Define identity licensing
A license is a purchased agreement to allow a user or group of users to use a piece of Microsoft technology. Most people are familiar with an end-user license agreement (EULA) when you buy a piece of software that documents the responsibilities of the purchaser and the software company. Licenses in Azure, Microsoft 365, and other technologies are no different. To be able to use specific functions / features of Microsoft cloud technologies, you often must buy a license. Here are several types of licenses to be familiar with:
- Microsoft Entra ID P1 or P2 license - This license allows you to purchase access to the more features in Microsoft Entra ID. You need a Microsoft Entra ID P2 license if you want to use Privileged Identity Management (PIM) capability in Microsoft Entra ID. Any user that assigns or manages assignments in PIM needs to have a license. A user within a privileged role doesn't need a license.
- There are Microsoft 365, Office 365, and Windows licenses - These licenses are assigned to a Microsoft Entra user or group to grant them access to use Office or Windows products. You need one license for each user who needs access to Windows and / or office.
- Monthly Active User (MAU) license - This license is used with Microsoft Entra External Identities. A monthly report is pulled for billing purposes, looking for external users logging in during the month.
- Other - there are many other types of licenses available.
| License | Monthly Active User (MAU) billing |
|---|---|
| Purchased agreement to allow users or guests to use a Microsoft technology. | Pricing model for external users in Microsoft Entra ID |
| Common SKUs / Licenses: | MAU billing available when you have a subscription |
| Microsoft Entra ID P1 or P2 license | Report of active users runs each month for billing |
| Microsoft 365 / Office 365 license | First 50,000 MAUs free monthly (P1 and P2) |
| Windows license | Helps establish predictable pricing |
| License needed per user on the service |
Subscription versus a license
Subscription - A subscription is an agreement with Microsoft to use one or more Microsoft cloud platforms or services, for which charges accrue based on either a per-user license fee or on cloud-based resource consumption. Microsoft's Software as a Service (SaaS)-based cloud offerings (Microsoft 365 and Dynamics 365) charge per-user license fees. Microsoft's Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) cloud offerings (Azure) charge based on cloud resource consumption. You can also use a trial subscription, but the subscription expires after a specific amount of time or consumption charges. You can convert a trial subscription to a paid subscription. Organizations can have multiple subscriptions for Microsoft's cloud offerings.
License - For Microsoft's SaaS cloud offerings, a license allows a specific user account to use the services of the cloud offering. You're charged a fixed monthly fee as part of your subscription. Administrators assign licenses to individual user accounts in the subscription. For the example, the Contoso Corporation has a Microsoft 365 E5 subscription with 100 licenses, which allows to up to 100 individual user accounts to use Microsoft 365 E5 features and services.