Microsoft 365 Plans with Basic Compliance for 150 Users
Contoso Ltd. is a mid-sized company with 1,200 employees. They currently use on-premises Exchange and SharePoint. They plan to migrate to Microsoft 365 and have decided to use Microsoft 365 E3 for all users. The IT department is concerned about the cost of add-on services. The CFO wants to minimize monthly expenses while ensuring that users have access to Exchange Online, SharePoint Online, Teams, and OneDrive. Additionally, the company needs to meet basic compliance requirements such as retention policies and eDiscovery. They do not require advanced security features like Microsoft Defender for Office 365 P2 or Microsoft Purview Data Loss Prevention. Which approach should the IT department recommend to meet these requirements at the lowest cost?
⚠ Common exam trap
Many candidates assume Microsoft 365 E3 lacks basic compliance features and incorrectly choose to add an add-on like Compliance Manager, or they may overlook the user count limitation of Business Premium, leading them to select a plan that is either overpriced or ineligible.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Use Microsoft 365 E3 without any add-ons
Microsoft 365 E3 includes Exchange Online, SharePoint Online, Teams, and OneDrive, as well as core compliance features like retention policies and eDiscovery (via Microsoft Purview). Since the company does not require advanced security add-ons, no additional purchases are needed, making E3 the lowest-cost option that meets all stated requirements.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Use Microsoft 365 E3 and add Microsoft Purview Compliance Manager
Why it's wrong here
Microsoft Purview Compliance Manager is a premium add-on to E3 that delivers advanced regulatory assessment, compliance posture scoring, and policy templates. However, Contoso's stated requirements are already met by the built-in compliance tools in Microsoft 365 E3, such as eDiscovery, legal hold, retention policies, and basic audit logging. Purchasing this add-on for all 1,200 employees adds significant recurring cost and administrative overhead for features that are not mandated. Therefore, it is an unnecessary expenditure.
- ✗
Use Microsoft 365 Business Premium for all users
Why it's wrong here
Microsoft 365 Business Premium has a hard user cap of 300 seats and is explicitly designed for small and midsize businesses, not a 1,200-employee enterprise like Contoso. It cannot technically provision licenses for all employees, so this option is out of scope regardless of any feature overlap. Even if the user limit were extended, Business Premium lacks enterprise-grade administration and compliance controls that large organizations typically require. Thus, it is not a viable choice.
- ✓
Use Microsoft 365 E3 without any add-ons
Why this is correct
Microsoft 365 E3 provides the full Office applications, enterprise email and collaboration services, plus foundational Microsoft Purview compliance capabilities such as Data Loss Prevention, eDiscovery, and retention policies. It also includes Microsoft Entra ID P1 for identity and access management, covering typical mid-sized enterprise needs without requiring any add-ons. Since the business scenario does not specify advanced security or analytics requirements, E3 alone delivers the right balance of functionality and cost for Contoso's 1,200-employee organization.
- ✗
Use Microsoft 365 E5 for all users
Why it's wrong here
Microsoft 365 E5 bundles advanced security and compliance products, including Defender for Office 365 Plan 2, Information Protection, Insider Risk Management, and Power BI Pro, at a substantially higher per-user price. Contoso's requirements do not mention any sophisticated analytics, threat protection, or insider risk needs, so deploying E5 for all 1,200 employees would waste budget on unused capabilities. The additional cost scales linearly with headcount, making this an economically poor choice when E3 already provides the necessary baseline features.
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Related to this question
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Microsoft Teams Governance and Policy Management
Key term
Office 365
Office 365 is a cloud-based subscription service from Microsoft that provides access to productivity applications like Word, Excel, and Outlook, along with other cloud services, for a monthly or annual fee.
Key term
Microsoft Defender
Microsoft Defender is a suite of security products that protects devices, data, and identities from cyber threats like malware, phishing, and unauthorized access.
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Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
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