Introduction

Picture this: You’re sitting across from your CFO, armed with a Microsoft licensing quote that makes their coffee cup rattle against the saucer: $1,200 per user per year for G5 licenses. Meanwhile, your current Small Business Premium setup hums along nicely at $264 per user annually, delivering virtually the same user experience your team has grown to love. 

“So, where exactly can we cut corners?” 

That question echoes through boardrooms across America as government contractors grapple with CMMC Level 2 requirements. This complexity affects your IT budget, and it directly influences how assessors view your readiness when you undergo a CMMC Level 2 assessment. 

Assessment Success

Here’s where the rubber meets the road in CMMC assessments. During your C3PAO evaluation, presenting an all-G5 licensing strategy is like showing up to a job interview in a perfectly tailored suit. You are more likely to get: 

  • A lower assessment quote 
  • Potential for remote assessment options 
  • A faster assessment timeline 
  • More assessor confidence 

Why? Because you’ve demonstrated earnest commitment to meeting NIST SP 800-171 requirements. C3PAOs know this configuration inside and out. It’s their comfort zone. 

Step 1: Choose GCC vs GCC High

If your organization deals with International Traffic in Arms Regulations (ITAR) data or other export-controlled information, GCC High isn’t optional. It’s mandatory. But if you’re working with standard Controlled Unclassified Information (CUI), the regular GCC environment might be your sweet spot. 

  • Require GCC High: Mandatory if your contracts include Export-Control specifications (ITAR/EAR). 
  • Prefer GCC High: Often chosen proactively because ITAR requirements can appear unpredictably, and it positions you for future contracts. 
  • Need cost-effective solution: GCC provides better affordability with expanded licensing selections 

Once you know whether GCC High is required, the next challenge is choosing the right license model. 

Step 2: Pick Your License Model

Let’s pull back the curtain on this licensing theater. The Microsoft 365 ecosystem for Government Community Cloud (GCC) presents three distinct paths, each with its own personality: 

The Premium Player: Microsoft 365 G5 (GCC and GCC High) 

GCC high and the G5 licensing is Microsoft compliance “promise” for the long-term partnership. Like Marriage, if you wanna keep it, put a ring on it, at $1,200. That premium price tag is paying for Microsoft’s special government teams to continue to develop technical controls against ever increasing threats. It provides: 

  • Comprehensive security stack with Entra ID P2 
  • Defender for Endpoint P2 protection 
  • Full Purview E5 capabilities for advanced compliance 
  • Advanced Audit and eDiscovery Premium features 

This is your “set it and forget it” solution, if budget constraints don’t make you wince. 

The Strategic Alternative: Microsoft 365 E5 (no Teams) + Teams Enterprise (GCC Only) 

Here’s where things get interesting. This configuration delivers identical security and compliance capabilities as G5 but often at a more palatable price point. It’s like getting the same gourmet meal but choosing the lunch special over the dinner menu. This option does TODAY provide identical compliance, but it is not guaranteed like the G5 is, meaning organizations would require close monitoring of licensing updates. 

The Budget-Conscious Choice: Microsoft 365 Business Premium (GCC only) 

At a fraction of the cost, Business Premium provides essential desktop applications and basic security features. However, and this is crucial, it lacks the full compliance artillery needed for CUI handling. 

These licensing choices directly impact how assessors view your compliance readiness. 

Cost Scenarios

GCC High cost scenarios (20 users), MSRP (Aug 2025) 

Scenario Composition Annual total 
All G5 (GCC High) 20 × $1,120.80 $22,416.00 
3 G5 + 17 F3 + F5 Security (nonCUI) (3 × $1,120.80) + (17 × ($116.40 + $116.40)) $7,320.00 

Notes (GCC High): The F3 + F5 Security identities must not handle CUI. Enforce isolation with Conditional Access, Purview labels/DLP, and site/label scoping. F3 has no desktop apps, 2 GB OneDrive, and Kiosk/OWA mailbox unless you add Exchange Online Plan 1. 

GCC cost scenarios (20 users), MSRP (Aug 2025) 

Scenario Composition Annual total 
All G5 20 × $855.60 $17,112.00 
All E5 (no Teams) + Teams 20 × ($657 + $63) $14,400.00 
Hybrid (5 G5 + 15 BP) 5 × $855.60 + 15 × $264 $8,238.00 
Hybrid (5 E5 (no Teams) + Teams + 15 BP) 5 × $720 + 15 × $264 $7,560.00 
All BP + E5 Security (Need CMMC L2; currently no CUI) 20 × ($264 + $144) $8,160.00 

While these scenarios show clear cost differences, organizations must balance affordability against the compliance risks created when mixing license types. 

The Risk of Mixing Licenses

The moment you introduce a hybrid approach (some users on G5 licenses, others on “risk-managed” alternatives), your compliance complexity has elevated from arithmetic to calculus. Still very solvable, but with elevated acceptance of risks and sustainment processes. 

The assessor’s scrutiny increases, since proving separation of environments becomes harder and often requires stronger documentation and compensating controls. This is due to: 

  • In-scope email boxes sitting alongside risk-managed email boxes 
  • Policy-based separation without ironclad technical controls 
  • No eDiscovery proof that CUI hasn’t migrated to risk-managed environments 

Imagine trying to prove a negative; that’s essentially what you’re asking your assessor to validate. 

Step 3: Build a Role-Based Licensing Strategy

Smart organizations develop a role-to-license matrix that serves as their North Star: 

  • CUI Handlers & Compliance-Critical Roles → G5 or E5 (no Teams) + Teams Enterprise 
  • Support Staff & Non-CUI Roles → Business Premium (GCC) 
  • Hybrid Roles → Case-by-case evaluation with clear documentation 

The golden rule: Isolate CUI to your premium-licensed users. This creates clear boundaries that assessors can validate, and auditors can trace. 

Think of it as creating digital neighborhoods: your CUI community lives in the gated area with all the premium security features, while your general business operations happen in the standard residential zone. 

Here’s the million-dollar question: Can you have your cake and eat it too? 

The pragmatic approach: 

  1. Start with role analysis rather than license analysis 
  1. Map CUI touchpoints across your organization 
  1. Right-size your premium licensing to actual CUI handlers 
  1. Document everything for assessment transparency 

Once the role-to-license matrix is established, the next challenge is ensuring this model can withstand assessor review and adapt to Microsoft’s evolving licensing changes. 

Implementation and Future-Proofing

Licensing isn’t a one-time purchase; it’s a living compliance program. To stay ahead of evolving CMMC expectations and Microsoft changes, organizations should implement clear governance and a forward-looking review process. 

Documentation That Demonstrates Control 

Assessors rely heavily on documentation, not just tools, to determine whether your controls are effective and sustainable. They will want to see: 

  • Clear licensing rationale tied to job functions 
  • CUI flow diagrams showing data boundaries 
  • Change management procedures for role transitions 
  • Regular access reviews and cleanup processes 

Remember, assessments aren’t just about technical compliance, they’re about demonstrating control maturity. An organization that can clearly articulate its licensing strategy, backed by solid documentation and consistent implementation, inspires assessor confidence. 

Future-Proofing Your Strategy 

The licensing landscape continues evolving. Microsoft regularly adjusts add-on eligibility and feature bundling.  

Build flexibility into your approach: 

  • Maintain licensing inventory with regular reviews 
  • Monitor Microsoft roadmap announcements 
  • Establish change management protocols 
  • Budget for compliance evolution 

Action Summary 

  • G5 = Safest, fastest assessments 
  • GCC High = Mandatory if ITAR/EAR data 
  • Hybrid = Lower cost, higher risk, requires strong controls 
  • Document licensing decisions tied to roles 

Conclusion

If you pursue CMMC Level 2 as a list of checkboxes and attempt to “save money” on licensing, you could end up with much higher costs down the road. 

CMMC Level 2 compliance should be part of your long-term business strategy. It’s about building a sustainable security posture that protects your organization and your customers’ sensitive information. 

Yes, G5 licensing represents a significant investment. But does the savings in licensing today justify the limitations you might face with ITAR, the extra sustainment costs in a complicated Hybrid licensing model, and the extra costs in the assessments? 
 
My advice: 
Different organizations will weigh these trade-offs differently. For example, as your compliance consultant, I will only recommend G5’s for all users within the information system because the elevated risks of a Hybrid approach require a full-time on-staff person to assume that liability. 

And as an IT director of a SMB with zero actual CUI in my information system, I am willing to protect by policy only and accept the liability of going with Small Business Premium licensing with the Security add-on. 

Remember: The goal isn’t to find the cheapest option, but to find the most cost-effective path to compliance that protects your business, satisfies your contracts, and positions you for future growth. 

Because at the end of the day, the most expensive license is the one that doesn’t protect you when it matters most. 

Ready to demystify your GCC licensing strategy? Atlantic Digital’s compliance experts have guided multiple contractors through this exact challenge. Contact us today for a personalized assessment that balances your budget constraints with your compliance requirements. 

Don’t let licensing confusion derail your CMMC Level 2 journey. Get clarity, get compliant, get competitive. 

Disclaimer 
This paper reflects the professional perspective of a CMMC compliance consultant and is intended for general guidance only. Licensing details, costs, and strategies are based on industry experience and illustrative examples as of August 2025 and should not be taken as definitive or exhaustive. For authoritative and up-to-date information, readers should consult Microsoft’s official licensing documentation, their licensing solution provider, and the Department of Defense’s published CMMC resources. Organizations should validate all decisions against these primary sources and their contractual requirements.