The Definitive Guide to

Microsoft 365 and Office 365 License Types

Learn and compare between Microsoft 365 and Office 365 license types, its costs, features, and get insights from a Microsoft licensing specialist.

► Find out how to successfully leverage insights to optimize Microsoft licenses!

Introduction

Understanding Microsoft 365 and Office 365 license types is important for saving money and ensuring employee productivity. Unfortunately, many companies happen to be improperly licensed and skip Microsoft EA renewal optimizations without even knowing.

This is often because licensing guides are unclear – leading to under-or over-licensing. It doesn't help that Microsoft’s own pricing web pages aren't the easiest to navigate (e.g., it is difficult to find a side-by-side view of all business and enterprise license types, including features and pricing).

To simplify things, we’ve created a license cheat sheet. It includes:

  1. Overview of common Office 365 (and Microsoft 365) license types
  2. FAQ insights from one of LeanIX’s Microsoft licensing specialists

 

 

Overview of common Office & Microsoft 365 license types

Enterprise (Support greater than 300 users)

License Type Pricing Feature Overview
License TypeMicrosoft 365 Apps for enterprise (formerly Office 365 ProPlus) Pricing$12.00 user/month (annual commitment) Feature OverviewEnterprise edition of the Office apps plus Outlook and cloud-based file storage and sharing. Exchange, Bookings, Social apps, Stream, and Teams are not included.
License TypeOffice 365 E1* Pricing$8.00 user/month (annual commitment) Feature OverviewIncludes full access to social & intranet, files & content, work management, but limited access to Office apps, email & calendar, meetings & voice, and analytics.
License TypeOffice 365 E3* Pricing$20.00 user/month (annual commitment) Feature OverviewAll features of Office 365 E1, plus full access to Office apps, email & calendar, device & app management, IAM, but limited access to information protection or advanced compliance.
License TypeOffice 365 E5* Pricing$35.00 user/month (annual commitment) Feature OverviewAll features of Office 365 E3, plus full access to meetings & voice, analytics, threat & information protection, and advanced compliance.
License TypeMicrosoft 365 E3 Pricing$32.00 user/month (annual commitment) Feature OverviewAll features of Office 365 E3, plus full access to security management, limited access to threat & information protection, and compliance management but limited access to IAM.
License TypeMicrosoft 365 E5 Pricing$57.00 user/month (annual commitment) Feature OverviewAll features of Microsoft 365 E3, plus full access to advanced analytics, IAM, threat & information protection, and compliance management.
License TypeMicrosoft 365 F3 (formerly Microsoft 365 F1) Pricing$8.00 user/month (annual commitment) Feature OverviewAll features of Microsoft 365 E3, but without advanced analytics.

Business (Support up to 300 users)

License Type Pricing Feature Overview
License TypeMicrosoft 365 Business Basic (formerly Office 365 Business Essentials) Pricing$5.00 user/month (annual commitment + autorenewal) Feature OverviewIncludes web and mobile versions of Word, Excel, and Powerpoint, plus Microsoft Teams, Exchange, OneDrive, and SharePoint. Desktop versions of Office apps are not included.
License TypeMicrosoft 365 Business Standard (formerly Office 365 Business Premium) Pricing$12.50 user/month (annual commitment + autorenewal) Feature OverviewFor businesses that need Office apps across devices, plus business email, cloud file storage, and online meetings and chat.
License TypeMicrosoft 365 Business Premium (formerly Microsoft 365 Business) Pricing$20.00 user/month (annual commitment + autorenewal) Feature OverviewIncludes everything in Business Standard, plus advanced cyberthreat protection and device management with Intune and Azure Information Protection.
License TypeMicrosoft 365 Apps for business (formerly Office 365 Business) Pricing$8.25 user/month (annual commitment + autorenewal) Feature OverviewOffers Office apps across devices and OneDrive cloud file storage. Business email, calendar, or Teams are not included.

Note: we display Office 365 E1, E3, and E5 above as many clients and prospects have these licenses, and Microsoft continues to offer them. However, Microsoft has updated this line to include Microsoft 365 E5, E3 and F3. These add intelligent experiences, enterprise-grade management, and advanced security features –but are priced substantially higher.

Find a brief comparison of Office 365 E3 vs. Microsoft 365 E3, with an included license for Windows 10 Enterprise & Microsoft Intune (enterprise mobility security package) being the biggest major difference between them.

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Insights from LeanIX’s Microsoft Licensing Expert

Below, Dejan Sraka, LeanIX’s Senior Engineering Manager, answers key questions on smart licensing with Office 365 and Microsoft 365. He’s worked closely with more than fifty companies in eight industries to successfully utilize SaaS services and Office/Microsoft 365 deployments.

Q: What licensing type is recommended?

A: Office and Microsoft 365 are available with various services bundled in the offered license packages. To pick the right license, consider the following:

  • Are you already using any comparable services?
  • Would services bundled in the packages complement or replace already actively integrated and used services? Are there any bundled services not needed?
  • What are the implementation/replacement costs for the services from the bundle?
  • How willing are you to integrate your business tightly into a whole Microsoft suite?

In addition to answering these questions, review service usage data. This boosts license-type decision-making with concrete data.

Q: Should I mix licensing types?

A: It is common for companies to mix license types as access, feature, and function needs vary by employee type and role. This is why it is essential to do a thorough inventory of your current environment before deployment of the Microsoft 365 solution.

This step should also include the discovery of similar, existing services already in use and agreement on whether they will remain in use after the deployment of Microsoft 365. Keeping or leaving comparable services influences the decision on which license type is required for each employee type.

Q: Where do you see clients waste money with unused functionality?

A: Businesses often buy bulk licenses but only use a subset of a license’s available functionality. In other cases, companies underbuy and limit the productivity of key staff. Buy-to-fit is the best way to ensure cost efficiency without inhibiting work efforts. But this requires understanding who you’re buying for, where licenses exist, and what the use case is.

Once these are defined, monitor adoption and ongoing use. It is not enough to buy based on security features, for example, and select Microsoft 365 E5 version. You may find that only twenty percent of staff use the security functionality and that less than half of employees ever activate their Microsoft Apps suite. Schedule quarterly reviews to ensure proper license assignment.

Q: What are other businesses and enterprises doing to improve productivity, license management, or cost savings?

A: Businesses manage SaaS by creating adoption and migration plans. With tools like LeanIX SaaS Intelligence, it's much easier to track adoption and usage.

For example, we saw one enterprise buy Office E5 licenses for the majority of its employees. Yet, less than one percent of employees utilized the license’s advanced security features. More than eight percent of employees were never assigned a Microsoft 365 Apps license, and only seventy-six percent of users actually activated the product. Many users could have downgraded to an F1 license without losing needed functionality.

We helped the customer understand the situation, potential cost savings, and underutilization. SaaS visibility helped them adjust licenses and add processes to achieve smarter adoption.

 

Answers to frequently asked questions on Microsoft license types

What does the Microsoft E3 license include?

Microsoft 365 E3 license costs $32.00 per user per month with an annual commitment and includes:

  • Microsoft 365 Apps; Powerpoint, Word, Excel, OneNote, Publisher (PC only), and Access (PC only)
  • Email and calendar; Outlook, Exchange, and Bookings
  • Social and Intranet; SharePoint and Yammer
  • Files and content; OneDrive, Stream, Sway, Lists, and Forms
  • Work management; Planner, Power Apps, Power Automate, and Power Virtual Agents, and To Do
  • Device and app management
  • Security management

What is the difference between Office 365 and Microsoft 365?

Microsoft offers Microsoft 365 E3 and Office 365 E3 licenses.

Office 365 E3 is an enterprise license that includes all features of Office 365 E1, plus full access to Office apps, email & calendar, device & app management, IAM, but limited access to information protection or advanced compliance.

Microsoft 365 E3 is an enterprise license which includes all features of Office 365 E3, plus full access to security management, limited access to threat & information protection, and compliance management but limited access to IAM.

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