Microsoft 365 licensing explained
Introduction
In today’s digital landscape, selecting the right Microsoft 365 license is more critical than ever. Yet, many organizations find themselves on the wrong license, either paying for features they don’t need or lacking crucial tools that could enhance productivity and security.
Whether due to the complexity of Microsoft’s licensing options or the rapid pace of technology changes, businesses often struggle to align their needs with the appropriate Microsoft 365 plan. This misalignment can lead to inefficiencies, increased costs, and missed opportunities for optimization.
Everything you need to know about M365 licensing
In this comprehensive guide to M365 licensing, we’ll explore everything you need to know about licensing Microsoft 365 for your organization, from breaking down M365 licensing basics to more advanced nuances and guide you through the process of making a more informed decision.
As LicenseQ specializes in Microsoft volume licensing, this article focuses specifically on M365 Enterprise.
Introduction
1. Introducing Microsoft 365 Licensing
What is Microsoft 365?
Microsoft 365 is a cloud-based subscription service that bundles the familiar Microsoft Office applications (Word, Excel, PowerPoint, etc.) with a variety of productivity and collaboration tools. But it goes beyond traditional office software. Microsoft 365 encompasses services like email, cloud storage, file sharing, communication platforms (Teams), and robust security features – all accessible from virtually any device.
Unlike traditional software purchases, Microsoft 365 operates on a subscription model. Depending on your contractual options, you pay a monthly or annual fee per user, granting your users access to the suite of applications and services included in their specific license plan. This approach ensures you always have access to the latest features and security updates without needing to purchase new software versions.
An overview of (some) Microsoft 365 features:
- Core Office applications – Create, edit, and collaborate on documents, spreadsheets, presentations, and more, with the latest features and functionalities.
- Enhanced collaboration: Streamline teamwork through integrated communication tools like Teams, allowing for real-time document co-authoring, video conferencing, and instant messaging.
- Cloud storage and file sharing: Securely store and share files across your organization, facilitating easy access and collaboration from anywhere.
- Business emailing: Stay connected and manage your communications with robust email capabilities and calendaring tools.
- Enhanced security: Microsoft 365 prioritizes data protection with features like multi-factor authentication, data encryption, and advanced threat detection.
- Device management: Simplify device management and ensure secure access to company data across various devices.
Types of Microsoft 365 Licenses
Microsoft 365 offers a diverse range of licensing plans to cater to the specific needs of individual users, small businesses, and large enterprises. You need to understand these options in order to select the most cost-effective and feature-rich solution for your situation.
Microsoft 365 categorizes its licenses into three primary groups:
- Personal: Designed for individual users and families, these plans provide access to the core Office applications (Word, Excel, PowerPoint, etc.) with varying levels of cloud storage and online features.
- Business: This category caters to small and medium-sized businesses, offering a range of plans that balance core productivity tools with collaboration features like Teams, file sharing, and business email. These plans are often tiered based on the number of users and included features.
- Enterprise: Aimed at large organizations with complex needs, Enterprise plans offer the most comprehensive set of features, including advanced security, compliance tools, desktop applications, and increased storage capacity. These plans are typically customized based on an organization’s specific requirements.
2. Microsoft 365 Enterprise basics
Who is Microsoft 365 Enterprise for?
Microsoft 365 Enterprise is specifically designed for large organizations with complex needs and a significant number of users (more than 500).
Here are some examples of organizations that can benefit from Microsoft 365 Enterprise:
- Large corporations with several hundred to thousands of employees across multiple geographical locations
- Government agencies and educational institutions handling sensitive data
- Healthcare organizations with strict compliance requirements
- Financial institutions needing robust security measures
While Microsoft 365 Enterprise caters to large organizations, it’s also worth considering for smaller businesses with specific needs:
- Businesses requiring advanced security features
- Organizations that heavily rely on collaboration across teams
- Companies planning to scale their workforce significantly
Benefits of Microsoft 365 Enterprise
Here’s why it’s a strong fit for these businesses:
- Scalability and feature richness: Enterprise plans cater to a large user base and offer the most comprehensive set of features within Microsoft 365. This includes advanced security tools, robust compliance capabilities, enhanced device management functionalities, and integrations with other Microsoft products like Power BI and Dynamics 365.
- Enhanced security and compliance: Large organizations often handle sensitive data and face stricter compliance regulations. Microsoft 365 Enterprise prioritizes security features like advanced threat protection, data loss prevention, and information rights management. This layered approach safeguards your data and helps ensure adherence to industry regulations.
- Centralized management and control: Managing a large user base and ensuring consistent IT policies can be challenging. Enterprise plans provide IT administrators with centralized tools to manage user accounts, control access to applications and data, and enforce security policies across the organization.
- Improved collaboration across Teams and locations: Large enterprises often have geographically dispersed teams or departments. Microsoft 365 Enterprise fosters seamless collaboration through features like Teams, facilitating real-time communication, document co-authoring, and video conferencing, regardless of location.
- Dedicated support: Microsoft offers dedicated support options for Enterprise plans, providing organizations with a direct channel to access assistance and troubleshooting resources.
If you’re unsure whether Microsoft 365 Enterprise is the right fit for your organization, consider consulting with a Microsoft licensing specialist to discuss your specific needs and explore available options. Reach out to us at info@licenseq.com or check out our services.
With this foundation in place, the following sections of the guide delve deeper into the world of Microsoft 365 for Enterprise licensing and explore the options that best suit your business needs.
Types of Microsoft 365 Enterprise licenses & features
Unlike the tiered structure of Business plans, Microsoft 365 Enterprise offers a more modular approach. This means you can choose a suite (for instance Office 365 E1, E3, or E5) and then add-on additional security or productivity features as needed. This flexibility allows you to tailor your licensing solution to precisely match your organization’s unique requirements.
Here’s a breakdown of the three core Enterprise suites and their key features:
Office 365 E1
This base plan provides the essential features for secure email, collaboration, and basic file storage. It includes:
- Web versions of core Office applications (Word, Excel, PowerPoint, OneNote)
- 1 TB of OneDrive cloud storage per user
- Business-class email with 50 GB mailbox
- SharePoint online team sites for basic collaboration
- Teams for online meetings and chat
- Basic security features with threat protection
Microsoft 365 E3
This plan builds upon Office 365 E1, offering a comprehensive suite of productivity and collaboration tools with enhanced security features. It includes all features of E1, plus:
- Desktop versions of core Office applications (Word, Excel, PowerPoint, OneNote)
- Advanced threat protection for email and data
- Data loss prevention capabilities
- Enhanced eDiscovery tools for legal and compliance purposes
- Advanced device management functionalities
- Full Windows Operating System license
Microsoft 365 E5
This premium plan is the most comprehensive offering within Microsoft 365 Enterprise. It includes all features of E3, along with additional security, analytics, and productivity features:
- Advanced information protection and rights management
- Insider threat detection and protection
- Power BI Pro for advanced business analytics
- Secure Analytics for advanced threat protection insights
- Teams Voice and audio-conferencing capabilities within Teams
- And many more Security and Compliance tools
Choosing the right M365 plan – Key questions to ask yourself
➡️ Does your organization handle sensitive data or require strict compliance regulations? You might need E3 or E5 for the enhanced security features.
➡️ Do your teams heavily rely on desktop applications for offline work? E3 provides desktop versions of core Office applications.
➡️ Do you require advanced business intelligence capabilities? E5 is the only plan that includes Power BI Pro.
M365 Frontline Suites
Microsoft 365 Frontline Suites are designed for blue-collar workers—employees who interact directly with customers or manage day-to-day operations. These suites are ideal for roles such as retail staff, healthcare workers (e.g. nurses), and service professionals who may not have dedicated desks or require regular access to computers.
Key features:
- Simplified communication through Microsoft Teams.
- Access to essential company information and resources.
- Task management tools for efficient operations.
- Mobile device management for secure and flexible access.
- Security and compliance features to protect data and communications, even for a mobile and dispersed workforce (premium features through an Add-on).
Benefits: Empowers blue-collar workers with the tools they need to stay productive, connected, and informed while maintaining organizational security and control.
Microsoft 365 security and compliance features
Security is a core focus of Microsoft 365 Enterprise. All suites offer baseline security features, but E3 and E5 provide progressively more advanced protection:
- Office 365 E1: Basic threat protection safeguards email and data from common threats.
- Microsoft 365 E3: Advanced threat protection offers stronger security with features like data loss prevention to prevent sensitive data leaks and eDiscovery tools for legal and compliance purposes.
- Microsoft 365 E5: Offers the most robust security with information protection and rights management, allowing you to control how data is accessed and shared. Additionally, E5 provides insider threat detection and Secure Analytics for comprehensive threat insights.
Microsoft 365 E3 Unattended License
The Microsoft 365 E3 Unattended License is designed to support scenarios where applications or scripts need to run without user intervention. This type of license is particularly useful for automation tasks, system integrations, and background services that require access to Microsoft 365 services.
An Unattended license is mandatory for solutions that operate on a server and are triggered through robotic process automation (RPA). While Microsoft 365 Enterprise licenses are typically user-based subscriptions, Unattended licenses convert them into device-based licenses, making them suitable for scenarios where automation processes require non-interactive access to Microsoft 365 services.
Please note! This is actually a requirement for these type of use cases, it’s not just an option. If you are in need of M365 functionality for your (ro)bots, then you need to invest in the Unattended License.
Key aspects & benefits M365 E3 Unattended License
- Specifically designed for scenarios involving automation, where tasks are performed without user intervention, such as robotic process automation (RPA).
- Ensures that automated workflows and processes remain compliant with licensing terms and conditions.
- Supports large-scale automation across multiple devices, making it ideal for enterprises with extensive RPA implementations.
- Provides secure, controlled access to Microsoft 365 services, even in unattended or automated environments.
- Offers a cost-effective licensing solution for automation scenarios, reducing the need for multiple user-based licenses for devices running unattended operations.
- Seamlessly integrates with existing Microsoft 365 environments, ensuring smooth operation of automated tasks and processes.
3. Understanding M365 Licensing Nuances: From SA, Step-up, Add-ons, and Dual Use Rights
As with most Microsoft products, there are numerous ways to procure licenses, influenced by factors such as your previous licensing model (e.g., transitioning from on-premises Software Assurance-based licenses) or the purchasing vehicle you use (such as an Enterprise Agreement versus the Cloud Solution Provider (CSP) program). Each of these options introduces different licensing types, which we will outline below.
1. Microsoft From SA (Software Assurance)
Software Assurance (SA) is a program offered alongside perpetual licenses for on-premises Microsoft products.
M365 connection
Previously, customers with active SA could leverage benefits like a discounted upgrade to specific M365 plans. This allowed them to transition from on-premises software to cloud-based solutions. This From SA license no longer exists for new customers migrating to the cloud, however if you are an existing From SA customer you can leverage this benefit indefinitely.
Benefits: Provided a cost-effective way to migrate to M365, potentially offering free or discounted licenses depending on the SA agreement.
2. Step-up licenses
These licenses allow you to upgrade specific features within your existing M365 plan.
Use Case: For example, if you have an E1 plan but require some features included in E3 (like desktop Office applications), you can purchase a step-up license to bridge the gap and gain access to those features. This step-up option is only available in the Enterprise Agreement.
Benefits: Provides a way to add specific functionalities without needing to upgrade to a completely new plan within a subscription period.
3. Add-ons:
These are additional licenses that provide features not included in your base M365 plan.
Examples: Popular add-ons include Power BI Pro for advanced business analytics, Enterprise Mobility + Security (EMS) for enhanced device management, and Defender for Cloud Apps for additional cloud security features.
Benefits: Allows you to customize your M365 licensing solution by adding specific features your organization needs, instead of moving to a higher suite.
4. Other license types:
- Microsoft 365 Government (G): Designed for government agencies with specific security and compliance requirements.
- Microsoft 365 Nonprofit (NP): Offers discounted plans for qualified non-profit organizations.
- Microsoft 365 Education (A): Offers discounted plans for qualified educational institutions.
5. M365 Dual Use Rights:
Dual Use Rights or CAL Equivalency Rights (Product Terms terminology) provide significant flexibility for users with qualifying Microsoft 365 licenses, enabling them to install and use local copies of desktop applications such as Word, Excel, and PowerPoint on their personal or work devices. This is particularly beneficial in environments where users may need to work offline or in situations where access to cloud-based services is limited or unavailable.
These rights are especially valuable for organizations that still have legacy on-premises installations, such as Exchange Server. With Dual Use Rights, users can connect to these on-prem environments using their Microsoft 365 suite through CAL (Client Access License) Equivalency Licensing. This ensures that your investment in cloud services integrates smoothly with your existing infrastructure, allowing for a hybrid solution or for gradual transition to full cloud adoption without disrupting current operations.
Eligibility
It’s important to note that not all Microsoft 365 plans include Dual Use Rights. This benefit is typically available with higher-tier plans, such as Microsoft 365 E3 and E5, which cater to enterprise needs. However, lower-tier plans, such as the F-series (designed for frontline workers), generally do not offer this feature (it can be amended as such by Microsoft). Organizations should carefully evaluate their licensing needs and choose a plan that includes Dual Use Rights if this functionality is required.
Benefits of Dual Use Rights
- Access to familiar applications: With M365, you might even get the option to install an older version or on-premises version of Office applications. This way, users can install and use familiar Microsoft applications, like Word, Excel, and PowerPoint, on personal devices, significantly boosting productivity.
- CAL Equivalency licensing: Organizations can leverage CAL Equivalency Licensing to connect their Microsoft 365 suite with legacy on-premises installations, such as Exchange, SharePoint and Windows Server, ensuring seamless access across environments.
- Hybrid flexibility: This dual access approach provides greater flexibility, allowing organizations to maximize their investment in Microsoft 365 while maintaining access to both cloud-based and on-premises resources.
- Tool availability across environments: Ensures that users have the tools they need, whether they are working in a cloud-based or on-premises environment, supporting a smooth transition to full cloud adoption. For instance, in an environment with local installations, but which also (sometimes) requires work in an (older) Virtual Desktop Infra. You can leverage your M365 license in both environments, regardless of what is being used.
4. Microsoft 365 Enterprise subscription & pricing
M365 Subscriptions
Microsoft 365 (M365) offers a range of subscription plans designed to meet the diverse needs of organizations, from small businesses to large enterprises. These plans provide access to Microsoft’s suite of productivity tools, security features, and cloud services, enabling businesses to operate more efficiently and securely. The subscription model allows organizations to pay on a per-user basis, with different tiers available depending on the required features and capabilities.
Below is a basic overview of the most popular M365 subscription options. For a more detailed comparison and comprehensive overview, click here.
M365 pricing
5. Migrating to Microsoft 365: On-premises to cloud
Planning your M365 migration
A well-defined plan is crucial for a smooth transition. Here are some key steps to consider:
- Assess your current environment: Evaluate your existing on-premises infrastructure, including software licenses, user base, and hardware capabilities.
- Define your M365 needs: Identify the features and functionalities your organization requires in M365. Consider user needs, collaboration requirements, and security objectives.
- Choose the right licensing: Based on your needs, select the appropriate M365 plan (E or F) and determine if additional add-ons are necessary. Explore benefits like Software Assurance that can ease the transition.
- Develop a migration strategy: There are various methods for migrating your data and applications to M365. Options include hybrid deployments (combining on-premises and cloud environments) or full cloud migrations. Choose a strategy that aligns with your comfort level and technical expertise.
- User training and communication: Prepare your users for the switch to M365. Provide training on new features and functionalities to ensure a smooth adoption process. Open communication throughout the migration process is essential.
M365 transition tools and resources
- Microsoft offers a multitude of resources to support your migration journey. Here are some valuable tools to consider:
- Microsoft Endpoint Manager: This cloud-based service simplifies device management and configuration for M365.
- Microsoft FastTrack: For qualifying organizations, this program provides guidance and resources from Microsoft experts to assist with the migration process.
- Microsoft 365 Adoption Center: This online hub offers resources and tools to help users adapt to and leverage the full potential of M365.
Additional considerations:
- Security: Ensure your data is secure throughout the migration process. Implement strong access controls and data encryption practices.
- Data backup and recovery: Maintain a robust backup strategy for your on-premises data before, during, and after migration.
- Testing and validation: Thoroughly test your M365 environment before transitioning all users. This helps identify and resolve any potential issues beforehand.
6. Microsoft 365 for small and medium businesses (SMB)
Microsoft 365 isn’t just for large enterprises; it also offers tailored solutions for small and medium-sized businesses (SMBs) that provide powerful tools at a more affordable price point. These plans are designed to meet the unique needs of SMBs, which often require flexibility, scalability, and robust security without the complexity of enterprise-level solutions.
Please note! Only available up to 300 subscriptions between the different plans (scroll down below for the popular Business plan details).
Key differences SMB vs Enterprise licenses
- Simplicity and ease of use: SMB-focused Microsoft 365 plans are streamlined to offer essential features without overwhelming smaller organizations with unnecessary complexity. This makes it easier for SMBs to deploy and manage Microsoft 365, even with limited IT resources.
- Cost-effective pricing: Microsoft 365 plans for SMBs are more affordable, with options that scale according to the size and needs of the business. This allows smaller organizations to access the same powerful tools used by larger enterprises but at a price point that aligns with their budget.
- Focus on core features: While enterprise plans include a wide range of advanced features, SMB plans focus on delivering the core productivity tools and services that smaller businesses need, such as Microsoft Teams, Word, Excel, and Outlook, along with cloud storage and business-class email.
- Scalability: SMB plans are designed to grow with your business. As your needs evolve, you can easily upgrade to higher-tier plans or add more users without significant disruption.
Popular Microsoft 365 SMB Plans
Microsoft 365 Business Basic:
- Cost: Approximately $6 per user per month (annual commitment)
- Includes: Web and mobile versions of Office apps, Microsoft Teams, 1 TB of OneDrive storage, business-class email, and calendaring.
Microsoft 365 Business Standard
- Cost: Approximately $12.50 per user per month (annual commitment)
- Includes: Everything in Business Basic plus full desktop versions of Office apps, business-class email with a 50 GB mailbox, and additional collaboration tools like SharePoint and Exchange.
Microsoft 365 Business Premium
- Cost: Approximately $22 per user per month (annual commitment)
- Includes: All features of Business Standard plus advanced security and device management features, including Microsoft Intune and Azure Information Protection.
Benefits for SMBs
- Enhanced collaboration: Microsoft 365 enables SMBs to collaborate seamlessly, whether teams are working in the office, remotely, or on the go. With tools like Microsoft Teams and OneDrive, employees can stay connected and productive from anywhere.
- Security and compliance: Even at a lower cost, SMB plans include robust security features that help protect sensitive data and ensure compliance with industry regulations. Features like email encryption, advanced threat protection, and mobile device management are available in higher-tier SMB plans.
- Support and resources: Microsoft offers a wealth of support resources tailored to SMBs, including access to Microsoft Experts for setup and deployment assistance, as well as ongoing technical support to ensure smooth operation.
Conclusion
As this guide has shown, there are many aspects to consider when licensing Microsoft 365 and it’s easy to end up on the wrong plan, potentially costing your organization time, money, and efficiency. Ensuring that your Microsoft 365 license aligns with your business needs is not just about compliance—it’s about optimizing your investment and empowering your workforce with the right tools.
M365 optimization
At LicenseQ, we’ve long advocated for the importance of Microsoft 365 optimization. Microsoft’s strategy often encourages organizations to adopt the M365 E5 plan by bundling security and compliance features and offering substantial discounts. While E5 might seem like the best option, it’s crucial to approach licensing with a tailored strategy.
With the right preparation and negotiation, you can uncover more cost-effective licensing solutions that better suit your organization’s diverse needs. As a rule, you need to identify the following roles: core office personnel, contractors, blue-collar workers, or resource accounts, and it will be clear that a one-size-fits-all approach doesn’t work.
Reach out to us today
This is just the tip of the iceberg. If you suspect that your organization might be on the wrong Microsoft 365 Enterprise license, or if you’re looking to navigate the intricacies of Microsoft’s licensing options, our licensing consultancy services are here to help. We specialize in tailoring licensing solutions that fit your unique requirements, ensuring you get the most value out of your Microsoft 365 investment. Let us guide you to the right license, so you can focus on what matters most— growing your business.
