Microsoft Licensing for Beginners

Microsoft Licensing for Beginners: Everything You Need to Know

• Perpetual Licenses: One-time purchase, use indefinitely.
• Subscription Licenses: Recurring fees and continuous updates.
• Volume Licenses: Bulk purchase, discounts.
• Key Programs: Enterprise Agreement (EA), CSP, Open License.
• Benefits: Compliance, cost savings, and latest features.

Introduction to Microsoft Licensing for Beginners

Understanding Microsoft licensing can feel like learning a new language, especially if you’re just starting. There’s a lot of jargon, and the number of options can be overwhelming. But don’t worry—this guide will help you understand it all.

We’ll break down the most important aspects of Microsoft licensing so you can understand the basics and determine which licensing options are best for you or your business. Let’s dive in!

Software Licensing

Individuals and businesses of all sizes widely use Microsoft products. Licensing isn’t just about buying software; it’s about being compliant, saving costs, and ensuring access to the features you need. Choosing the wrong license could cost you more money or leave you without important functionalities.

Key Microsoft Licensing Terms You Should Know

Before jumping into the types of licenses, it’s useful to understand some key terms that frequently pop up when talking about Microsoft licensing:

• License: The permission to use a specific Microsoft software product.
• Perpetual License: You pay once, and you own the software forever.
• Subscription License: You pay regularly (monthly or yearly) to use the software.
• CAL (Client Access License): A license that allows users or devices to connect to Microsoft server software.
• Volume Licensing: Special licensing that allows large organizations to purchase software at a discount.
• SPLA (Service Provider License Agreement): A licensing model for service providers that want to host Microsoft software for their customers.

Understanding these terms will help make the rest of this article easier to follow. Which can be invaluable in resolving issues and optimizing software use.

Types of Microsoft Licenses

Microsoft offers various licensing models, depending on the product, the size of your organization, and your needs.

Below, we’ll explore the most common types:

1. Retail Licensing

Retail licenses are sold directly to consumers, typically for Windows, Office Home & Student, or Office Professional products. These licenses are easy to purchase through stores or online and are commonly used by individuals or small businesses.

• Example: If you’re a student who needs Microsoft Office for school, you could buy a retail license from Microsoft’s website. This is usually a one-time purchase.

Pros:

• Simple purchase process.
• Generally, it is a one-time payment.

Cons:

• Not cost-effective for large organizations.

2. OEM Licensing

OEM (Original Equipment Manufacturer) licenses are pre-installed on a computer when you buy it from a vendor like Dell or HP. This license is tied to that particular hardware, so it cannot be transferred to another computer.

• Example: If you buy a laptop with Windows 11 already installed, that’s an OEM license.

Pros:

• Cost-effective when bundled with new hardware.

Cons:

• Non-transferable if your hardware fails or is replaced.

3. Volume Licensing

Buying individual licenses can get expensive and cumbersome for organizations with multiple employees. Volume Licensing is designed for businesses that need more flexibility and often want to manage licenses for many users or devices.

• Products Available: Windows, Office, Microsoft 365, and others.
• Example: A company with 100 employees might use Microsoft 365 Enterprise through a volume licensing agreement, allowing them to provide Office and productivity tools to all employees under a single license.

Benefits of Volume Licensing:

• Lower Costs: Per-license costs are often reduced.
• Flexibility: Ability to add or remove licenses as needed.
• Management Tools: Features like centralized deployment and management through the Volume Licensing Service Center (VLSC) tools.

Types of Volume Licensing Agreements:

• Open License: Best for small to medium-sized businesses (5-250 users).
• Enterprise Agreement: For large organizations with more than 500 users.
• Microsoft Products and Services Agreement (MPSA): A flexible way to purchase multiple licenses and services under one agreement.

4. Microsoft 365 Subscription

Microsoft 365 is a subscription-based model that combines Office productivity apps (Word, Excel, PowerPoint) with cloud services like OneDrive, Exchange, and Microsoft Teams.

• Example: Small businesses may choose Microsoft 365 Business Standard, which provides Office apps, email hosting, and cloud storage for a monthly or annual fee.

Pros:

• Always up-to-date software.
• Access to cloud features and collaboration tools.
• Flexible payment options.

Cons:

• Costs can add up over time compared to perpetual licensing.

5. Cloud Licensing (Azure)

For services like Azure, Microsoft uses a pay-as-you-go licensing model. This means you only pay for what you use, and it’s great for organizations looking to scale their computing resources up or down based on demand.

• Example: A startup uses Azure to host its applications and only pays based on the number of virtual machines and the time they use them.

Pros:

• Scalability and flexibility.
• No upfront hardware costs.

Cons:

• Costs can fluctuate, which makes budgeting challenging.

Microsoft Licensing Programs

Microsoft licensing can be grouped into several programs that serve different needs. Here are the most commonly used:

1. Open License Program

The Open License Program is an easy entry point for small businesses needing multiple licenses. It’s affordable and simple to manage, designed for businesses with 5 to 250 PCs.

• Example: A small consulting firm with 15 employees may use the Open License Program to buy Microsoft Office licenses for all employees.

2. Enterprise Agreement

The Enterprise Agreement is for larger organizations. This agreement provides bulk purchasing power, allowing businesses the best value.

• Example: A large corporation with 2,000 employees might use an Enterprise Agreement to acquire Microsoft 365 licenses at a discounted rate.

Benefits:

• Standardization: Consistent technology across all employees.
• Discounts: Better pricing for volume purchases.

3. CSP (Cloud Solution Provider)

The CSP Program is for businesses that prefer to buy Microsoft cloud services through a third-party provider. A CSP can offer more tailored support and assist with the transition to cloud services.

• Example: A small company looking to move to the cloud might choose a local CSP to set up Microsoft 365 and Azure services.

The Microsoft Licensing Calculator

If you’re not sure what’s best for your organization, Microsoft provides a Licensing Calculator. It’s a handy tool for understanding the cost and finding the best solution.

• How to Use: You can input the number of users or devices and select your needed products. The calculator will help you estimate your licensing costs.

Benefits of Volume Licensing

• Cost Savings: Buying in bulk lowers per-user costs, which is helpful for larger companies.
• Simplified Management: Instead of tracking individual licenses, volume licensing makes deploying and managing licenses centrally easier.
• Standardization: Ensures that all users are on the same version of the software, reducing compatibility issues.

How to Choose the Right Microsoft License

Choosing the right license depends on several factors:

1. Number of Users: Retail or Open Licensing might be enough for small setups. Large setups benefit more from volume licensing or an Enterprise Agreement.
2. Subscription vs. Perpetual: If you prefer ongoing access to the latest updates, choose a subscription license like Microsoft 365. A perpetual license might be better for long-term use without ongoing payments.
3. Cloud or On-Premise: If you need the flexibility of remote access, cloud licensing (Microsoft 365 or Azure) might be ideal.
4. Budget: Calculate the total cost of ownership over time. Subscriptions may cost more in the long run but include updates and cloud features.

Microsoft Licensing for Servers

Microsoft also has specific licensing models for server software like Windows, SQL, and Exchange Server. Understanding server licensing can be more challenging, especially due to terms like core-based licensing and Client Access Licenses (CALs).

Server Licensing Models

1. Per Core: Licenses are based on the number of cores in your server. This is commonly used for SQL Server.
2. Server + CAL: For Windows Server, you typically need to purchase a server license plus CALs for every user or device connecting to the server.

Example: A company with ten physical servers running Windows Server would need server licenses for each machine and CALs for every employee accessing the server resources.

Frequently Asked Questions (FAQs)

What is Microsoft Licensing?

Microsoft Licensing refers to the agreements and terms that define how individuals and organizations can use Microsoft software and services. It includes different licensing models to accommodate various business needs, such as perpetual, subscription-based, and volume licensing.

What are the main types of Microsoft licenses?

The main types of Microsoft licenses are:

• Perpetual Licensing: One-time purchase for indefinite use.
• Subscription-Based Licensing: Recurring payments for continuous access and updates.
• Volume Licensing: Bulk licensing for organizations, offering discounts and simplified management.

How do subscription-based licenses work?

Subscription-based licenses require users to pay a recurring fee, either monthly or annually, to use the software. This model ensures continuous access to the latest features, updates, and support. Examples include Microsoft 365, Office 365, and Azure services.

What is volume licensing?

Volume licensing is designed for organizations that need multiple licenses. It provides discounts based on the volume of licenses purchased and simplifies license management. Programs include Microsoft Enterprise Agreement (EA), Microsoft Products and Services Agreement (MPSA), and Microsoft Open License.

What is the Microsoft Enterprise Agreement (EA)?

The Microsoft Enterprise Agreement (EA) is a volume licensing option for large enterprises with 500 or more users or devices. It offers flexible payment options, comprehensive software, and services at discounted rates. EA includes software assurance, which provides access to updates, deployment planning services, and technical support.

How does Microsoft Open License differ from Open Value?

Microsoft Open License:

• A two-year agreement allows organizations to purchase software licenses anytime during the term.
• Suitable for small to mid-sized organizations with straightforward IT needs.

Microsoft Open Value:

• It provides additional benefits, such as software assurance, which includes access to the latest software updates and deployment planning services.
• Offers more flexibility and support compared to the Open License program.

What is the Cloud Solution Provider (CSP) program?

The CSP program allows businesses to purchase Microsoft cloud services through a Cloud Solution Provider. CSPs offer tailored solutions, ongoing support, and flexible billing options, designed to help businesses manage their cloud services more effectively.

What are the different Office 365 plans?

Business Plans:

• Business Basic: Web and mobile versions of Office apps, email, OneDrive, and Teams.
• Business Standard: Includes Business Basic features plus desktop versions of Office apps.
• Business Premium: Adds advanced security and device management features.

Enterprise Plans:

• E1: Web and mobile Office apps, email, OneDrive, and Teams.
• E3: Adds desktop Office apps, data loss prevention, and legal hold.
• E5: Includes E3 features plus advanced security, analytics, and voice capabilities.

Education Plans:

• A1: Basic Office apps, email, Teams, and other educational tools.
• A3: Adds desktop Office apps and additional management features.
• A5: Includes A3 features plus advanced security and analytics tools.

What is the difference between SharePoint Online and SharePoint Server?

SharePoint Online:

• A cloud-based service included in Office 365 and Microsoft 365 subscriptions.
• Offers scalability, automatic updates, and accessibility from anywhere.

SharePoint Server:

• An on-premises solution managed by the organization’s IT department.
• Provides full control over the SharePoint environment and is suitable for businesses with specific security or compliance needs.

How is SQL Server licensed?

Core-Based Licensing:

• Licenses are based on the number of cores in the server.
• Requires a minimum of four core licenses per server.

Server + CAL Licensing:

• Licenses the server plus Client Access Licenses (CALs) for users or devices accessing the server.
• Suitable for environments with a predictable number of users or devices accessing the server.

What are the benefits of Dynamics 365 licensing?

Dynamics 365 licensing offers flexibility with various plans tailored to specific business needs. Benefits include:

• Integrated Applications: Unified applications for sales, customer service, finance, and operations.
• Scalability: Easily scalable to match business growth.
• Customization: Extensive customization options to fit unique business processes.
• Access to Innovation: Regular updates and new features.

How does Azure licensing work?

Pay-as-You-Go:

• Pay based on actual usage of Azure resources.
• Ideal for startups, small businesses, or unpredictable workloads.

Reserved Instances:

• Commit to using certain Azure resources for a one- or three-year term.
• Suitable for stable and predictable workloads.
• Offers significant cost savings compared to pay-as-you-go pricing.

What are the licensing options for educational institutions?

Educational institutions can benefit from discounted pricing and tailored plans such as:

• Office 365 A3: Includes SharePoint Online Plan 2, offering advanced features, unlimited storage, and educational tools.
• Microsoft 365 Education: Comprehensive suite including SharePoint Online, Office apps, and additional collaboration tools.
• Azure for Education: Provides cloud services at discounted rates.

How can nonprofits benefit from Microsoft licensing?

Nonprofits can access discounted Office 365 and Microsoft 365 plans, including SharePoint Online, enabling better collaboration and document management. Programs like Office 365 Nonprofit E1 and Microsoft 365 Nonprofit Business Premium offer significant discounts and dedicated support.

What tools are available for managing Microsoft licenses?

Key tools for managing Microsoft licenses include:

• Microsoft Volume Licensing Service Center (VLSC): Central portal for managing volume licenses, accessing software downloads, and retrieving product keys.
• Office 365 Admin Center: Web-based portal for managing Office 365 and Microsoft 365 services, including user accounts, service health, billing, and reporting.