Microsoft OneDrive: Pay-As-You-Go Alternative to Upgrading Your Storage License

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How to Enable OneDrive Pay-As-You-Go Storage in Microsoft 365

How to Enable OneDrive Pay-As-You-Go Storage in Microsoft 365

A step-by-step guide for admins

Microsoft has introduced Microsoft 365 OneDrive Storage, a new consumption-based service that lets selected users go beyond the OneDrive storage quota included in their license. Instead of purchasing fixed storage add-ons, the organization pays only for the extra storage actually consumed. The feature is currently available as a preview and is planned for general availability in November 2026.

What Is OneDrive Pay-As-You-Go?

Traditionally, users receive a storage quota based on their Microsoft 365 license. Once that quota is full, an administrator must either purchase additional storage or manually raise the storage limit.

With OneDrive Pay-As-You-Go, administrators can instead choose which users are allowed to exceed their licensed storage limit. The organization is then billed only for the extra storage used above the original quota.

Example

License
Microsoft 365 E3
OneDrive quota
1 TB
Used
1.4 TB

The organization is billed only for:

400 GB

— the amount above the licensed quota.

Prerequisites

Before you start, you'll need the following:

  • Microsoft 365
    • Global Administrator or SharePoint Administrator
    • A Microsoft 365 tenant
  • Azure
    • An Azure subscription
    • A resource group
    • Owner or Contributor permission on the Azure subscription
Microsoft uses Azure-based billing to charge for actual storage consumption.

1Check Users' Storage Consumption

Open:

Microsoft 365 Admin Center → Reports → Usage → OneDrive

Or alternatively:

SharePoint Admin Center → Active Sites → OneDrive

Identify users who:

  • Are approaching their storage limit
  • Have filled up their OneDrive
  • Frequently work with large files

Examples: video teams, CAD users, GIS users, project managers.

2Open Pay-As-You-Go Services

In the Microsoft 365 Admin Center:

Billing → Pay-as-you-go services

This shows Microsoft's consumption-based services. Select:

Microsoft 365 OneDrive Storage

3Connect an Azure Subscription

When the service opens, you'll need to connect a:

Azure Subscription and Resource Group to Microsoft 365.

This connection is what's used for ongoing storage billing.

4Enable OneDrive Storage

Once the Azure connection is complete:

Microsoft 365 Admin Center → Billing → Pay-as-you-go Services → Microsoft 365 OneDrive Storage

Select Enable.

The organization is now ready to use consumption-based OneDrive storage.

5Enable Extra Storage for Users

Once the service is enabled, you can raise a user's storage limit.

Go to:

SharePoint Admin Center → More Features → User Profiles

Search for the user.

Default limit
1 TB
New limit
3 TB

The user now has more storage available, but the organization is billed only for the portion actually used above the licensed limit.

6Set Up Cost Controls

Microsoft recommends creating budgets for all Pay-As-You-Go services.

Open:

Azure Portal → Cost Management → Budgets

Create, for example:

  • $50
  • $100
  • $250

...and configure email alerts.

This way, unexpected storage growth is caught before costs get too high.

Which Licenses Are Supported?

Microsoft describes the service as an add-on capability on top of a user's existing OneDrive quota. The user's license governs the original storage limit, while Pay-As-You-Go is used for storage above that quota. In the documentation currently available, Microsoft has not specified any particular restrictions between licenses such as F3, E3, or E5.

Recommendation

I would not recommend enabling this feature for all users right away.

  • ✅ Enable the feature for users with a genuine need.
  • ✅ Set cost budgets.
  • ✅ Review consumption regularly.
  • ✅ Keep the majority of users on standard OneDrive quotas.

This gives the organization maximum flexibility without the risk of unexpected costs.

Summary

OneDrive Pay-As-You-Go Storage is a new option that lets specific users exceed their licensed OneDrive quotas while paying only for the storage actually used. It's particularly useful for users working with large files, while administrators retain full control over which accounts are allowed to use extra storage.

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