The University of New South Wales (UNSW) is preparing for a drastic 95 percent reduction in the storage allocation for its Microsoft 365 environment in October, introducing a series of space-saving measures.
The reduction in cloud storage for staff and students is due to Microsoft changing the licensing terms for its productivity suite in 2023 – limits that it appears are only now being enforced.
The university acknowledges that there could be looming challenges for user cohorts such as researchers that use OneDrive to store their data.
In an FAQ, UNSW said the clampdown on storage by Microsoft “is impacting all institutions in the higher education sector that have been using M365 applications and storage solutions.”
“This is an industry-wide shift, and every Australian university is navigating the same challenge,” UNSW stated in online FAQs.
Asked by iTnews about the timing of the changes, a UNSW spokesperson would only respond in broad terms that it “engages with its technology vendors under a range of commercial models.”
“These arrangements are reviewed regularly to ensure they continue to meet the university’s operational, financial and strategic needs,” the spokesperson said.
“As with all cloud-based services, UNSW follows established best practices to ensure services are used effectively and efficiently.”
“This includes encouraging responsible use of storage and other resources so the university can maximise value, manage demand and operate sustainably,” the spokesperson added.
Microsoft’s complex licensing
Like other universities that have signed up for M365, UNSW has to deal with Microsoft’s complicated three-tier A1, A3 and A5 licensing system.
iTnews was unable to determine the mix of licences that UNSW specifically holds, to get a better picture of why its capacity is so drastically impacted.
UNSW’s spokesperson declined to comment on licensing specifics, saying as a matter of policy commercial terms of the university’s contracts are not shared publicly.
As part of the changes announced in 2023, each M365 education tenant now receives a base allocation of 100 terabytes – storage that is pooled across Microsoft’s OneDrive, SharePoint and Exchange.
For UNSW, that storage pool has to cater for over 82,000 students and 8300 staff.
Then, depending on what licence tier each staff member or student holds, and the extent to which it matches their consumption or usage needs, they either add excess storage capacity to the pool, or subtract from it.
For example, a paid A3 licence adds 50 gigabytes to the pool, while A5 ones top up the pool with 100 gigabytes each.
By comparison, free A1 educational M365 licence that draws from the capacity without adding to it.
Complicating the issue, the paid-for A3 and A5 licenses come with Student Use Benefit (SUB) licenses attached.
SUBs are doled out at a ratio of 40 per A3/A5 licence and allow students to download standalone apps, whereas the free A1 tier is web-based only.
This could explain the mix of responses observed from universities domestically and overseas to a change in the storage inclusions for education licences.
Intelligent Business Research Services (IBRS) adviser Dr Joseph Sweeney told iTnews that the variations are likely the result of differing licensing strategies employed on a university-by-university basis.
Storage clawback coincides with AI growth
When Microsoft announced changes to storage limits back in 2023, it pointed to a range of factors including environmental ones for the decision, and claimed that 99.96 per cent of users are below their quotas.
Such claims by Microsoft are open for debate, however, Sweeney told iTnews in an analysis of the tech giant’s changes.
“This year is a come-to-Jesus moment for vendors and the industry alike on ICT costs,” Sweeney said.
“Here’s what is really happening: Microsoft is looking for every opportunity to reduce its need to expand data centres.
“Cutting storage entitlements in education gives it back a massive chunk of infrastructure that it does not have to reinvest in.”
“The timing of the announcement, just as the AI data centre frenzy began, and the enforcement window through the enterprise agreement lifecycles are not coincidental,” Sweeney said.
On-prem NAS now looks attractive but M365 gotchas abound
Microsoft has a vice-like grip on the office productivity ecosystem worldwide, with around 80 percent market share, Sweeney noted.
“The power it wields is not just market share, diversifying away from the MS Office environment means organisations struggle to exchange documents with the rest of the market,” Sweeney said.
Switching to other vendors means Microsoft’s governance, compliance and security tooling no longer applies to storage outside the M365 ecosystem.
This makes any alternative that might look attractive from a financial point of view such as Google Workspace and Zoho potentially complicated to implement.
“Few organisations in Australia will make the move,” Sweeney said.
Nevertheless, re-architecting and diversifying storage could pay off; in fact, moving back to on-premises from cloud storage now looks attractive.
Sweeney calculated that a 12-bay network accessible storage (NAS) unit loaded with high-capacity drives could be had for A$500 to A$8000 up front.
Compared to buying the equivalent additional storage from Microsoft at 10 TB increments charged at US$300 per month, this is a fraction of the cost over five years.
A NAS unit could be a reasonable home for cold and archival data for research, and other bulk files that aren’t used for real-time collaboration.
For institutions wary of managing physical hardware, Sweeney pointed to cloud alternatives such as Wasabi, which runs on Equinix infrastructure in Sydney and Melbourne.
Wasabi offers Amazon Web Services S3-compatible object storage at a fraction of Microsoft’s pricing, making it a viable general-purpose option for data that does not need the broader M365 ecosystem.
Neither option is a wholesale replacement for OneDrive or SharePoint, however, and both sit outside Microsoft’s governance and security tooling once data moves across.
Contestability must return to licensing negotiations
Ultimately, the real issue, Sweeney said, is not so much about storage costs.
Sweeney argues it’s more about how little leverage institutions have to push back when vendors change the terms of long-standing licensing agreements.
“Building genuine contestability back into licensing negotiations is now an imperative,” Sweeney said.
For universities working through their renewal cycles, that means segmenting storage deliberately, setting realistic limits on free student accounts, and deciding case by case where Microsoft’s ecosystem is worth paying for and where it isn’t.
