Knowledge Base · Microsoft 365 Licensing

Managing SharePoint Storage Growth Under Microsoft 365 E5: Archiving, OneDrive, and Legal Hold

For a Microsoft 365 E5 tenant of roughly 250 users running into SharePoint storage limits, four remediation paths exist (deleting content, buying additional standard storage, enabling Microsoft 365 Archive, or licensing more users), and the cheapest of them, Archive, does not actually shrink the tenant's storage footprint; it only changes the billing rate applied to the excess. OneDrive accrues against the same tenant pool that SharePoint draws from, but each user's individual OneDrive allocation sits outside that pool, and data moved into Archive keeps its full searchability, eDiscovery reach, and legal hold status without needing to leave SharePoint at all.

How the SharePoint storage pool is built and where OneDrive fits

Every commercial Microsoft 365 tenant receives a SharePoint storage pool built from two components: a flat 1 TB (1,024 GB) base per tenant, plus a per-license accrual that varies by plan. For Microsoft 365 Enterprise plans including E3 and E5, the accrual is 10 GB per licensed user. At 250 E5 users, the pool works out to:

1,024 GB (tenant base) + 250 × 10 GB = 1,024 GB + 2,500 GB = 3,524 GB (≈3.44 TB)

That figure excludes each user's individual OneDrive allocation. The SharePoint Limits documentation is explicit that the tenant pool total is calculated "not including the OneDrive created for each licensed user". OneDrive for work or school runs on its own separate per-user quota, for Microsoft 365 E5, 1 TB per user, extendable to 5 TB, and consumption inside a user's OneDrive does not draw down the shared SharePoint pool. The two converge only when OneDrive content is deliberately copied or synced into a SharePoint site library, at which point it becomes SharePoint storage and is counted there instead. A tenant's 250 OneDrive allocations do not eat into the SharePoint ceiling, provided that content actually lives in personal OneDrive rather than in shared site libraries.

Mixed license environments complicate the per-seat accrual. Where other license types are present:

• Frontline F1/F3 licenses contribute nothing per seat beyond the shared 1 TB base.
• Power Platform licenses (Power Apps, Power Automate) run on Dataverse, a separate store, so they do not add to the SharePoint pool.
• Dynamics 365 licenses are inconsistently documented here. Microsoft positions them as primarily Dataverse storage rather than SharePoint, but several Dynamics apps have been observed to add roughly 10 GB per license to the SharePoint tenant pool in live tenants. Treat the admin centre storage report as the authority, not the plan tables.
• Visio Plan 2 and Project Plan 3/5 are documented as contributing approximately 10 GB per license to the SharePoint tenant pool, though that figure sits in some tension with the same passage's statement that these plans don't significantly increase tenant storage like E3/E5 licenses.

Tenants running a material number of Visio, Project or Dynamics 365 seats should treat the SharePoint admin centre's storage report, not the plan comparison tables, as the authority for what has actually been provisioned. Per-SKU contribution figures in this category are inconsistently documented. Verify the tenant's own numbers directly rather than assuming them from list pricing, and where uncertainty remains, a Microsoft licensing specialist can confirm what the tenant's specific SKU mix is generating.

Why archiving does not affect total capacity, only the charged rate

Microsoft 365 Archive moves inactive SharePoint sites or files into a colder storage tier, but the underlying bytes never leave the tenant. The pricing model is direct on this point: the archive meter is charged only when archived storage plus active storage in SharePoint exceeds the included or licensed allocated SharePoint storage capacity limit of the tenant. Archiving reclassifies data from the active bucket to the archive bucket. It does not delete it, compress it, or otherwise remove it from the combined total against which the quota is measured.

This creates a specific trap for a tenant already over quota. Archiving the excess does not make the overage disappear, because combined storage, active plus archived, is unchanged. What changes is only the rate charged on that excess. Standard, active storage over quota bills at $0.20 per GB per month, while archived storage over quota bills at $0.05 per GB per month. That is a four-fold reduction in the ongoing cost of carrying the excess, but not a path to zero cost.

Suppose 250 users have grown active SharePoint consumption to 4,000 GB against the 3,524 GB pool calculated above, an overage of 476 GB:

• Left as standard storage, that overage bills at 476 × $0.20 = $95.20/month.
• If that same 476 GB is identified as inactive and archived, combined storage remains 4,000 GB; the 476 GB has moved buckets, not disappeared, so the overage is still billed, now at the archive rate: 476 × $0.05 = $23.80/month, a saving of $71.40/month against carrying it as standard storage.
• The only way to avoid the charge altogether is to bring combined storage back under 3,524 GB, which means deleting content, not archiving it.

These are list rates. Actual billed amounts depend on the tenant's pay-as-you-go configuration and current pricing, and should be confirmed against the live Pay-as-you-go pricing pages before being used to model a budget.

One point in the Archive FAQ documentation warrants direct attention because it can mislead. The FAQ states elsewhere that a tenant is "considered over quota only if...active storage usage exceeds" the limit, which read in isolation implies archived data is quota-exempt. That statement conflicts with the governing pricing-model language quoted above, which counts archived plus active storage together against the quota. The pricing model is the operative billing rule and should be treated as authoritative over the FAQ's looser phrasing. A tenant that archives its way to active storage under quota while combined storage remains over quota should expect to still see archive-rate charges on the excess, not a clean bill.

Storage remediation paths compared

Four levers exist for closing a SharePoint storage gap. Each behaves differently on cost and mechanics.

Deleting or trimming content is the only lever that reduces the tenant's actual combined storage footprint. Recycle bin cleanup, version-history trimming, and removing genuinely obsolete sites all reduce the number that the quota is tested against, and carry no ongoing storage charge once removed. This is the only option with zero marginal monthly cost. It requires content to be genuinely disposable, which legal hold and retention obligations frequently prevent.

Purchasing additional standard storage raises the tenant's licensed quota directly through one of two routes:

1. Office 365 Extra File Storage, sold in 1 GB increments, though this add-on is not purchasable directly from Microsoft under Volume Licensing or CSP channels and must be arranged through a reseller or partner.
2. The newer pay-as-you-go Microsoft 365 SharePoint Storage service, which as of mid-2026 is in public preview for commercial tenants and bills only the portion of usage above quota rather than requiring a fixed pack purchase.

Both routes bill active storage at the standard rate. Neither is cheaper than archiving for data that is genuinely inactive.

Licensing more E5 (or lower-edition) seats is rarely the right lever purely for storage. Each additional 10 GB of pool capacity comes bundled with a full user subscription, so this path only makes sense where the organisation is separately adding users for functional reasons and the storage uplift is incidental. Buying storage add-ons or enabling Archive is materially cheaper per gigabyte than expanding the licensed population solely to grow the pool.

The right choice depends on the nature of the overage. For aging or inactive content, old project sites, superseded document sets, dormant team sites; Archive is the cheapest paid option because of the $0.05 versus $0.20 rate differential. For overage that is still active and being edited, no lever except deletion or a straight storage or license purchase applies: Archive is designed for content that will not continue to change.

Searchability, eDiscovery, and legal hold on archived content

Archiving does not remove content from the compliance perimeter. Microsoft's own FAQ confirms that content in legal hold can be archived, and that nearly all Microsoft Purview features continue to operate as normal against archived material. Purview eDiscovery search, retention policies, and holds all continue to reach archived sites and files exactly as they reach active ones. The reason is architectural: archiving is a storage-tier reclassification inside SharePoint, not a migration to a separate system.

Content moved to Azure Blob storage or a third-party archive is different in kind. That approach typically requires standing up a parallel security and compliance boundary. Microsoft's comparison of the two approaches notes that keeping data in place under Microsoft 365 Archive means security and compliance tooling operates seamlessly, including eDiscovery, retention policies, and more. That seamlessness is the practical case for choosing Archive over exporting data out of the Microsoft 365 environment altogether.

Search behaviour differs by audience. Admin-level and Purview-based search against archived sites operate normally, and end-user search is supported for archived content. Content under an active legal hold cannot be deleted while the hold remains in force, archived or not. What enables deletion is removing the hold or allowing the retention policy to expire; never the act of archiving itself. One functional exclusion applies regardless of compliance status: archived content is not used to ground Microsoft Copilot responses. Any workflow depending on Copilot surfacing older material will lose visibility into it once archived, even though the same content remains fully discoverable through Purview search and eDiscovery.

Two mechanical constraints govern the archive/reactivate cycle and matter for planning around legal holds that may later be lifted:

• Reactivation of archived SharePoint content is free of charge as of March 2025 and completes within up to 24 hours.
• Once reactivated, content cannot be re-archived for a further 120 days.

A tenant using Archive as an active cost-management lever should therefore expect that content pulled back for review cannot be immediately re-archived. That constraint directly affects the timing of repeated legal-hold review cycles against archived data.

Site-level and file-level archiving also carry functional gaps that warrant attention before enabling this broadly across a 250-user estate. The gaps fall into three categories:

• Application support. Older Office desktop clients not updated since March 2026, the OneDrive sync client on macOS or older Windows builds, and mobile apps for Teams, OneDrive, and SharePoint do not yet support opening archived files cleanly.
• Content types that cannot be archived. OneNote files, SharePoint pages, and SharePoint agents are excluded entirely.
• Teams-connected sites. Archiving the primary site does not extend to private or shared channel sites. Those must be handled separately.

None of these gaps affect the underlying legal hold or discoverability position. They affect end-user accessibility and should be communicated to site owners before any broad rollout.

Pricing Note: Cost analysis uses published Microsoft list prices. Actual costs may differ based on enterprise agreements, volume discounts, or licensing channel. For precise analysis using negotiated pricing, consult price sheets or a LicenseDesk Expert.

About This Guidance: LicenseDesk provides licensing guidance based on publicly available Microsoft documentation and deep domain expertise. This is not legal advice. For complex licensing decisions or tailored analysis using specific agreement terms, consult with a qualified legal professional, Microsoft licensing specialist, or a LicenseDesk Expert.

Program: Enterprise Agreement (EA/EAS/SCE). Analysis may differ under other programs.

Analysis Completed: 20 September 2026. Microsoft Product Terms and the linked source pages change over time; citations and quoted terms are effective as at this date.

References

• SharePoint Limits (storage & service limits)
• SharePoint Limits (storage & service limits) > Limits by plan
• OneDrive for Business Service Description > Storage limits
• SharePoint Limits (storage & service limits) > Service limits for all plans
• Microsoft 365 Archive overview
• Microsoft 365 Archive pricing
• Pricing model for Microsoft 365 Archive - Microsoft 365 Archive
• Microsoft 365 Archive FAQ
• Plan for SharePoint storage > Optimize storage usage
• Buy more OneDrive and SharePoint storage capacity