Race against the OneDrive clock

Microsoft is making subtle but potentially significant changes to the default retention policy for unlicensed OneDrive accounts—changes that could have a major impact on your data management strategy. As usual, Microsoft’s official support article is anything but clear, so CyberSmith is here to break it down for you.

In this blog, we’ll explain exactly what’s changing, how it affects your organization, and what steps you should take to stay ahead. Let’s dive in

• Starting January 27, 2025, unlicensed OneDrive accounts for more than 93 days will either move to the recycle bin and subsequently permanently deleted OR will be archived if they fall under a retention policy

• If archived, access to files will undergo reactivation fees and additional monthly storage cost.

• If a user is deleted or taken through the user deletion wizard, their OneDrive data is preserved for 30 days and then moved into a recycle bin where it can be recovered by an admin using PowerShell for up to 93 days.

• Custom retention policies can be set in the SharePoint Admin Center or the Compliance Admin Center
  

If a user is unlicensed, their data can be retained indefinitely for OneDrive.

The loophole in not having to pay for storage on data preserved through retention policies or through unlicensed users who are not deleted (i.e. they still exist in your user list) is what Microsoft is trying to solve for with this new motion. Imagine a high churn company who has either a 10 year retention policy or does not delete users upon termination. (i.e. they simply strip their license and disable the account.), or both. This company could have 100 active employees with OneDrive but another 500 disabled accounts with 10TB of OneDrive storage that they technically do not have to pay for today.

User Deletion Wizard:

Retention Policy Configuration:

Future State:

• Moving forward on January 27, 2025, users who are deleted will follow the same default retention and deletion policies that exist today.

• If there are any retention policies in place beyond the default 30 days, OneDrive accounts from deleted users will be archived after 93 days

• Additionally, any unlicensed accounts will also be archived after 93 days by default regardless if there is a retention policy in place.
  

To access files from archived accounts, a reactivation fee of $0.60 per GB is required. Additionally, a storage fee of $0.05 per GB applies to all archived accounts, not just the one being accessed.

For example, if an organization has 100 unlicensed OneDrive accounts, each using 1 TB (totaling 100 TB), and these accounts are archived between January and March 2025, reactivating a single account in October 2025 incurs the following costs:

• A one-time reactivation fee of $0.60/GB for 1 TB, totaling $614.40.

• A monthly storage fee of $0.05/GB for the full 100 TB, amounting to $5,120 per month from October 2025 onward.

What happens if I take no action?

You are NOT going to automatically be enrolled into paying additional money

If you have unlicensed OneDrive accounts that are older than 93 days of being unlicensed, they will automatically be archived and no longer be able to be accessed unless you fork up the additional cash to reactivate them and pay the monthly storage cost.

If you have unlicensed OneDrive accounts older than 93 days of being unlicensed AND they do not have a custom retention policy applied, this data will be automatically moved to the recycle bin for another 93 days and then PERMANTELY DELETED

Understanding Scope

You can identify unlicensed OneDrive accounts using the SharePoint admin center. The following steps show how to use the SharePoint admin center to generate a report of unlicensed OneDrive accounts:

1. Sign in to the SharePoint admin center with your work or school account.

2. Go to Reports and select User reports.

3. Under OneDrive usage, select Unlicensed users.

4. You can download the report as a CSV file.

5. Starting January 2025, an interactive UI is available. You can select a username to view the details.

What Are Your Options?

When dealing with archived OneDrive accounts, you have several options. Here’s how you can approach it, and how CyberSmith can help ensure you make the best decision for your business needs.

1. Do Nothing (Except Inform Your Staff)

As part of your offboarding process, you can grant another user (typically a manager) access to a departing employee’s OneDrive for 30 days—enough time to retrieve necessary files. Beyond that, admins still have 93 days to recover files from the recycle bin. However, if you have compliance requirements or clients who insist on longer retention, you'll need to consider other options.

2. Have Clients Sign a Waiver for Additional Storage Costs

Instead of debating whether you’ll ever need access beyond the 93-day window, set clear expectations. Storage fees can vary widely depending on account size, so it’s best to make clients opt in or acknowledge that unlicensed OneDrive accounts are subject to a limited retention policy.

3. Use a Third-Party Backup Solution

A solid backup solution eliminates the worry of Microsoft’s retention policies. If you already have a third-party backup in place (which you should), you can restore OneDrive data into a SharePoint site later if needed.

4. Assign a Single OneDrive License to an Account

If the identity isn’t deleted, you can reactivate a single OneDrive account by re-adding a license. This allows access without triggering Microsoft’s automatic billing for all archived data—a key consideration if you’re managing large amounts of storage.

These are just some of the top strategies, but every business has unique needs. CyberSmith specializes in IT Infrastructure and Cybersecurity, and we can help you navigate these options while ensuring compliance, cost efficiency, and data security.

Need Help Managing Your OneDrive Storage and IT Services?

Don’t let unexpected storage fees catch you off guard. CyberSmith can help you optimize your IT strategy, ensure compliance, and implement backup solutions that work for your business. Reach out today for expert guidance on this and all your IT needs! 🚀