In Episode 3 of OK. Got it., host Chris Vaccaro sits down with Miriam Carena-Schmitt (Miri), VP of Sales Excellence at Retarus, to break down a fast-growing concern for every organization using Microsoft 365: the new Tenant External Recipient Rate Limit, better known as TERRL.
If your business relies on sending external emails, from invoices to order confirmations to marketing campaigns, these limits may affect your daily operations far more than you realize.
What is TERRL and why is Microsoft enforcing new outbound sending limits?
TERRL stands for Tenant External Recipient Rate Limit, and it’s Microsoft’s way of ensuring that all services inside Microsoft 365 run smoothly. Because email volume affects bandwidth for every application in the M365 suite, Microsoft now restricts how many external emails an organization can send per day.
These limits apply to every Microsoft 365 customer, regardless of size. According to Miri, TERRL may look harmless, “only five simple letters”, but in practice, it can create major operational risk for companies that depend on high-volume outbound communication.
How do Microsoft’s new email send limits actually work?
Microsoft ties your sending capacity to the number of licensed users in your tenant, not to the number of active mailboxes or applications sending emails.
For organizations with 100,000 licenses or more, the cap is 1.5 million external emails per day. That may sound like plenty, but as Miri explains, it breaks down to roughly 15 emails per licensed user, and far fewer once you consider:
- Functional mailboxes (e.g., accounting@, billing@, HR@)
- Group mailboxes
- Automated application emails from internal systems
According to Miri’s experience, organizations typically have 15–20% more mailboxes than licenses, meaning their true per-mailbox daily limit quickly drops into the 10–12 emails per day range.
Most employees exceed that naturally, let alone entire applications.
What happens when you exceed Microsoft’s daily external send limit?
The consequences are immediate and severe: your organization can no longer send external emails for the rest of the day.
Your users receive a bounce message stating that the tenant has exceeded its allowable send rate. There is no queueing, no retry buffer, and no carryover from previous days.
That means:
- Business-critical emails fail silently.
- If sending in bulk, you do not know which emails were delivered and which failed.
- Time-sensitive or legally required communications may not reach recipients.
- Financial processes, like invoicing, can be disrupted.
Miri gives a scenario: imagine sending 10,000 invoices on December 31st and hitting the TERRL limit. Which customers didn’t receive their invoice? How do you prove delivery if a dispute arises? This is where TERRL becomes a serious operational and compliance risk.
Why are application emails the hidden danger behind TERRL?
When organizations think of outbound volume, they often picture marketing newsletters or communication teams sending manual emails. In reality, applications are the primary volume drivers; ERP systems, CRM platforms, billing engines, logistics notifications, and support systems all send automated emails around the clock.
Most companies don’t know how many applications are generating outbound mail.
One prospective customer Miri spoke with estimated they had “10 to 50 applications”. After migrating to Retarus, they discovered over 6,000 systems sending email through Microsoft 365.
This lack of visibility is exactly why companies hit the TERRL limit before they realize how close they are.
How can organizations reduce TERRL risk and continue sending high-volume application emails?
Many enterprises now route their application email traffic through other services, like Retarus, instead of Microsoft 365. Doing so dramatically reduces the load counted toward Microsoft’s daily limit and provides better transparency, tracking, and deliverability for application-generated messages.
A large logistics customer, for example, diverted more than 500,000 emails per day from Microsoft to Retarus, instantly reducing their TERRL exposure.
By sending application mail through Retarus, organizations benefit from:
- Reduced TERRL risk and eliminated sending limits
- Higher transparency into delivery status
- Reputation management and detailed reporting
- Flexible billing models (pay-per-use or package)
- A clear separation between user-generated email and system-generated email
This ensures business-critical emails, like invoices, confirmations, receipts, and alerts, continue flowing without interruption.
What should organizations audit internally before TERRL affects them?
Before TERRL enforcement expands further (Microsoft already began rolling it out to smaller tenants and will continue through next year), companies should examine:
- How many applications actually send email?
- Which departments rely on automated outbound communication?
- How many functional mailboxes exist, and how much volume do they generate?
- How many back-and-forth email interactions occur daily during negotiations or support?
Most organizations dramatically underestimate this. ERP, marketing, billing, legal, customer support, order management, service platforms, every team generates automated outbound mail.
Even for small message threads, an added thank you or your welcome email, all count toward the tenant’s daily limit.
TERRL isn’t theoretical, it’s real, and it hits harder than most organizations expect.
Final Thoughts: What should companies do next?
TERRL is now a reality for every Microsoft 365 tenant and ignoring it won’t prevent outages. Organizations must gain visibility into their outbound traffic and decide which messages truly belong inside Microsoft, and which should be offloaded to a dedicated enterprise email service like Retarus.
Doing this doesn’t just reduce TERRL risk. It increases transparency, protects reputation, avoids legal and financial disputes, and ensures business-critical emails always reach their recipients. If you have any questions or concerns about your external email rate limit, you can contact Retarus right here and we’ll be happy to help.
“OK. Got it.” is Retarus’ first podcast series. Get the low down on all things cloud communications and technology related happening right now, directly from the experts who work with them every day. Learn more about complex cloud messaging, e-invoicing, industry trends and more. Subscribe with us or over at YouTube, Apple Podcasts or Spotify.
If you would like to submit a question for a future episode, email us at podcast@retarus.com.
