Understanding Microsoft Licensing Terminology: A Complete Guide
- License: Legal permission to use software.
- EULA: End User License Agreement.
- Software Assurance: Benefits for volume licensing customers.
- CAL: Client Access License.
- True-Up: Annual adjustment for volume licenses.
Introduction to Microsoft Licensing Terminology
Microsoft licensing can be daunting, especially if you aren’t familiar with the terms involved. The jargon alone can be a barrier to understanding the type of license you need, how to manage it, and how much it will cost.
To make things easier, this guide covers key Microsoft licensing terminology, simplifying each concept with examples and explanations. Whether you’re an IT professional, a business owner, or someone looking to understand Microsoft’s licensing options, this breakdown is your go-to resource.
License
A license is essentially permission from Microsoft to use a specific software product. It is what gives users or businesses the right to install and run Microsoft software on their devices.
- Example: Purchasing a license for Microsoft Office allows you to install Word, Excel, and other applications on your computer.
Microsoft licenses can come in different forms—such as subscriptions or perpetual licenses—depending on how the software is paid for and used. Software investments by ensuring you always have access to the latest features, support, and training.
Types of Licenses
Perpetual License
A Perpetual License is a one-time purchase that allows you to use the software forever. However, this kind of license often lacks the ongoing updates or support subscription licenses offer.
- Example: Buying Office 2019 Home & Business is a perpetual license, meaning you pay once and own it for life, but without major updates.
Subscription License
A Subscription License is a licensing model where you pay for the software monthly or yearly. This approach is designed to keep you up-to-date with the latest features and security patches.
- Example: Microsoft 365 licenses are subscription-based, meaning you’ll always have access to the latest version of the software.
Client Access License (CAL)
A Client Access License (CAL) is required when users or devices access Microsoft server software, such as Windows Server or SQL Server.
- User CAL: One user can access the server from multiple devices.
- Device CAL: This allows multiple users to access the server from one device.
- Example: A Windows Server company might need to purchase 50 User CALs so 50 employees can connect to the server.
Volume Licensing
Volume Licensing allows organizations to purchase software licenses in bulk, which is typically cheaper and comes with easier management tools.
- Types of Volume Licensing:
- Open License: Designed for small to medium-sized businesses.
- Enterprise Agreement (EA): Geared towards larger enterprises requiring a wide range of Microsoft products.
- Microsoft Products and Services Agreement (MPSA): A flexible volume licensing option simplifying buying across different business units.
- Example: A business with 100 employees might choose a Volume Licensing Agreement for Office 365 to provide software at a reduced price for every employee.
Microsoft 365
Microsoft 365 is a subscription service that combines Office applications (such as Word, Excel, and PowerPoint) with additional cloud services, such as OneDrive and Teams.
- Microsoft 365 Business vs. Enterprise:
- Business Plans: Suitable for small to medium businesses with up to 300 users.
- Enterprise Plans: Designed for larger companies needing advanced compliance and security features.
- For example, a small business might choose Microsoft 365 Business Standard because of its ease of use and affordability.
Azure Subscription
Azure is Microsoft’s cloud computing platform, and using Azure services involves a subscription-based model.
Example: If a company hosts a website on Azure Virtual Machines, they will pay based on the processing power and data consumed.y.
Pay-as-you-go: Pay for only what you use, whether it’s storage, virtual machines, or databases.
Reserved Instances: Commit to certain services for longer to get a discount.
Software Assurance (SA)
Software Assurance is an add-on that provides benefits like free upgrades, support, training, and deployment tools. It’s often added to Volume Licensing agreements.
- Example: An organization buying a Windows Server license might opt for Software Assurance to receive the latest version of the server OS when it becomes available.
Microsoft Terminology
OEM Licenses are pre-installed on new hardware by manufacturers like Dell or HP. These licenses are tied to the specific device they were purchased with and are non-transferable.
- Example: If you buy a laptop with Windows 11 pre-installed, that’s an OEM license.
License Mobility
License Mobility allows eligible volume licenses to be moved to cloud environments without additional licensing costs. This is especially useful for hybrid environments that combine on-premises and cloud resources.
- Example: A company with SQL Server Volume Licenses might move their workloads to Azure without purchasing extra licenses.
BYOL (Bring Your Own License)
BYOL is a model that allows you to bring your existing licenses into a cloud environment like Azure, potentially reducing costs.
- Example: A business with an SQL Server license can bring it to Azure Virtual Machines, reducing the overall cloud deployment cost.
Enterprise Agreement (EA)
The Enterprise Agreement is a three-year licensing agreement for larger businesses with over 500 users or devices. It provides access to various Microsoft software products and allows for significant discounts.
- Example: A company with 2,000 employees might use an EA to secure Microsoft 365 licenses for all users at a reduced cost.
Cloud Solution Provider (CSP)
The Cloud Solution Provider (CSP) program allows businesses to buy Microsoft cloud services from third-party resellers, such as Microsoft 365 and Azure. CSP partners provide support and additional services.
- Example: A company may purchase its Microsoft 365 subscription from a local CSP to get more hands-on support.
Unified Licensing
Unified Licensing simplifies Microsoft licensing by bundling multiple services under a single contract, including cloud solutions, on-premises software, and support.
- Example: A large enterprise that uses Microsoft 365, Azure, and Dynamics 365 might consolidate these services under a Unified License to streamline management and payment.
License Types Based on Devices and Users
- User-Based License: Licenses a specific user, allowing them to access software on multiple devices.
- Example: Employees with a Microsoft 365 E3 User License can install Office apps on their desktops, laptops, and mobile phones.
- Device-Based License: License a specific device, regardless of who uses it.
- Example: A shared computer in a library that runs Windows 10 might have a Device-Based License.
Downgrade Rights
Downgrade Rights allow customers to use an older version of the software instead of the version they purchased.
- Example: A company buying a Windows Server 2022 license might use Windows Server 2019 if their applications aren’t compatible with the latest version.
External Connector License
An External Connector License is needed if you want external users, such as customers or business partners, to access your Microsoft server software.
- Example: An e-commerce company that needs customers to access certain Windows Server resources may require an External Connector License.
Tenant
In Microsoft cloud terminology, a Tenant is an organization’s dedicated instance of Microsoft 365 or Azure Active Directory.
- Example: A company setting up Microsoft 365 would have its tenant providing its employees with email, collaboration, and security services under one umbrella.
Hybrid Use Benefit (HUB)
The Hybrid Use Benefit allows customers to use their existing on-premises licenses for workloads in Azure, effectively reducing cloud costs.
- Example: A company with Windows Server data center licenses can use them for Azure virtual machines instead of paying for separate Azure Windows VM licensing.
Pay-as-you-Go Licensing
Pay-as-you-go licensing means you pay only for the services you consume, a model commonly seen in Azure. This flexible model allows businesses to scale up or down as needed.
- Example: If you are running a marketing campaign and need additional server power for two weeks, Azure’s pay-as-you-go model allows you to spin up additional virtual machines and shut them down after the campaign.
Reserved Instances (RI)
Reserved Instances are a licensing option in Azure where you can commit to using certain services for a one- or three-year term in exchange for significant discounts.
- Example: A business needing steady database services may buy a Reserved Instance of Azure SQL for three years, reducing overall costs.
Multi-User Licensing (RDS)
Remote Desktop Services (RDS) licensing allows multiple users to access a Windows server remotely. Each user or device requires an RDS CAL.
- Example: A customer support team using a Remote Desktop to access a centralized server requires RDS User CALs for each team member.
License Compliance
License Compliance refers to ensuring your organization has the correct licenses for the software used by Microsoft’s licensing terms.
- Example: If you have 50 employees using Office 365, you must have 50 licenses to stay compliant.
Non-compliance can lead to penalties, and Microsoft sometimes audits organizations to ensure they meet their licensing requirements.
SA Benefits (Training, Support, Deployment Planning)
Software Assurance (SA) benefits include training, support, and deployment planning services.
- Example: A company purchasing a Windows Server with SA might get Deployment Planning Services to help install and configure the server software efficiently.
CAL Suites
A CAL Suite is a package that bundles multiple CALs together for convenience and cost savings.
- Example: The Core CAL Suite includes licenses for Windows Server, Exchange Server, and SharePoint Server, making it more cost-effective than buying each separately.
Nested Licensing
Nested Licensing applies to environments like virtual machines, where licenses might be needed for both the physical host and the virtual machines running on it.
- Example: A company using Hyper-V on a Windows Server might need a Windows Server Host License and additional Virtual Machine Licenses for the VMs running on that server.
Licensing Portability
Licensing Portability allows certain volume licenses to be reassigned to other servers or devices, providing flexibility when infrastructure changes are needed.
- Example: If an application is moved from an on-premises server to Azure, license portability can help avoid the need to purchase new licenses.
Trial Licensing
Trial Licensing allows users to test Microsoft software for a limited time without cost. After the trial, you need a full license to continue using the software.
- Example: A business might use a Microsoft 365 E5 trial for 30 days before deciding if it’s worth the investment.
FAQs
What is Microsoft Licensing?
Microsoft Licensing defines the terms and conditions for using Microsoft software. It includes various licenses such as perpetual, subscription-based, and volume licenses.
What is a Perpetual License?
A perpetual license allows users to pay a one-time fee to use the software indefinitely. This type of license does not require ongoing payments.
What is a Subscription License?
A subscription license requires regular monthly or annual payments to continue using the software. This model ensures access to the latest updates and features.
What is an OEM License?
An Original Equipment Manufacturer (OEM) license comes pre-installed on new hardware and is typically tied to that specific device. It is usually more cost-effective but non-transferable.
What is Volume Licensing?
Volume licensing is designed for organizations that need multiple licenses. It offers discounts based on the number of licenses purchased and simplifies management under a single agreement.
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 significant discounts, comprehensive coverage, and flexibility.
What is the Microsoft Products and Services Agreement (MPSA)?
The Microsoft Products and Services Agreement (MPSA) provides a flexible, transactional licensing approach for organizations of varying sizes. It consolidates all product and service purchases under a single agreement.
What is the difference between Microsoft Open License and Open Value?
Microsoft Open License allows organizations to purchase licenses as needed over two years. Open Value offers additional benefits like software assurance and flexible payment terms over three years.
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.
What are the different Office 365 plans?
Office 365 plans include Business Basic, Business Standard, Business Premium, and various Enterprise plans (E1, E3, E5). Each plan offers different features and services.
What is the difference between SharePoint Online and SharePoint Server?
SharePoint Online is a cloud-based service in Office 365 subscriptions, offering scalability and accessibility. SharePoint Server is an on-premises solution that provides full control over the environment.
How is SQL Server licensed?
SQL Server can be licensed based on the number of cores in the server (core-based licensing) or through a server license plus Client Access Licenses (CALs).
What are the benefits of Dynamics 365 licensing?
Dynamics 365 licensing offers integrated sales, customer service, finance, and operations applications. It provides flexibility, scalability, and extensive customization options.
How does Azure licensing work?
Azure offers pay-as-you-go pricing, where costs are based on actual resource usage, and reserved instances, which provide significant cost savings for long-term commitments.
What tools are available for managing Microsoft licenses?
The Microsoft Volume Licensing Service Center (VLSC) and the Office 365 Admin Center are key tools for managing licenses. These tools help track usage, manage subscriptions, and ensure compliance.
