irrelevant data to avoid archival fees. Ensure compliance with retention policies before deletion.
4. Migrate Critical Data: Move important data from unlicensed accounts to active SharePoint sites or licensed OneDrive accounts. This ensures access without incurring archival costs.
5. Set Up Billing for Archived Accounts: If you must retain archived data, enable unlicensed account billing in the Microsoft 365 admin center. Be prepared for the associated cost.s
6. Organizations should consider the impact of archiving and reactivation fees on their backup and recovery strategies. Reactivating archived accounts to restore data could incur significant costs, so it’s essential to ensure that critical data is backed up separately or stored in licensed accounts.
7. Organizations should communicate these changes to end users, especially those using OneDrive without a license. Clear communication can help avoid confusion and ensure that users take necessary actions, such as backing up their data or requesting a license.

What Happens If You Don’t Act?

Failure to address unlicensed accounts before the deadline could lead to:

• Unexpected Costs: Monthly storage and reactivation fees can quickly escalate.
• Data Inaccessibility: Archived accounts cannot be accessed without reactivation, which could disrupt business operations.
• Compliance Risks: Mishandling unlicensed accounts could result in non-compliance with data retention regulations

Final Thoughts

Microsoft’s new policy is a game-changer for organizations relying on OneDrive for data storage. While it aims to improve security and compliance, it also introduces significant financial and operational challenges. The time to act is now. Audit unlicensed accounts, assign licenses where necessary, and delete or migrate data to avoid hefty costs.

Don’t let January 27, 2025, catch you off guard. Start preparing today to protect your organization’s budget and data accessibility.

For more details, refer to Microsoft’s official documentation: Manage unlicensed OneDrive user accounts 2.

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