Microsoft 365 Backup Licensing: What’s Native, What Needs Third-Party, and What It Actually Costs

Microsoft 365 Backup is a paid add-on that Microsoft launched in general availability in 2024. Before this product existed, the standard Microsoft position on M365 backup was: "Microsoft takes care of the infrastructure; you are responsible for your data." That position led to a flourishing third-party backup market — Veeam, Acronis, Dropsuite, AvePoint, Barracuda — all building M365 backup products that filled the gap Microsoft left. Now Microsoft has entered the market with its own product. This creates a genuine evaluation decision for enterprises: does Microsoft 365 Backup replace your existing third-party backup, or is a third-party tool still the better commercial and functional choice?

The answer depends on your organisation's specific requirements. This guide covers what native M365 restore capabilities exist (without paying extra), what the M365 Backup add-on provides and costs, and how to make the Microsoft vs third-party decision with full commercial transparency.

What M365 Provides Natively Without Backup

Before evaluating M365 Backup or third-party tools, you need to understand what Microsoft already includes with every M365 plan. These native capabilities address many common data recovery scenarios:

OneDrive and SharePoint Version History

M365 E3 includes 500 versions per file in OneDrive and SharePoint by default (configurable up to unlimited versions with an admin policy). If a user accidentally overwrites a file, restores are self-service from the version history panel. This addresses the most common data recovery scenario (user error, accidental deletion) without any additional backup product.

OneDrive Recycle Bin

Deleted files in OneDrive go to the First Stage Recycle Bin (user-visible) for 93 days by default. After that, they move to the Second Stage Recycle Bin (admin-visible) for a further period. Users can self-restore from First Stage; admins can restore from Second Stage. For files deleted by users or via accidental mass-deletion, the Recycle Bin is effective within its retention window.

SharePoint Recycle Bin

SharePoint has the same two-stage recycle bin model. Site collection admins can restore items from either stage. SharePoint also has a Site Restore feature (in preview / GA for M365 E3+ tenants) that allows restoring an entire site to a previous point in time — functioning similarly to a snapshot backup for SharePoint sites.

Exchange Online Deleted Items and Litigation Hold

Email deleted from Exchange Online goes through Deleted Items → Recoverable Items folder, with a default 30-day recovery window. With Litigation Hold or In-Place Hold enabled, email is preserved in the Recoverable Items folder indefinitely — functionally giving you unlimited email recovery as long as the hold is in place.

Microsoft 365 Audit Logs

Audit logs capture who deleted what and when, which is important for forensic purposes even if the data itself cannot be recovered beyond the recycle bin window. Audit logs are retained for 90 days in M365 E3; Audit Premium (E5 or E5 Compliance) extends this to 1 year or longer.

What Native M365 Does NOT Cover

The gaps in Microsoft's native capabilities are where backup products — both M365 Backup and third-party tools — provide genuine value:

Ransomware recovery beyond version history: If a ransomware attacker gains admin credentials and deliberately destroys version history and empties recycle bins — which sophisticated ransomware operations do — native M365 restore capabilities are compromised. A separate backup copy in an isolated environment (whether M365 Backup's segregated storage or a third-party tool's external storage) survives this scenario.

Recovery beyond the recycle bin window: The default 93-day OneDrive recycle bin window and Exchange Online's 30-day deleted items window mean that data deleted more than 3 months ago cannot be recovered natively unless a Litigation Hold or retention policy was in place at the time of deletion. Backup products extend the recovery window significantly.

Point-in-time restore for whole mailboxes: Native M365 allows restoring individual items from the Recoverable Items folder, but it does not support restoring a mailbox to a specific point in time in a clean operation. Third-party tools and M365 Backup support point-in-time mailbox restore — recovering the mailbox state to a specific date — which is essential for legal and compliance scenarios.

Teams chat messages: Teams chat messages (as opposed to Teams channel files stored in SharePoint) have limited native restore capabilities. Microsoft's native tools do not provide point-in-time restore of Teams chat conversation history. Third-party backup tools that specifically support Teams chat are the primary option here — and as of 2026, M365 Backup's Teams chat coverage is limited compared to third-party alternatives.

Exchange Online mailboxes for leavers: When a user leaves an organisation and the licence is removed, the mailbox is retained for 30 days before deletion (or longer with retention holds). Without a backup, recovering a former employee's mailbox data more than 30 days after licence removal requires a Litigation Hold to have been in place. Backup tools address this more cleanly.

Microsoft 365 Backup: What It Is and What It Costs

Microsoft 365 Backup is a native Microsoft product, managed through the Microsoft 365 admin center and Purview, that provides snapshot-based backup for SharePoint, OneDrive, and Exchange Online. It entered general availability in late 2024.

Pricing Model

M365 Backup uses a consumption-based pricing model rather than a per-user licence:

£0.07 per GB per month for OneDrive and SharePoint backup storage.

£0.07 per GB per month for Exchange Online backup storage.

The cost depends entirely on how much data you have. For a reference organisation with 1,000 users, M365 E3 includes 1 TB of OneDrive per user (so up to 1 PB total, though actual usage is far lower). A realistic 1,000-user organisation might have 5–10 TB of active OneDrive/SharePoint data and 500 GB–1 TB of Exchange data.

At 6 TB total data, the monthly M365 Backup cost is approximately £420/month (£5,040/year). This assumes your backup set is roughly the same size as your live data. Microsoft 365 Backup keeps up to 180 days of restore points, which means actual backup storage can be larger than live data.

What M365 Backup Covers

M365 Backup vs Third-Party: Key Differences

Microsoft 365 Backup stores backup data within Microsoft's infrastructure (in an isolated partition of the M365 tenant, not in the live data environment). This is a significant improvement over native recycle bins but a meaningful distinction from third-party tools that store data in a completely separate infrastructure (Azure, AWS, or on-premises). In a scenario where a sophisticated attacker compromises your entire Microsoft tenant (including backup storage partitions), a third-party backup that stores data in a separate cloud environment provides greater isolation.

M365 Backup vs Third-Party Tools: The Commercial Comparison

When Microsoft 365 Backup Is the Right Choice

M365 Backup makes most commercial sense when your primary use cases are accidental deletion recovery and ransomware protection for SharePoint and Exchange, your organisation does not have a Teams chat backup requirement, you prefer native Microsoft tooling over third-party management consoles, your data volume is manageable (£0.07/GB/month is competitive at moderate data volumes), and you have 180 days of retention as your target recovery window.

For mid-market organisations (500–2,000 users) without complex backup requirements, M365 Backup is likely the simplest and most cost-effective solution. The native integration with the M365 admin center reduces operational overhead, and the 180-day retention window covers most practical recovery scenarios outside regulatory long-term retention (which is handled by Purview retention policies anyway).

When Third-Party Backup Is Still the Better Choice

Third-party backup tools remain the better choice when your organisation requires backup data in a completely separate infrastructure from Microsoft (critical for the highest-security or most heavily regulated environments); you need Teams chat message backup (not covered by M365 Backup as of 2026); your recovery requirements include long-term retention beyond 180 days at a lower cost point; or you need highly granular item-level restore for compliance or legal purposes.

Third-party pricing is also potentially more favourable at scale. A 5,000-user organisation with 30 TB of M365 data would pay approximately £2,100/month with M365 Backup. Veeam or Acronis at flat per-user pricing (£2–£4/user/month) would cost £10,000–£20,000/month for the same user count — which appears more expensive, but includes features M365 Backup does not cover (Teams chat, longer retention, better granularity). The apples-to-apples comparison requires costing M365 Backup on data volume and third-party tools on user count, then adjusting for feature differences.

M365 Backup and the EA Renewal

If your organisation is evaluating M365 Backup as part of an EA renewal, treat it as a separate commercial decision from your M365 SKU mix. M365 Backup is priced on consumption, not per-user — which means it does not belong in your per-user M365 licence count discussion. However, it can be included in an EA as a committed spend item, which may give you access to better rates than standard consumption pricing if your account team can apply EA-level discounts.

The more important EA renewal consideration is whether M365 Backup replaces an existing third-party backup contract. If you currently pay for Veeam or Acronis M365 backup, the EA renewal is the right moment to formally evaluate the switch to M365 Backup. Cost the existing contract against M365 Backup on actual data volumes, assess the feature gaps (Teams chat, retention, granularity), and make a documented decision. If M365 Backup is sufficient for your requirements, switching can reduce annual spend by 20–40% compared to third-party per-user pricing, while consolidating vendors. If third-party features remain essential, use M365 Backup's existence to renegotiate the third-party renewal price.

Frequently Asked Questions

Is Microsoft 365 Backup included in M365 E3 or E5?

No. Microsoft 365 Backup is a paid add-on not included in any M365 plan. It is priced at £0.07/GB/month for backup storage. M365 E3 and E5 include native recycle bin and version history features but not the M365 Backup product.

Does M365 Backup protect against ransomware?

Yes, but with a caveat. M365 Backup stores data in an isolated partition within Microsoft's infrastructure. A ransomware attack that compromises your M365 admin credentials could potentially access this partition. For the highest-security ransomware protection, a completely isolated third-party backup in a separate infrastructure is more resilient. For most organisations, M365 Backup provides meaningful ransomware protection improvement over no backup at all.

How long does M365 Backup retain data?

Microsoft 365 Backup retains restore points for up to 180 days. This is not configurable to a longer period within M365 Backup. For longer retention, use Purview retention policies (which are separate from M365 Backup and work differently) or a third-party backup solution.

Can M365 Backup restore individual emails or files?

At launch, M365 Backup supported site-level and mailbox-level restores. Granular item-level restore (individual file, individual email) has been added over subsequent updates but is less mature than third-party tools. For highly granular recovery requirements, evaluate the current state of M365 Backup's restore capabilities against your requirements before purchasing.

Does M365 Backup cover Teams chat messages?

As of 2026, M365 Backup covers Teams channel files (stored in SharePoint) but not Teams chat messages (one-to-one and group chat conversations stored in Exchange Online infrastructure). For Teams chat backup, third-party tools that specifically support Teams chat data are required.