The scenario requires removing Microsoft Office 365 E3 licenses that were assigned directly to individual users. The most efficient way to perform this bulk operation is by using a PowerShell script. The Set-MsolUserLicense cmdlet, part of the legacy MSOnline (Azure AD V1) PowerShell module, is specifically designed to modify license assignments for user accounts. It includes a -RemoveLicenses parameter that allows an administrator to specify which license SKU to remove. By scripting this command to iterate through the 2,500 users, the directly assigned E3 licenses can be removed with the least administrative effort, fulfilling the question's requirement.

A. the Set-MsolProductKey cmdlet: This is not a valid or recognized PowerShell cmdlet for managing Microsoft 365 or Azure AD licenses.

B. the Update-MgGroup cmdlet: This cmdlet modifies the properties of a group, including its license assignments. It cannot be used to remove licenses that were assigned directly to individual users.

D. the Update-MgUser cmdlet: This is a general-purpose cmdlet from the Microsoft Graph PowerShell SDK for updating user object properties. The more specific and direct cmdlet for managing licenses is Set-MsolUserLicense (or its modern equivalent, Set-MgUserLicense).

1. Microsoft Learn. (n.d.). Set-MsolUserLicense. Microsoft PowerShell Documentation. Retrieved from https://learn.microsoft.com/en-us/powershell/module/msonline/set-msoluserlicense.

Reference Details: The documentation explicitly states this cmdlet "can be used to update the license assignment for a user" and details the -AddLicenses and -RemoveLicenses parameters

which are central to the solution.

2. Microsoft Learn. (2023

September 15). What is group-based licensing in Azure Active Directory? Microsoft Entra Documentation.

Reference Details: Under the section "A user has a license that conflicts with a group license

" the documentation explains that a user can have both a directly assigned license and a group-inherited license. This confirms that assigning the E5 group license does not automatically remove the direct E3 license

necessitating a separate removal action.

3. Microsoft Learn. (n.d.). Update-MgGroup. Microsoft Graph PowerShell Documentation. Retrieved from https://learn.microsoft.com/en-us/powershell/module/microsoft.graph.groups/update-mggroup.

Reference Details: The documentation shows that this cmdlet is used to "Update the properties of a group object." This confirms its scope is limited to the group itself

not the direct license assignments of its members.