Microsoft 365 Archive Takes On Unlicensed OneDrive Sites

What are we to make of the announcement in message center notification MC836942 (26 July 2024) that Microsoft plans to charge for storing unlicensed OneDrive for Business sites through Microsoft 365 Archive?

Slipped into the newsfeed late on a Friday afternoon (the recommended way to share bad news), Microsoft’s announcement is both unexpected and entirely predictable. It’s unexpected because Microsoft hadn’t communicated their intention of doing this during high-profile conference keynotes (perhaps because of the bad news element). It’s predictable because Microsoft hadn’t the tool to handle unlicensed OneDrive sites until Microsoft 365 Archive (Figure 1) came along. Archiving unlicensed sites makes a ton of sense.

An unlicensed OneDrive site can exist for several reasons. The most common is that the site comes within the scope of a retention policy (or items within the site have retention labels). In this situation, OneDrive must retain the sites even after the retention period configured for deleted OneDrive accounts (by default 30 days) elapses. It’s also possible that the owner’s account no longer has a OneDrive license.

The simplest reading for this story is that Microsoft wants organizations to clean up (remove) unlicensed OneDrive sites. It could also be a step to help organizations manage the removal of OneDrive sites belonging to ex-employees better. These reasons are valid, but as often the case with Microsoft, some other influences might also contribute to the decision.

Helping Copilot for Microsoft 365

Copilot for Microsoft 365 might be another factor in this story. By their very nature, unlicensed OneDrive sites are unmanaged and prone to contain obsolete and unwanted information. Keeping the obsolete sites online and available for Copilot to access increases the chances that Copilot will reuse some of the material contained in the sites in its responses to user prompts. That’s obviously a bad thing.

As I noted on May 20, archiving obsolete material can help organizations deal with the digital debris found in obsolete SharePoint Online sites. The same applies to obsolete OneDrive sites.

Payment for Archived OneDrive Sites

Like SharePoint Online sites managed by Microsoft 365 Archive, Microsoft will charge to archive unlicensed OneDrive sites. The charge is minimal ($0.05/GB per month) with a $0.60/GB fee to reactivate an archived site. Like other Microsoft 365 Archive operations, payments must be made through an Azure subscription.

The interesting thing is that reactivation lasts 30 days after which the site becomes archived again. It seems like this is a strong hint for someone to use the time to extract any required information from the reactivated OneDrive site before removing the account.

One thing that’s unclear is what happens if you don’t set up an Azure subscription. From the text, it seems like OneDrive will automatically move the unlicensed sites into Microsoft 365 Archive and the sites will remain there in an inaccessible (can’t be reactivated) state until the organization creates an Azure subscription and links the subscription to Microsoft 365 Archive. However, even when an Azure subscription is not present, archived sites remain indexed and available to Purview compliance solutions like eDiscovery, so administrators can still run content searches to find and export content from the archived sites.

I don’t think archiving unlicensed OneDrive sites will be a huge revenue generator for Microsoft. But what it might do is bring Microsoft 365 Archive to the attention of organizations that have not used it before who might then start to use the product to archive obsolete SharePoint Online sites. The big attraction here is that moving SharePoint Online sites to Microsoft 365 Archive frees up expensive SharePoint storage.

Next Steps

To help tenant administrators understand how many unlicensed OneDrive sites are present, Microsoft plans to introduce a new report for OneDrive in the SharePoint Online admin center. The new report should be available in all tenants worldwide by August 16, 2024. The report notes why OneDrive accounts are unlicensed. Tenant administrators can’t do much about sites required for retention, but they can remove the other sites.

January 27, 2025, marks the point when Microsoft moves unlicensed OneDrive sites into Microsoft 365 Archive and Azure subscriptions are required to reactivate sites. The six-month period before automatic archiving of OneDrive sites in an unlicensed state for 90 days begins should be enough time to discuss and decide how to accommodate this new aspect of OneDrive management.

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SharePoint Online Storage, OneDrive for Business, and SharePoint Embedded

Given the vast numbers of files created in SharePoint Online daily (Jeff Teper cited 2.3 billion in December 2023), it must be the case that the storage quotas assigned to tenants are being consumed at an alarming rate. However, I suspect that a large proportion of the files end up in OneDrive for Business and don’t impact storage so much.

These thoughts came to mind when I perused the OneDrive files report for my account to discover just how many applications now store their data in OneDrive for Business. Microsoft has truly made OneDrive for Business the personal storage system for Microsoft 365 holding anything from Office documents to Teams meeting recordings and transcripts to Whiteboards.

But coming back to storage, I often hear confusion in how Microsoft charges for SharePoint storage. Let’s review the current situation.

Three Major Storage Partitions

SharePoint Online covers three major storage partitions:

• SharePoint Online sites.
• SharePoint Embedded applications, like Loop and Designer.
• OneDrive for Business accounts.

The SharePoint Online storage quota assigned to a tenant (1 TB plus 10 GB per licensed user) covers only the first category. The storage consumed by SharePoint sites is well understood because it’s highlighted in the SharePoint admin center and is easy to report with PowerShell. A Graph usage API is also available for SharePoint Online, but currently suffers from a longstanding data issue that prevents site URLs from being shown.

Understanding the storage consumption of SharePoint Embedded applications is less clear. These applications use file storage containers (like document libraries). First-party applications like Loop charge their storage against the tenant storage quota for SharePoint Online. If the applications support SharePoint Online PowerShell or another API to report storage, it’s possible to generate a report about the storage consumed by an app.

Third-party apps built on top of SharePoint Embedded are billed separately through an Azure subscription using a pay-as-you-go metered model. Charges are accrued for API calls and the storage consumed.

OneDrive for Business Storage

The OneDrive service description says that “the default storage space for each user’s OneDrive is 1 TB. Depending on your plan and the number of licensed users, you can increase this storage up to 5 TB.” The default storage assigned to OneDrive for Business accounts is defined through the Settings section in the SharePoint Online admin center (Figure 1).

In a Microsoft 365 enterprise tenant, the storage for OneDrive can be increased to more than 5 TB. The documentation states: “Before requesting an increase you need at least five licenses that include OneDrive Plan 2, you must assign at least one license to a user, and a single user must have already filled 90% of their 5 TB storage.”

The problem here is that Microsoft stopped offering OneDrive Plan 2 in August 2023, apparently to stop offering the “unlimited storage capacity” that was once available for licenses like Office 365 E3 and E5. No official notice was given, and the plan slipped away. Office 365 and Microsoft 365 licenses no longer include a OneDrive service plan.

In any case, if you want to keep an eye on OneDrive storage consumption, it’s easy to generate a report with PowerShell.

Microsoft 365 Archive

Microsoft 365 Archive is a solution that moves SharePoint Online sites from “hot” storage (immediate access) to “cold” storage. The idea is that organizations can keep data online in a form that’s available for eDiscovery but not for user access. Archiving sites also helps to remove information from consumption by AI solutions like Copilot for Microsoft 365 to stop the results generated by AI being affected by old and possibly obsolete information.

Organizations pay for the storage consumed by archived sites through an Azure subscription. The cost per GB is much less than having to pay for regular SharePoint storage and Microsoft doesn’t charge for archive storage if the tenant has regular storage available. If the tenant runs out of regular storage, Microsoft 365 archive switches to its pay-as-you-go model.

Retention Storage

Microsoft 365 Retention Policies and Retention Labels can dictate how long content stored in SharePoint Online (including OneDrive for Business and SharePoint Embedded) is kept before it can be deleted. If files coming within the scope of retention are deleted by users, SharePoint Online keeps them in the site’s preservation hold library. Depending on the settings of retention policies and labels, it’s possible that preservation hold libraries can consume a large amount of storage (Figure 2).

Retained content can be easy to overlook. Microsoft plans to introduce intelligent versioning (originally planned for November 2023), which should help.

Summarizing SharePoint Online Storage

In summary, traditional SharePoint site storage is only one of the ways that tenant storage quota can be consumed. OneDrive for Business stores more data than ever before, but Microsoft has renounced unlimited storage. New applications and retention can consume storage unexpectedly, and Microsoft 365 Archive can help by moving data to cheaper cold storage. What could be easier to understand?

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