Making Sense of Microsoft Cloud Licensing

For as long as I can remember, I was in awe of people who had the discipline and time to get their heads around Microsoft licensing.  The list of things I’d rather do to escape it was getting comically long.  In the early days of the Microsoft Cloud, BPOS and Office 365, there wasn’t much choice, but years later and an explosion of services and offerings means we face a somewhat overwhelming array of plans, entitlements, consumption models, SKUs and add-ons.  It’s become critical to understand the dark art of Microsoft licensing when it comes to helping clients make informed decisions and strategies.

In this blog we’ll look at simplifying the what, why and how of Microsoft Cloud licensing, focussing specifically on the SaaS service offerings.  Experience shows this can be the most challenging to gets to grips with.  Microsoft’s IaaS and PaaS cost models are easier to understand.  Largely based on consumption, the phrase ‘what you see is what you get’ rings true as you generally buy compute power, storage or bandwidth.  It’s a concept that IT Pros have been dealing with long before the cloud.

When it comes to SaaS, the options are more diverse.  Whether your organisation has a handful of users or thousands, it’s essential to have a solid licensing strategy that ensures users have the right plans and entitlements to make their lives more productive, whilst choosing the most cost-effective approach.  Most Microsoft end-user licences are available as a SaaS offering these days, so it can often be beneficial to carry an audit of some description to ensure you’re getting the most return on your investment.  For example,

  • Do you buy Windows licence with each device?
  • Are you licensing Office products as one-off purchases?
  • Do you have an existing EA with Microsoft?

With Microsoft 365, there are various options that include Windows 10 and Office Pro Plus, so by switching to an OpEx model you are not only guaranteed to be on the latest version, but you’ll benefit from other entitlements provided by these plans.

Microsoft literature needs to appeal to different demographics.  Depending on where you look or what you searched for, you’ll find different ways of describing the same set of licences or services.  First off, let’s look at some descriptions captured from different sources and what services and platforms underpin them.

Description Service Platform 
Office Applications 

Office on tablets and phones 

Office Pro Plus (Word, Excel, PowerPoint & OneNote) Office 365 
Office Online 
  • Word Online 
  • Excel Online 
  • PowerPoint Online 
  • OneNote Online 
Office 365 
Email & Calendar 
  • Outlook 
  • Exchange Online 
Office 365 
Chat-based workspace 

Hub for Teamwork 

  • Microsoft Teams 
Office 365 
Schedule & Task Management 


  • Microsoft StaffHub 
  • PowerApps 
  • Flow 
Office 365 
Workflow Automation 
  • Microsoft Flow 
Office 365 
Web and Mobile Apps 

Business Apps 

  • Microsoft PowerApps 
Office 365 
Voice, video & meetings 

Messaging, Presence and Meetings 

  • Skype for Business 
  • Audio Conferencing 
  • Microsoft Phone System 
Office 365 
Social & Intranet 

Intranet Access 

  • SharePoint 
  • Yammer 
Office 365 
Corporate Social Network 
  • Yammer 
Office 365 
Professional Digital Storytelling 
  • Sway 
Office 365 
Enterprise Video 
  • Microsoft Stream 
Office 365 
Threat Protection 
  • Microsoft Advanced Threat Analytics 
  • Windows Defender Antivirus 
  • Device Guard 
  • Windows Defender Advanced Threat Protection 
  • Office 365 Advanced Threat Protection 
  • Office 365 Threat Intelligence 
Office 365
Enterprise Mobility + Security
Windows 10 
Identity & access management 
  • Azure Active Directory 
  • Windows Hello 
  • Credential Guard 
Enterprise Mobility + Security
Windows 10 
Device & app management 
  • Microsoft Intune 
  • Windows Autopilot 
  • Windows Analytics Device Health 
  • System Center Configuration Manager 
Enterprise Mobility + Security 
Information protection 
  • Windows Information Protection 
  • BitLocker 
  • Azure Information Protection 
  • Office 365 Data Loss Prevention 
  • Microsoft Cloud App Security 
  • Office 365 Cloud App Security 
Office 365
Enterprise Mobility + Security
Windows 10 
Advanced compliance 
  • Advanced eDiscovery 
  • Customer Lockbox 
  • Advanced Data Governance 
Office 365 
  • Delve 
  • Power BI Pro 
  • MyAnalytics 
Office 365 
Workday Management 
  • StaffHub 
Office 365 
File storage and sharing 
  • OneDrive for Business 
Office 365 

Now we know a bit about what’s going on behind the scenes, we can see how Microsoft is pulling together different services that are harmoniously integrated to deliver a great experience.  Impressive as that list is, it’s now important to note that each of the services and platforms have multiple licence plans available.  Another phrase, ‘you get what you pay for’ springs to mind here.  For example, some of the services come in Office 365, Plan 1 and Plan 2 variants, with differing levels of capabilities.  Some services aren’t available on the lower-priced plans, so let’s take a closer look at what entitlements are associated with the common Office 365 plans.

Office 365 Business Essentials Business Premium F1 E1 E3  E5 
Office Online       
Office 365 Business       
Office 365 Pro Plus       
Exchange Online       
Exchange Online K1       
Exchange Online Plan 1       
Exchange Online Plan 2       
SharePoint Online       
SharePoint Online Enterprise Kiosk (K1)       
SharePoint Online Plan 1       
SharePoint Online Plan 2       
Skype for Business Online Plan 1       
Skype for Business Online Plan 2       
Audio Conferencing       
Phone System       
OneDrive for Business Plan 1       
OneDrive for Business Plan 2       
Microsoft Teams       
Microsoft Planner        
Microsoft Forms        
Microsoft StaffHub         
Microsoft Sway       
Microsoft Bookings          
Microsoft Flow for Office 365       
Microsoft Flow Plan 1       
Microsoft Flow Plan 2       
Microsoft MyAnalytics       
Microsoft PowerApps for Office 365       
Microsoft PowerApps for Office 365       
Microsoft PowerApps Plan 1       
Microsoft PowerApps Plan 2       
Microsoft Power BI Pro       
Microsoft Stream for Office 365         
Microsoft Stream Plan 1       
Microsoft Stream Plan 2       
Office 365 Advanced Threat Protection       
Office 365 Advanced Compliance       
Office 365 Cloud App Security       
Office 365 Threat Intelligence       
Yammer Enterprise       
Azure Information Protection for Office 365       
Azure Active Directory Free       
Enterprise Mobility + Security E3 E5 
Azure Information Protection Premium P1    
Azure Information Protection Premium P2    
Azure Active Directory Premium P1    
Azure Active Directory Premium P2    
Microsoft Intune   
Microsoft Advanced Threat Analytics   
Microsoft Cloud App Security    
Windows 10 Pro E3 E5 
Windows Hello for Business    
BitLocker and BitLocker to Go    
Windows Information Protection    
Windows Defender Credential Guard     
Windows Defender System Guard    
Windows Defender Application Guard     
Windows Defender Application Control     
Windows Defender Exploit Guard    
Windows Defender Antivirus    
Windows Defender Advanced Threat Protection      
Windows Server Update Service    
Windows Update for Business    
Desktop Analytics Upgrade Readiness    
Desktop Analytics Update Compliance    
Desktop Analytics Device Health     
Windows Insider Program for Business    
Express Updates    
Delivery Optimisation    
Kiosk Mode    
Windows Shared Devices    
Windows Autopilot    
Cloud Activations     
Hybrid Azure Active Directory Join    
Microsoft Store for Business    
Mobile Device Management    
Mobile Application Management    
Manage User Experiences     
Microsoft Application Virtualisation (App-V)     
Microsoft User Environment Virtualisation (UE-V)     

As long as those lists are, in the case of Office 365 and Enterprise Mobility + Security, they just scratch the surface. The information was collated from several Microsoft sources and has proven invaluable as a quick reference cheat sheet, rather than trawling through different sites and different formats of information. It provides a good high-level overview, but we often need to know more about the variants of each plan to ensure it’s fit for purpose as well as helping clients make the most of the available entitlements and getting a full ROI.

This is where it can get unwieldy. I find the Office 365 Service Description site is a fantastic source of information – Tracking down the same level of information for Enterprise Mobility + Security is harder as it’s currently spread across several sections of the Microsoft Azure and Power Platform repositories.

Things change quickly in this space, so rather than collating information that could be out of date before you’ve finished reading it, I find it’s better to keep a high level cheat sheet of the differences, along with links to the original sources to make it easy to cross reference.

So, what more do you get?

Exchange OnlineVariantsLinks
Plan 1

Plan 2

Service Description

Plan Comparison

There are so many features of Exchange Online, I’d recommend looking through the Service Description for the low-level detail, but Plan 2 includes everything offered with Plan 1 with these additional features:

* 100GB vs 50GB mailbox storage

* Unlimited in-place archive

* Unified messaging & voice mail

* Advanced Threat Protection

* Data Loss Prevention

* In-place hold and litigation hold

* Message encryption

* IRM with Azure Information Protection

SharePoint OnlineVariantLinks
Plan 1

Plan 2

Service Description

Plan Comparison

Like Exchange Online, the exhaustive list of features can be found on the Service Description page. Plan 2 includes everything offered by Plan 1 with these additional features:

Business Connectivity Services 


  • External content types 
  • Business data web parts 
  • External lists 
  • OData Connector 
  • Rich Client Integration 


Advanced Publishing Features 


  • Catalog lists 
  • Cross site publishing 
InfoPath Form Services 


Data Loss Prevention 
Video search asset libraries 


Visio Services 


  • Search 
  • Hold 
  • Export 
  • Preservation hold library 


Enterprise Search 


  • Faceted navigation 
  • Search web parts 
  • Query rules 
Business Intelligence 


  • Business Intelligence Center 
  • Calculated Measures and Members 
  • Data Connection Library 
  • Decoupled PivotTables and PivotCharts 
  • Filter Enhancements 
  • Filter Search 
  • Power BI web part 
  • Power View for Excel in SharePoint 
  • Power Pivot for Excel in SharePoint 
  • Quick explore 
  • Timeline slicer 


Microsoft TeamsVariantsLinks

Office 365

Plan Comparison

If you’re licensed for Office 365, you’re licensed for Microsoft Teams. There is also a free, stand-alone plan, designed to entice organisations into the Microsoft ecosystem. The limitations of the free offering mean reduced capacity for file storage and of course, the extended capabilities provided by other Office 365 services like Exchange, OneDrive, SharePoint, Planner and Yammer.

The Microsoft Teams for Office 365 offering is consistent across all Office 365 plans. If you don’t hold an Enterprise E5 licence, you can enable Phone and Audio Conferencing features with add-on subscriptions.

Skype for Business OnlineVariantsLinnks
Plan 2Service Description

Skype for Business Online is currently in a major transition. As of October 2018, Plan 1 is no longer available. As a result, there are migration paths for any Plan 1 users to Office 365 plans that offer Plan 2. Longer term, Microsoft Teams will become the primary client for messaging, meetings and calling. New Office 365 tenants with less than 500 seats won’t have Skype for Business capabilities and migrations are planned for existing tenants that will enable Microsoft to, one day, remove Skype for Business Online entirely.

OneDrive for BusinessVariantsLinks
Plan 1

Plan 2

Service Description

Plan Comparison

Who knew? If you’re looking after the compliance and advanced data governance for an Office 365 tenant, you probably did. Plan 2 is included with Enterprise E3 and E5 plans. Check out the Plan Comparison for the low-level features. As usual, Plan 2 includes everything offered by Plan 1 with these additional features:

  • Unlimited storage (for subscriptions of 5 users or more) up to 25TB
  • Advanced Data Loss Prevention
  • In-place hold for eDiscovery
Microsoft FlowVariantsLinks

Office 365

Plan 1

Plan 2

Plan Comparison

Microsoft Flow is included with all Office 365 plans. The offering is reasonably consistent, except for the Enterprise F1 plan effectively providing the Free plan, and Enterprise E1 limiting connectivity to Microsoft online services, so no on-premises data gateway usage.

If you need faster run frequencies, more runs per month or interaction with other SaaS systems like Salesforce, you’ll need to purchase a Plan 1 or Plan 2 subscription.

Microsoft PowerAppsVariantsLinks

Office 365

Plan 1

Plan 2

Plan Comparison

Like Microsoft Flow, Microsoft PowerApps is included with all Office 365 plans. A key consideration here is that Microsoft PowerApps has Microsoft Flow bundled in. If you need to use the Common

Data Service or create model driven apps, you’ll need to purchase a Plan 1 or Plan 2 subscription. Because Microsoft PowerApps includes Microsoft Flow, you’ll get the added benefits of the equivalent upgrade to Microsoft Flow.

Microsoft StreamVariantsLinks
Office 365

Plan 1

Plan 2

Service Description

If there was ever a good example of how fast-paced the cloud is, it’s this.  When I started writing this post, there was a good Plan Comparison page showing the differences between the variants.  It’s now gone, and it redirects to the Microsoft Stream product page.  I even found a cached version to make sure I wasn’t going mad.  On reflection, it probably wasn’t that valuable.  Advanced features such as searching automatically generated transcripts, In-video face detection and a timeline view of face detection are only available in Plan 2 and selected Office 365 plans.  Check out the Service Description for the low-level detail.

Azure Information ProtectionVariantsLinks
Office 365

Premium P1

Premium P2


Plan Comparison

Before we get excited about a free offering for protecting content, we should adjust our expectations.  It enables anybody using Windows or Mac to open protected content.  Think of it like the free viewers for opening Office content like Visio diagrams. 

The Office 365 offering is reasonably comprehensive in terms of its integration with platforms like Exchange Online, SharePoint Online and OneDrive for Business.  However, the real benefits of Azure Information Protection are delivered through the Premium plans. 

Plan 1 Plan 2 
  • Manual, default and mandatory document classification 
  • Azure Information Protection scanner for content discovery of on-premises files matching any of the sensitive information types 
  • Azure Information Protection scanner to apply a label to all files in an on-premises file server or repository 
  • Rights Management connector with on-premises Windows Server file shares by using the File Classification Infrastructure (FCI) connector 
  • Document tracking and revocation 
  • Microsoft Information Protection software developer kit (SDK) to apply labels and protection to emails and files for all platforms – Windows, iOS, Mac OSX, Android and Linux 


  • Plan 1 features + 
  • Configure conditions for automatic and recommended classification 
  • Hold Your Own Key (HYOK) that spans Azure Information Protection and Active Directory (AD) Rights Management for highly regulated scenarios 
  • Azure Information Protection scanner for automated classification, labelling and protection of supported on-premises files 
Azure Active Directory Variants Links 


Premium P1 

Premium P2 

Plan Comparison 

Office 365 uses Azure Active Directory as an identity provider, so if you already have a tenant, you will be using the Free offering.  If you’re looking to enhance areas around self-service user management, Multi-Factor Authentication, Mobile Device Management, sight of other SaaS applications in use across the organisation or conditional user, group and device access then Premium P1 has plenty to offer.  Premium P2 adds further levels of protection to identities.  Check out the Plan Comparison for the low-level detail. 

What’s the right plan for you?  To make things easier, Microsoft 365 is a construct that pulls together Office 365, Enterprise Mobility + Security and Windows 10.  It’s available in Enterprise F1, E3 and E5 plans, which include the respective plans for each of the services.  In addition to this, there is also a Business plan, which includes Office 365 Business Premium, Windows 10 Pro and selected Enterprise Mobility + Security features.  Naturally, there are price incentives for buying a Microsoft 365 plan compared to purchasing the individual plans. 

The beauty of SaaS based licensing is that you only buy what you need.  With a rolling monthly subscription, you can increase or decrease the number of licenses to meet your demand.  Also, you only need to license users for the services they need.  For example, if only a handful of users need enterprise voice or Power BI capabilities, license them with Enterprise E5.  If others just need email, you can look at Enterprise F1 or an Exchange Online plan. 

Practically all the Office 365 and Enterprise Mobility + Security services can be bought individually as add-ons to plans you may have assigned already.  For example, you may have a bunch of users with Enterprise E1 who need SharePoint Online Plan 2, but don’t need Office Pro Plus, so E3 would be cost prohibitive.  In this scenario, purchasing SharePoint Online Plan 2 entitlements for those users would work out to be more cost effective, whilst ensuring they have the tools they need to be productive. 

In addition, Microsoft also offer the following add-on plans.  Some are purely stand-alone as they’re not included in any of the Enterprise or Business plans. 


  • Project Online Essentials 
  • Project Online Premium 
  • Project Online Professional 
  • Visio Online Plan 1 
  • Vision Online Plan 2 
  • Exchange Online Advanced Threat Protection 
  • Exchange Online Archiving for Exchange Online 
  • Exchange Online Protection 
  • Azure Active Directory Basic 
  • Azure Advanced Threat Analytics 
  • Common Area Phones 
  • Calling Plans 


When it comes to buying and managing licenses for your Microsoft Cloud tenancy, you have a few options.  Firstly, you may have an Enterprise Agreement with Microsoft already.  Sticking with that is probably your best option for being able to negotiate terms under any pre-agreed arrangements.  But the cloud is fit for everyone, so if you’re not big enough to have a direct relationship with Microsoft you can either purchase licences through the admin centre, pop in your credit card details and deal with filing the expenses or enlist the help of Intelogy.  As Microsoft 365 experts and a Tier 1 Cloud Solution Provider Reseller, we’ll listen to what you need to achieve and help you make the right choice. 


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Iain Williamson
Iain is the Practice Lead for Platform Solutions at Intelogy, specialising in productivity platforms such as SharePoint, Office 365 and Microsoft Azure. Iain is passionate about delivering technology that enhances productivity and has over 16 years' experience with the Microsoft technology stack. Iain consults with many organisations ranging from SMEs to global enterprises - designing, implementing and supporting secure, robust platforms that deliver business critical operations.
Published On: November 28th, 2018 Categories: Microsoft 365, Modern IT, Office 365

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