Power Platform Licensing Negotiation: Right-Sizing & Savings in 2025
Microsoft’s Power Platform offers tremendous value through Power Apps, Power Automate, and Power BI; however, its licensing is complex and costly if not aligned with actual needs.
In 2025, enterprises must take a strategic approach to right-size their Power Platform licensing and negotiate effectively with Microsoft to avoid overspending. For a full overview of negotiations, read our Ultimate Guide to Microsoft Contract Negotiations.
This guide provides CIOs and procurement leaders a clear roadmap to optimize license models (e.g. Power Apps per app vs. per user, Power Automate per user vs. per flow), control the costs of flows and add-ons, and leverage bundling options with Microsoft 365 wisely.
The goal is to reduce Power Platform spend while still empowering your organization with these tools. Let’s explore each aspect of an optimal Power Platform licensing strategy and key negotiation tactics for savings.
App-Based vs Per-User Licensing
Power Apps has two primary premium licensing models, and choosing the right one (or mix) is the first step to cost optimization:
- Per App Plan – Licenses a single user for one specific app (or one Power Apps application, with the flexibility to assign up to two apps and a portal to a user under this plan). This costs about $5 per user per app per month. It’s ideal when each user only needs to use 1-2 Power Apps. For example, if 1,000 employees each use one expense reporting app, you can license that app for all 1,000 users at roughly $5,000/month. If a user needs access to a second app, you can “stack” a second per-app license (an additional $5). Cost trade-off: Per-app is highly cost-effective for limited app usage because you pay only for what each user needs, rather than paying for blanket licensing of unlimited apps.
- Per-User Plan – Licenses a user for unlimited apps in Power Apps (often referred to as Power Apps Premium). This runs about $20 per user per month (with potential volume discounts). It makes sense if users need to regularly use multiple apps. For example, a power user in finance might use 5 or 6 different Power Apps; a single $20 license covers all, which is simpler and potentially more cost-effective than stacking multiple $5 licenses. Volume advantage: Microsoft offers significant discounts at scale – for instance, committing to 2,000+ seats can drop the price to roughly $12 per user. Enterprise Agreement customers can negotiate even better rates based on quantity.
Negotiation and right-sizing tactics:
Start by mapping out the actual number of apps each role or department needs. Often, a mix-and-match licensing strategy yields the best value:
Bold: Give heavy users (who use many apps) a per-user license, and casual users a per-app license for just the one or two apps they need. By tailoring license types to usage patterns, you avoid over-licensing.
Be prepared to show your Microsoft account representative a breakdown of your needs – this usage data strengthens your case for negotiating volume pricing.
If you know you’ll eventually scale up, consider locking in a multi-year deal with price protection or discounts now.
On the flip side, don’t commit to more licenses than necessary; you can always scale up later or use flexible models (like pay-as-you-go) to fill gaps.
Tip:
Microsoft now offers a Pay-as-You-Go model for Power Apps via an Azure subscription. Instead of pre-licensing every user, you pay approximately $10 per active user per app per month. This is double the per-app rate, but only charges you when a user actually launches the app.
This model is great for unpredictable or infrequent usage – for example, an app used by seasonal staff or a large external community. It can dramatically optimize Power Apps cost for sporadic users.
If usage grows steadily, you can always switch those users to fixed licenses; however, Pay-as-You-Go provides flexibility during pilots or uncertain adoption phases.
Ensure you monitor these Azure-based costs closely so they don’t run away – but they can be a handy negotiation point too (“We can stick to PAYG unless you offer a better bulk license discount”).
Read about Working with LSPs in Microsoft Negotiations.
Flows Licensing: Per-User vs Per-Flow
Power Automate (Flows) licensing is another area to right-size carefully.
There are two main licensing approaches for Power Automate beyond the basic free use included with Office 365:
- Per User License (Power Automate Premium) – Priced at around $15 per user/month, this license allows one user to create and run unlimited flows (cloud workflows) and includes attended RPA (robotic process automation) rights for that user’s desktop, if needed. Each licensed user can utilize any number of Power Automate workflows, including those with premium connectors (such as SQL, SAP, Salesforce, etc.). This model is best suited when individual users (e.g., developers or power users) are each running their own automations, or when you have many small-team workflows. For instance, if you have a team of 10 process engineers building dozens of flows for various departments, licensing each of them for $15 is straightforward. However, every end user who triggers those flows might also need a license unless the flows are run in a special way (more on that below).
- Per-Flow License (Power Automate per-flow plan) – Also known as a Power Automate Process license, this license enables the workflow itself rather than individual users. Priced at about $100 per flow per month, it’s sold in packs (commonly five flows for $500). This allows unlimited users to trigger or benefit from that flow without needing their licenses. This model excels in providing broad, critical automations that are used across your organization. Example: A company has an onboarding workflow (a cloud flow that handles new hire setup across HR and IT systems) that every new employee triggers via a form. Instead of licensing every employee or component separately, the company can license the onboarding flow as a whole. For ~$100/month, any number of users can run it. Cost trade-off: If you have a small number of high-impact flows used by many people, per-flow licensing yields huge savings. One $100 flow license could replace dozens or hundreds of individual $15 user licenses. On the other hand, if every user has very distinct or personal flows, per-user licensing will be more practical.
Right-sizing Power Automate: Review your automation portfolio and categorize flows as either personal/team workflows or organizational workflows:
- If a workflow is primarily used by one person or a small team (e.g., a manager’s approval flow, or a specialist’s data sync flow), a per-user license for those individuals is most efficient.
- If a workflow is a shared process (e.g,. a company-wide notification flow, a helpdesk ticket triage flow triggered by anyone, etc.), then licensing the flow itself is the smarter route.
Often, enterprises use a mix: e.g., 50 user licenses for all the individual-specific automations within departments, plus 10 flow licenses for the central processes everyone touches.
Microsoft allows combining these models freely.
Negotiation insights:
Microsoft’s list pricing for the per-flow plan requires purchasing a minimum of 5 flows. If you require a large number of flows, consider negotiating with Microsoft for bulk pricing beyond the standard pack. Ensure to also discuss any planned unattended RPA bots – these are an add-on ($150 per bot/month for each unattended bot that runs automation without human intervention).
If you’re investing in RPA at scale, negotiate those rates or seek bundles (Microsoft even offers a hosted RPA service at ~$215/bot with infrastructure included). The key is to only pay for what you truly need: if you have only one or two bots, don’t let Microsoft upsell you unnecessary capacity.
Also, take advantage of the included opportunities:
If your organization has Power Apps licenses or Dynamics 365 licenses, these often include the right to run Power Automate flows within the context of those apps. For example, a Power Apps Premium user can trigger flows tied to their app without needing a separate Power Automate license.
Likewise, Dynamics 365 users can use certain automated processes as part of their app license. Use these entitlements to avoid double-paying. Part of effective negotiation is knowing what you’re already entitled to – and making it clear you won’t pay twice for the same functionality.
Finally, always remember that Office 365 (Microsoft 365) includes basic Power Automate usage at no additional cost (with standard connectors only). Simple workflows like Outlook email alerts or SharePoint approvals can run on those seeded licenses. Encourage teams to start with standard connectors where possible; upgrade to premium licenses only when the workflow truly demands it. By steering usage in this way, you retain leverage to only license premium features for high-value cases, which is a form of internal cost control (and a talking point when discussing renewals: “We minimized premium flow usage to only what’s necessary – now we want a better deal on those we do need”).
Read our Microsoft Audit Defense and Compliance Strategy.
Capacity Add-Ons: Smart Sizing
One area that can sneak up on Power Platform customers is the cost of capacity add-ons – especially for Microsoft Dataverse storage and AI Builder credits.
Microsoft provides a certain base amount of data storage and AI capacity with your licenses. Still, as your apps and flows grow, you might exceed those limits and incur significant extra costs.
Smart sizing means planning and negotiating for these needs upfront, rather than being hit with surprise overages.
Dataverse Storage:
Power Apps and related licenses include Dataverse capacity entitlements, pooled at the tenant level. For example, a per-user Power Apps license includes a base of 250 MB Dataverse database storage and 2 GB file storage for your tenant (a per-app license contributes a smaller amount, e.g., 50 MB of database storage and 400 MB of file storage).
Microsoft also provides every tenant with a default 10 GB of database storage to get started.
While these numbers seem large, enterprise applications can consume storage quickly – especially if you’re logging tons of data or storing file attachments in Dataverse.
Once you go beyond the included storage, you’ll need to purchase Dataverse capacity add-ons:
- Database Capacity Add-On: ~$40 per GB per month (list price) for database storage.
- File Capacity Add-On: ~$2 per GB per month for file storage.
- Log Capacity Add-On: ~$10 per GB per month for audit log and telemetry storage.
These costs can add up, so capacity management is critical. Here’s how to approach it:
- Assess and forecast your storage needs. During project planning, estimate the amount of data and files an app will generate annually. If you foresee a need for, say, an extra 100 GB of database over the next year, you have a negotiation point ready.
- Leverage included capacity first. If you’re licensing many users, aggregate their entitlement. For instance, 100 Power Apps per-user licenses would pool to 25 GB of database space (100 × 250 MB) in addition to the 10 GB default, totaling 35 GB before purchasing anything extra. That might be sufficient for a while.
- Clean up and archive: Implement data lifecycle policies. Often, enterprises find that old records and audit logs consume gigabytes of space. Deleting or exporting old data to less expensive storage (such as Azure Blob or an on-premises archive) can free up Dataverse capacity and delay add-on purchases.
- Smart environment strategy: Each environment you create comes with a one-time allotment (typically 1 GB of database storage and 1 GB of file storage). Don’t needlessly spin up dozens of production environments that fragment your capacity (unless you truly need isolation), but do utilize separate dev/test environments which also contribute a bit of capacity. Balance this carefully.
- Negotiate bulk add-ons: If you know you’ll need a large amount of extra storage, negotiate a better rate. Microsoft has volume tiers (for example, at 1000+ GB, the price/GB can drop). Rather than buying capacity ad hoc at retail rates, include a chunk of storage in your enterprise agreement. Often, Microsoft would rather bundle in additional capacity at a discount during a major licensing deal than risk you being unable to use the product due to storage costs. Make it part of the deal: “We project needing 50 GB of extra Dataverse storage – can you include that for the first year?” It never hurts to ask.
AI Builder Credits:
AI Builder enables you to integrate AI capabilities (such as form processing and prediction models) into Power Platform apps and flows. Each Power Apps per-user license currently includes some AI credits (e.g., 500 credits per user).
However, serious AI use (such as processing thousands of documents) will require more. Microsoft sells AI Builder add-ons at about $500 per unit per month (with one unit equating to a set number of service credits).
This is not cheap, so be strategic:
- Use the included AI credits to pilot your AI scenarios. Measure the number of credits a typical operation consumes so you can accurately forecast your real needs.
- If AI is central to your solution (say you’re automating invoice scanning with AI Builder), negotiate for AI Builder capacity as part of your deal. Microsoft occasionally runs promotions or offers a limited number of free AI credits for a specified period to encourage adoption – ask about it.
- Consider alternatives: In some cases, using Azure Cognitive Services on a pay-per-call basis might be more economical than AI Builder credits, especially if usage is sporadic. Your development team can integrate those directly into Power Automate with some custom work. This could reduce costs and serve as a bargaining chip (“We might just use Azure AI services instead of buying more AI Builder units – unless we can get a better rate on AI Builder”).
In summary, treat capacity like any other resource – monitor it, manage it, and only pay for what you truly need.
The Power Platform admin center provides capacity usage analytics, allowing you to set up alerts when you reach, for example, 80% of your allocated database space. That gives you time to clean up data or buy add-ons in a planned way (preferably under negotiated terms) rather than in a last-minute panic.
By being proactive, you maintain control – and that’s key to Power Platform cost savings.
Bundling with Microsoft 365: Flexibility vs Risk
Microsoft entices customers with bundles – notably the Microsoft 365 plans (E3, E5, etc.) which include certain Power Platform capabilities “for free.”
It’s essential to understand what you gain from these bundled rights and when bundling benefits or hinders your cost optimization.
Included (“Seeded”) Power Platform rights in M365:
If your users have Office 365 or Microsoft 365 licenses, they already can use Power Apps and Power Automate at no extra cost – but only for standard features.
Specifically, M365 users can:
- Build and use Power Apps with standard connectors (i.e., connecting to data sources like SharePoint, Excel, OneDrive, Teams, etc.) – essentially, extending or customizing Office 365 workflows.
- Run Power Automate flows that also use standard connectors (e.g., automate Outlook emails, route documents in SharePoint, etc.).
- These are often sufficient for basic departmental apps or personal productivity automation. For example, an HR team could build a vacation request app that stores data in a SharePoint list, all of which is covered under their existing M365 license.
However, M365 seeded licensing has limitations:
- No premium connectors or Dataverse: The moment you need to connect a flow or app to a Salesforce API, an Oracle database, or even certain Microsoft services like Azure SQL or the full Dataverse database, you step into “premium” territory that requires standalone Power Apps/Automate licensing. The free ride ends there.
- Limited capacity and support: The included usage comes with lower limits (such as API calls per day) and doesn’t include advanced governance features. It’s intended for use as a teaser or for lightweight applications, not enterprise-scale solutions.
- Power BI Pro not included in E3: Note that only Microsoft 365 E5 includes Power BI Pro licenses. If you have E3, you will still need to license Power BI Pro separately per user for any BI sharing. (Power BI is part of Power Platform and a big cost factor for enterprises, so consider that in bundling decisions).
Bundling benefits: If you are already considering upgrading to a higher Microsoft 365 tier (such as moving from E3 to E5) for reasons beyond Power Platform, it can yield some cost efficiency.
For example, M365 E5 includes:
- Power BI Pro for all users (a $14/user/month value if bought standalone).
- Advanced analytics and security features that might overlap with other needs.
- Some enhanced Power Automate capabilities are available for Windows (E5 includes Windows Enterprise, which has some RPA rights, although these are still limited).
For an organization that truly needs the broad package of E5 (security, compliance, analytics, telephony, etc.), bundling those needs into E5 can be more cost-effective than buying multiple separate add-ons – and as a bonus, you get Power BI Pro and full Office 365 services in one price.
Negotiation-wise, you can leverage interest in E5 to get a concession on other licenses: “If we move to E5 for 5,000 users, we’ll need far fewer standalone Power BI licenses – but we also want a better rate on the Power Apps licenses we’ll still need for those new solutions.”
Microsoft loves to sell E5, so use that as a bargaining chip for your overall deal.
Bundling risks: The flipside is over-buying:
- Don’t go to E5 just for Power Platform. If your primary aim is to enable Power BI or some Power Apps, it’s usually cheaper to buy those a la carte for the specific users who need them. E5 is a significant jump in cost (often double that of an E3), so justify it with multiple benefits. We often see companies persuaded to go E5 “because it includes Power BI” but later realize only 20% of those users needed Power BI – the rest of E5’s premium features went unused, and the company overpaid.
- Bundling doesn’t cover everything: Even with E5, remember that Power Apps premium apps and Power Automate flows with premium connectors still require standalone licensing. An E5 user has no advantage over an E3 user when it comes to a custom Dataverse app – both would need a Power Apps license. It’s a common misconception that “E5 gives me full Power Platform.” It does not; it gives you full Power BI and some analytics add-ons, but Power Apps/Automate beyond basic usage are separate. So, bundling with M365 might give you a false sense of all-inclusive rights – be careful.
- Dependency and flexibility: When you bundle everything into one SKU (like E5), you lose flexibility in a sense. If budgets get tight, you can’t easily drop just the Power Platform part – you’d have to downgrade the whole user’s license, which impacts security and Office features too. Some organizations prefer to keep things modular: standardize on E3 for Office, and add Power Platform licenses separately as needed. This way, if an initiative is cancelled or delayed, you can reduce those separate licenses without disrupting core Office licensing. It’s worth weighing this modular approach vs. the all-in bundle.
Negotiation angle for bundling: During your Microsoft enterprise agreement negotiations, bring Power Platform into the conversation early. Microsoft reps may try to upsell you to broader bundles – sometimes that’s beneficial, sometimes not. Evaluate the numbers: what is the cost of E5 for all vs. E3 + standalone Power Platform licenses for the subset that needs it? Often, a hybrid licensing strategy wins: e.g., go E5 for your top 20% of users who need the full stack (and thus receive Power BI and other perks), and keep the remaining 80% on E3 with selective Power Apps/Automate licensing. You can negotiate pricing on both the bundles and the add-ons together. And if you’re a very large customer, you might even negotiate special SKUs – for example, an “E3 plus Power Apps” bundle at a slightly reduced combined price, instead of paying list price for each component.
In short, bundling can bring flexibility (one license that covers multiple capabilities, making it simpler for users) but also carries the risk of overpaying if it is misaligned with actual usage.
The best strategy in 2025 is to be surgical: leverage M365’s included features as far as they go, and only step up to premium licenses when the business case is clear. Microsoft’s account teams have some flexibility, especially at EA negotiation time, to craft a mix that suits you – but you need to come to the table with a well-informed plan of what you need and what you don’t need.
FAQ – Power Platform Licensing in 2025
Q: Our company has Microsoft 365 E3 licenses. Can we build Power Apps and Automate flows without incurring additional costs?
A: Yes, but only basic ones. With Microsoft 365, your users can already utilize Power Apps and Power Automate using standard connectors (such as SharePoint, Excel, Outlook, and Teams data). This means you can create simple apps and flows tied to those services with no additional licensing.
However, suppose your solution needs premium connectors (e.g., connecting to external databases, Salesforce, or leveraging the Dataverse database for richer functionality). In that case, you must upgrade those users to a Power Apps or Power Automate premium license.
In summary, you can accomplish a lot with what you already have (at no cost). Still, any advanced scenario (the kind that goes beyond Office 365 data) will require standalone Power Platform licensing. It’s wise to prototype with standard connectors first – you might be surprised how far the included capabilities go before you need to spend.
Q: What’s the best way to license Power Apps – per app or user?
A: It depends on app usage per user. If each user only needs one or two apps, the Per App plan at $ 5 per user per app is far cheaper. For example, imagine 500 employees each need access to a single safety incident app. Licensing that app for all 500 employees (500 × $5 = $2,500/month) is much less than buying 500 individual per-user licenses (500 × $20 = $10,000/month). On the other hand, if users need many apps (e.g., 5, 6, 10 different apps regularly), a single Per User license for $20 covers all of them and is more convenient than juggling many $5 licenses (plus the cost evens out around four apps/user). A good strategy is to mix licenses: offer heavy multi-app users an unlimited per-user license, and provide occasional users with per-app licenses for only the specific apps they need. Also consider the Pay-as-You-Go option via Azure if you have a large population of users who use an app very infrequently – that way you pay only in months they use it. Regularly review app usage analytics: if you notice users with per-app licenses starting to use multiple apps each, reevaluate whether moving them to a per-user license saves money (and vice versa). Flexibility is key.
Q: How should we decide between Power Automate per user vs per flow licensing?
A: The decision hinges on how many people use a given workflow. Use per-user licensing for individual-centric automations, and use per-flow (process) licensing for widely shared automations. Suppose you have a single flow that everyone in the company might trigger (for example, an IT helpdesk request flow or an HR onboarding flow). In that case, it’s far more economical to license that one flow than to require every person to have a Power Automate license. A one-per-flow license (approximately $100) can cover hundreds of users’ interactions. Conversely, if you have specialists or teams each running multiple small flows for their tasks, it’s better to license those individuals with the $15/month per-user plan – they can build and run all the flows they need under that plan. Also consider hybrid scenarios: perhaps you start by licensing 10 critical flows for the organization and 20 power users with individual licenses to handle departmental tasks. Monitor usage: if a particular flow’s usage spreads company-wide, switch it to a per-flow license. If a user with a per-user license ends up using only one flow that everyone else uses as well, you might consider licensing that flow instead.
Bottom line: Per-flow licenses are a great way to right-size costs for enterprise-wide processes, and per-user licenses cover the rest of the personal or team-specific automation needs. Using both in tandem often yields the lowest total cost.
Q: We’re worried about Dataverse storage and capacity costs – how can we keep those under control?
A: Dataverse capacity (for database, file, and log storage) can indeed become a significant cost if not managed.
Here are several tactics:
- Plan and monitor: Before building an app, estimate the amount of data it will store. Use the Power Platform admin center’s capacity charts to monitor consumption. Early warning means you can take action (such as cleaning up or budgeting) before hitting limits.
- Optimize data usage: Not all data needs to live in Dataverse. For file attachments, consider storing them in SharePoint or Azure Blob and linking to them – $2/GB for Dataverse files vs. pennies in Azure storage can save a significant amount for large file volumes. For audit logs, consider using shorter retention periods or exporting old logs to a data lake for long-term reporting.
- Leverage pooled entitlements: Each license you have contributes storage to the tenant pool. Make sure you’ve activated all entitlements. Sometimes, companies buy licenses but don’t realize their capacity entitlements increased – check your tenant’s total capacity; it might be higher than you think. Use that capacity wisely across environments.
- Negotiate extra capacity in bulk: If you know you’ll need additional Dataverse GBs beyond the free pool, talk to Microsoft about it as part of your agreement. For example, instead of paying à la carte each month for 20 GB at $40/GB, you might negotiate a package of 20 GB at a discounted rate or even have year-one capacity included as a concession. Microsoft would rather lock you into using the platform (even with some free storage) than limit adoption due to storage costs – use that fact in negotiations.
- Periodic housekeeping: Assign someone to periodically purge or archive stale data. For instance, if you have 5-year-old records that no one uses but are consuming 2 GB of storage space, consider offloading them. This kind of data hygiene can often defer or eliminate the need to buy more capacity.
By treating storage as an important resource – one that’s monitored and optimized – you can avoid surprise bills and make informed decisions on when to buy extra capacity (and hopefully on your terms, not at last-minute rates).
Q: What are some effective strategies to negotiate better Power Platform pricing with Microsoft?
A: Negotiating with Microsoft is all about knowledge and leverage.
Here are some proven strategies:
- Know your usage and needs: Come to the table with clear data on the number of users, apps, flows, and storage you anticipate. When you show you’ve done your homework on right-sizing (and aren’t just buying blindly), reps are more likely to offer flexible solutions. For example, “We have 500 heavy users and 2000 light users” could initiate a discussion on a mixed-license enterprise deal, rather than forcing you to standardize on a single license for all.
- Bundle and save (smartly): If you’re also renewing Office 365, Windows, Dynamics, or other Microsoft products, negotiate Power Platform as part of that larger deal. Microsoft sales teams have quotas across product lines and can shift discounts around. You might get a deeper discount on Power Apps if, say, you agree to expand Azure usage or upgrade some of your Office licenses. Use the entire relationship as leverage.
- Consider timing and multi-year commitments: The end of Microsoft’s fiscal year (June) or quarter can be a time when they’re more eager to close deals and might offer extras or discounts. Additionally, committing to a longer term (e.g,. a 3-year enterprise agreement) often unlocks better pricing than one-off purchases. Just ensure you have flexibility (such as the ability to true-up or adjust if your needs change at renewal).
- Evaluate CSP versus EA: Large enterprises typically opt for an Enterprise Agreement (direct with Microsoft) for the most significant discounts. But if you’re mid-sized or prefer flexibility, buying through a Cloud Solution Provider (CSP) can let you adjust license counts more frequently (even month-to-month in some cases). The discount might be smaller, but you save by not over-buying shelfware. In negotiations, you can subtly let Microsoft know that if their direct deal isn’t compelling, you have the option to buy via CSP or even to use alternatives (that competitive pressure often makes them more flexible).
- Ask for concessions beyond price: Sometimes you won’t get a huge per-license discount, but Microsoft might offer free consulting hours, deployment funding, or bonus capacity/licenses for the first year. For example, we’ve seen deals where a client pays list price, but Microsoft throws in 100 free Power Apps per-app licenses for 6 months to help with a rollout, or provides an extra 10 GB of Dataverse storage at no charge. These “soft” discounts can be very valuable – don’t be afraid to ask, especially if you’re committing to use more of the platform.
- Stay informed and push back on changes: 2025 has seen some licensing changes (like price increases on Power BI, stricter enforcement of licensing for all app users, new AI and Copilot add-ons). If a change negatively affects you, bring it to our attention. Microsoft may consider grandfathering pricing or finding a workaround if it means retaining your business. For instance, if you budgeted $10 for Power Apps per user and it increased to $20, express your concern – you might be eligible for a discount to bridge the gap.
In summary, be an informed customer. Microsoft’s salespeople respond best when you clearly understand your requirements, have considered your options, and are willing to negotiate holistically.
By right-sizing internally first (as this guide has covered), you’re in a strong position to right-size your deal with Microsoft and achieve substantial savings on Power Platform licensing in 2025 and beyond.
Read about our Microsoft Negotiation Services.
