Choosing between Microsoft 365 E3 and Microsoft 365 E5 isn’t just a productivity decision—it’s a security architecture decision. Both plans can support a modern, cloud-first workplace, but from a cybersecurity standpoint they sit at two different maturity levels:
- E3 is a strong foundation: core identity controls, device management, baseline endpoint protection, and core compliance.
- E5 is the “security-and-compliance-forward” suite: advanced identity protection, richer threat detection/response (XDR), significantly stronger email security, deeper endpoint detection & response (EDR), and advanced compliance/insider risk capabilities.
This guide is written for security-minded buyers—IT leaders, security teams, and compliance stakeholders—who want to understand what you actually gain in E5, what E3 already covers, and which plan is “better” based on your risk profile.
The fastest way to think about E3 vs E5
Choose Microsoft 365 E3 when…
You need a solid baseline and either:
- You already use best-of-breed security tools (email security gateway, third-party EDR, CASB, etc.), or
- Your risk and regulatory requirements don’t demand advanced detection/response and insider-risk controls, or
- You want to stay modular and selectively add security/compliance later (more on this below). Microsoft
Choose Microsoft 365 E5 when…
You want Microsoft to provide a broad, integrated security stack (identity + endpoint + email + cloud apps + compliance) and you care about:
- Risk-based identity protection + privileged access controls
- Stronger phishing protection for email/Teams/SharePoint/OneDrive
- Endpoint EDR + automated investigation/remediation
- Cloud app protection (CASB)
- Advanced audit retention + eDiscovery Premium
- Insider risk + communications compliance Microsoft Learn
At-a-glance security feature comparison (E3 vs E5)
The table below is based on Microsoft’s official plan comparison and Microsoft Learn service descriptions for Entra, Defender, and Purview.
| Security area | Microsoft 365 E3 | Microsoft 365 E5 | Why it matters (security impact) |
|---|---|---|---|
| Identity & access | Microsoft Entra ID Plan 1 (P1) | Microsoft Entra ID Plan 2 (P2) | P2 adds risk-based identity protection and Privileged Identity Management (PIM)—two major building blocks for Zero Trust and least privilege. |
| Conditional Access & MFA | Yes (via Entra ID P1) | Yes (via Entra ID P2) | Conditional Access + MFA are table-stakes for modern identity security; P2 expands into risk-driven automation. |
| Device management (MDM/MAM) | Microsoft Intune Plan 1 | Microsoft Intune Plan 1 | Both plans support strong endpoint management; E5’s bigger value is in detection/response, not basic management. |
| Endpoint protection | Defender for Endpoint Plan 1 | Defender for Endpoint Plan 2 | Plan 2 adds EDR, automated investigation/remediation, and richer threat/vulnerability capabilities—key for ransomware and hands-on-keyboard attacks. |
| Email baseline protection | Default protections / EOP (included with cloud mailboxes) | Same baseline included | Baseline anti-spam/anti-malware/anti-phishing is there, but E3 lacks the deeper “post-click” and advanced response tooling of Defender for Office 365 P2. |
| Advanced email & collaboration security | Not included (requires add-on) | Defender for Office 365 Plan 2 | This is often the biggest “security jump”: Safe Links/Safe Attachments + advanced hunting, automation, and investigation for phishing and collaboration threats. |
| Identity threat detection (hybrid ITDR) | Not included | Defender for Identity | If you have on-prem AD/hybrid identity, Defender for Identity materially improves detection for lateral movement and identity compromise. |
| Cloud app discovery | Included | Included | Useful for shadow IT visibility—but discovery alone is not the same as full CASB controls. |
| Full CASB / SaaS security | Not included | Defender for Cloud Apps | Adds controls to govern SaaS usage, detect risky behavior, and strengthen posture across cloud apps (including AI app usage scenarios). |
| Information protection (labels) | Purview Information Protection Plan 1 | Plan 2 | E5-level capabilities enable automatic labeling and other advanced protections; E3 supports core/manual labeling. |
| DLP for email/files | Included | Included | Both can enforce core DLP in Exchange/SharePoint/OneDrive; E5 expands DLP reach and investigative depth. |
| Endpoint DLP | Not included | Included (via E5-level licensing) | Endpoint DLP is a major upgrade when data exfiltration happens via copy-to-USB, printing, local files, browsers, etc. |
| Audit logs | Purview Audit (Standard) | Purview Audit (Premium) | Premium provides longer retention (e.g., 1 year) + more high-value events—critical for investigations and many compliance regimes. |
| eDiscovery | eDiscovery (Standard) | eDiscovery (Premium) | Premium adds custodian workflows, analytics, review sets, and deeper case management—important for legal and complex investigations. |
| Insider risk | Not included | Included (Insider Risk Management) | Enables detection/investigation of risky internal behavior patterns; valuable in high-trust/high-data environments. |
| Communication compliance | Not included | Included | Detects policy/regulatory violations in messages across channels—important for regulated industries and sensitive environments. |
What you’re paying for: the real security delta between E3 and E5
Microsoft positions E5 as “everything in E3, plus” advanced identity/security, XDR, enhanced phishing protection, and higher-end compliance.
As listed on Microsoft’s enterprise plan page (US pricing shown, annual commitment), E3 is $36 user/month and E5 is $57 user/month—but pricing varies by region/agreements and changes over time.
From a cybersecurity lens, the E5 premium usually maps to four practical upgrades:
- Identity: from “control access” to “detect identity risk + enforce least privilege.”
- Endpoints: from “prevent” to “detect/respond (EDR) + automate investigation.”
- Email/collaboration: from baseline filtering to deep phishing controls + SOC-ready tooling.
- Compliance: from core controls to investigation-grade audit + insider risk + communications compliance.
Let’s break that down in a way that helps you decide.
1) Identity security: Entra ID P1 (E3) vs Entra ID P2 (E5)
What E3 gives you (Entra ID P1)
E3 includes Microsoft Entra ID Plan 1, which is the foundation for common identity controls like Conditional Access and MFA. Microsoft describes Entra ID as delivering capabilities like single sign-on, multifactor authentication, and Conditional Access. Microsoft Learn
What E5 adds (Entra ID P2)
E5 includes Microsoft Entra ID Plan 2, which builds on P1 and explicitly adds:
- Microsoft Entra ID Protection (risk-based Conditional Access)
- Privileged Identity Management (PIM) for just-in-time admin access and privileged access governance
Why this matters
If your threat model includes account takeover, MFA fatigue attacks, token theft, password spraying, or privilege abuse, P2’s risk-driven protection and privileged access controls can be the difference between:
- A blocked risky sign-in automatically, versus
- A compromised session that persists until someone notices. Microsoft Learn
CyberDuo-style rule of thumb:
If you’re serious about Zero Trust, PIM is not “nice to have.” It’s a core control for enforcing least privilege in real operations.
Note: Microsoft also offers Microsoft Entra Suite and Entra ID Governance as add-ons for broader identity governance scenarios. Entra ID Governance is positioned as available for P1/P2 customers.
2) Endpoint security: Defender for Endpoint P1 (E3) vs P2 (E5)
E3: Defender for Endpoint Plan 1 (P1)
Microsoft’s Defender service description states that Defender for Endpoint P1 delivers core protection such as:
- Next-gen anti-malware
- Attack surface reduction rules
- Device control, firewall, network protection, application control, and more
…and that P1 is included as part of Microsoft 365 E3.
E5: Defender for Endpoint Plan 2 (P2)
Defender for Endpoint P2 includes everything in P1, plus critical SOC-grade capabilities such as:
- Endpoint detection and response (EDR)
- Automated investigation and remediation
- Threat & vulnerability management
- Threat analytics / intelligence and more
…and P2 is included as part of Microsoft 365 E5.
Why this matters
If you’re worried about ransomware, hands-on-keyboard intrusions, or “living off the land” behavior that evades prevention, you need EDR + automated response. That’s the operational leap from “we hope we blocked it” to “we can detect, investigate, and contain it.”
3) Email & collaboration security: baseline protections vs Defender for Office 365 Plan 2
Baseline (E3 and E5): default email protections / EOP
Microsoft states that default email protections are included in organizations with cloud mailboxes and protect against spam, malware, phishing, and other email threats.
Additionally, Microsoft’s Exchange Online Protection (EOP) service description explains that EOP protects Exchange Online cloud-hosted mailboxes by default.
The real E5 upgrade: Microsoft Defender for Office 365 Plan 2
Microsoft’s Defender for Office 365 service description is clear:
- Defender for Office 365 comes in Plan 1 and Plan 2
- Plan 2 is included in enterprise-level subscriptions such as Microsoft 365 E5
Plan 2 includes Plan 1 capabilities (Safe Links, Safe Attachments, etc.) and adds “AST and SOC capabilities” like advanced threat hunting, automation, and investigation tools.
Why this matters
Most organizations don’t fail because they had no spam filtering. They fail because:
- A user clicks a weaponized link,
- Credentials/token gets captured,
- The attacker pivots internally (often fast),
- And response is too slow.
Defender for Office 365 Plan 2 is designed for organizations that need deeper visibility and response for those cases. Microsoft Learn
4) Cloud app security: discovery (E3) vs CASB-grade controls (E5)
Cloud Apps Discovery (E3 and E5)
Microsoft’s enterprise plan comparison includes Cloud Apps Discovery across plans—useful for visibility into shadow IT.
Full SaaS protection (E5): Microsoft Defender for Cloud Apps
Microsoft’s Defender service description states Defender for Cloud Apps is available as a standalone license and is also available as part of:
- Microsoft 365 E5 (among other plans)
Why this matters
Discovery tells you what’s happening. A CASB helps you control and respond—governing risky SaaS behavior, enforcing policies, and detecting SaaS-based attack techniques.
If your environment relies heavily on SaaS (which most do), and data routinely flows through non-Microsoft apps, this is one of the strongest arguments for E5.
5) Hybrid identity threat detection (ITDR): Defender for Identity (E5)
If you have on-prem Active Directory (or hybrid identity), Microsoft Defender for Identity is often a major detection win.
Microsoft’s Defender service description states:
- Defender for Identity is included in Microsoft 365 E5
Microsoft also frames E5’s added value as including “hybrid identity protection (ITDR).”
Why this matters
Many serious breaches still involve:
- Credential theft,
- AD reconnaissance,
- Privilege escalation and lateral movement.
Defender for Identity focuses on those hybrid identity attack paths. Microsoft Learn
6) Compliance & investigation: where E5 becomes “research-grade” operationally
This is the part many buyers underestimate: security operations and investigations live or die on audit data, retention, and workflow.
Audit: Standard (E3) vs Premium (E5)
Microsoft’s Purview service description explains:
- Audit (Standard) supports logging and searching audited activities
- Audit (Premium) provides one-year retention of audit logs for user/admin activities, custom retention policies, and additional investigation-critical events
…and the table shows Audit (Premium): Yes for E5, No for E3.
Security impact: If you discover an intrusion late (common), short retention can block root-cause analysis.
eDiscovery: Standard (E3) vs Premium (E5)
Microsoft’s eDiscovery documentation states:
- eDiscovery (Standard) supports case basics (identify, hold, export)
- If you have Microsoft 365 E5, you can use eDiscovery (Premium) for custodian management and deeper end-to-end workflows.
Security impact: Premium eDiscovery can matter for incident investigations, HR/legal holds, and regulated response requirements.
Insider Risk Management (E5)
Purview service description states Insider Risk Management helps detect/investigate risky activities and can escalate cases to eDiscovery (Premium).
Security impact: Insider risk isn’t only “malicious insiders”—it’s also negligent behavior, data mishandling, and risky sequences of actions that traditional DLP may miss.
Communication Compliance (E5)
Purview service description explains Communication Compliance evaluates messages (including across Microsoft and some third-party apps) for policy/regulatory violations.
Security impact: For regulated industries, this can be a requirement—not an option.
7) Data protection: DLP and information protection differences that matter
DLP for email and files (E3 and E5)
Microsoft’s security suites guidance describes E3 as providing core Purview DLP for Exchange Online, SharePoint Online, and OneDrive for Business.
Endpoint DLP (E5-level)
Purview service description explicitly states Endpoint DLP extends DLP to sensitive items stored on Windows/macOS devices and indicates it’s available under E5-level licensing.
Security impact: This is the difference between “we control sensitive data in Microsoft 365 locations” and “we also control sensitive data once it hits endpoints.”
Sensitivity labels: manual vs automatic labeling
Purview service description shows:
- Manual sensitivity labeling is broadly available (including E3-level plans)
- Client and service-side automatic sensitivity labeling is tied to E5-level licensing
Security impact: Automatic labeling reduces reliance on perfect user behavior, which is a big deal in real-world security.
Which plan is “better” depends on your threat model
Here are practical profiles CyberDuo typically sees.
Microsoft 365 E3 is usually the better fit if…
- You’re a small-to-mid enterprise with a strong baseline security program and you already pay for:
- A dedicated email security platform, and/or
- A third‑party EDR, and/or
- A CASB/SaaS security solution
- You want Conditional Access + MFA + device management and solid foundational controls
- Your compliance needs are “core” rather than investigation-heavy (long audit retention, insider risk workflows, advanced eDiscovery)
E3 also supports a modular strategy: Microsoft explicitly frames E3 as a strong base with add-on options like Defender Suite and Purview Suite.
Microsoft 365 E5 is usually the better fit if…
- You want a Microsoft-first security stack with integrated capabilities across identity, endpoint, email, and cloud apps
- You need EDR + automated response (Defender for Endpoint P2)
- Phishing and collaboration threats are a top risk and you want Defender for Office 365 Plan 2 baked in Microsoft Learn
- You need deeper compliance and investigation capabilities:
- Audit Premium (retention + higher-value events)
- eDiscovery Premium workflows Microsoft Learn
- Insider risk + communication compliance
- You have hybrid identity (on-prem AD) and want ITDR via Defender for Identity
A simple decision checklist (use this in stakeholder meetings)
If you answer “yes” to 2+ of the following, E5 tends to be the better default:
- Do we need risk-based identity protection and privileged access controls (PIM) built-in?
- Do we want EDR + automated investigation/remediation as part of licensing?
- Is phishing our #1 threat, and do we want advanced protection and response for email/Teams/SharePoint/OneDrive?
- Do we need Audit Premium retention and investigation events?
- Do we anticipate legal/compliance investigations where eDiscovery Premium would matter?
- Do we have insider risk or communications monitoring requirements?
- Do we need CASB-grade SaaS controls (not just discovery)?
If most answers are “no,” E3 is often sufficient—especially when paired with a mature third‑party stack.
Security-focused alternative: E3 + targeted add-ons (often the sweet spot)
A lot of organizations don’t actually need everything in E5—but they do need the security delta.
Microsoft explicitly positions add-ons like:
- Microsoft Defender Suite (requires Microsoft 365 E3 or equivalent)
- Microsoft Purview Suite (requires Microsoft 365 E3 or equivalent)
Microsoft’s own guidance even calls out that E3 provides a strong foundation and you can “selectively add advanced capabilities” based on need.
From a cyber-centric budgeting lens, this approach can be compelling when:
- You want EDR + advanced email security + CASB + PIM,
- But don’t need some of the non-security E5 items (e.g., telephony/analytics components).
Implementation reality check (important, and often missed)
Buying the license isn’t the same as being protected.
Many of the E5 advantages only show up when you:
- Configure identity policies (Conditional Access, risk policies, privileged workflows)
- Onboard endpoints correctly (EDR visibility, tamper protection, automated response)
- Tune email protections and user reporting workflows
- Set up Purview policies, roles, and investigation processes
Also note Microsoft’s “tenant-level service” model: some security services are enabled at the tenant level, and appropriate licensing is still required for users who benefit.
Bottom line: which plan is better?
- E3 is better when your priority is strong fundamentals + cost efficiency + flexibility (especially if you already own or prefer non-Microsoft security tooling).
- E5 is better when you want Microsoft’s strongest built-in security and compliance stack—especially for organizations facing real-world phishing pressure, endpoint risk, hybrid identity exposure, and investigation/compliance requirements.