Mastering Office 365 Licensing: Essential Tips and Best Practices

The different Office 365 licensing types include:

  • Office 365 E1: Basic services like online Office apps, email, and storage.
  • Office 365 E3: Advanced security, compliance features, and desktop apps.
  • Office 365 E5: All E3 features, plus analytics and advanced security.
  • Office 365 F3: For frontline workers, with essential online apps and services.
  • Microsoft 365 Business Basic: For small businesses, online apps, and cloud services.
  • Microsoft 365 Business Standard: Business apps, both online and desktop, business services.
  • Microsoft 365 Business Premium: All Standard features, advanced security and device management.

Overview of Microsoft 365 Plans

Microsoft 365 Plans

Microsoft 365 presents a diverse range of plans, each tailored to fit different user needs and organizational sizes.

This section explores the features and benefits of these plans.

  • Microsoft 365 Family: Ideal for up to 6 people, offering up to 6 TB of cloud storage (1 TB per person) and includes applications like Word, Excel, PowerPoint, and Outlook. Priced at $99.99/year, it’s suitable for small teams and families.
  • Microsoft 365 Personal: Designed for individual users, this plan provides 1 TB of cloud storage and access to essential Microsoft apps for $69.99/year.
  • Office Home & Student 2021: A one-time purchase option catering to students and home users, providing classic Office apps on a single PC or Mac at $149.99.

Each plan is uniquely positioned to cater to different segments, from individual users to families and small businesses, making Microsoft 365 a versatile choice for various needs.

Critical Components of Office 365 Licensing

When exploring Office 365 Licensing, it’s pivotal to understand its key components, each offering unique functionalities and benefits.

Exchange Online

  • Core Email Solution: Exchange Online is Microsoft’s cloud-based email service, integral to Office 365 plans.
  • Plan Variations: All Office 365 plans are available, but the features vary. Basic plans include essential email functionalities, while higher-tier plans offer advanced features like increased mailbox storage and enhanced security options.

SharePoint Online

  • Collaboration and Document Management: SharePoint Online is pivotal for document storage, management, and collaboration.
  • Plan Differences: While available in all Office 365 subscriptions, higher-tier plans provide greater storage capacity and more sophisticated document management features.


  • Personal Cloud Storage: OneDrive offers cloud storage for individuals and businesses.
  • Storage Allocation Across Plans: Storage capacity varies with Office 365 plans, ranging from 1 TB for personal plans to unlimited storage in enterprise-grade plans.

Microsoft Teams

  • Communication Hub: Teams is the central platform for communication and collaboration.
  • Access Across Plans: All Office 365 plans are available, but advanced features like webinar hosting and larger meeting sizes are reserved for higher-tier plans.

Each component plays a crucial role in Office 365, offering a range of functionalities that cater to different business needs.

Specialized Services in Microsoft 365

Beyond the essential components, Microsoft 365 encompasses specialized services that enhance its functionality and security.

Azure Information Protection

  • Data Protection and Compliance: Azure Information Protection (AIP) is critical for data security and compliance, offering capabilities for classifying and protecting documents and emails.
  • Licensing Relevance: While AIP is not included in all plans, it can be added as a separate purchase, which is essential for businesses handling sensitive information.

Microsoft 365 Apps for the Web and Desktop

  • Web and Desktop Applications: These include popular applications like Word, Excel, PowerPoint, and Outlook.
  • Availability: Web apps are generally available across all plans, offering basic functionalities, while desktop apps, offering full functionalities, are included in higher-tier plans.

These specialized services are instrumental in extending the capabilities of Microsoft 365, ensuring businesses can operate efficiently and securely in a digital environment.

Office 365 Business Plans

Office 365 Business Plans

Office 365 offers several business plans designed to meet organizational needs.

Here’s a breakdown:

  1. Microsoft 365 Business Basic:
    • Services: Web and mobile versions of Office apps, email and calendaring, file storage and sharing, team collaboration via Microsoft Teams, and cyber threat protection.
    • Best For Businesses needing online Office apps and cloud storage.
  2. Microsoft 365 Business Standard:
    • Includes everything in Business Basic.
    • Adds: Desktop versions of Office apps, advanced support, and additional business services like bookings and invoicing.
    • Best For Businesses requiring comprehensive productivity and collaboration tools.
  3. Microsoft 365 Business Premium:
  4. Office 365 E3:
    • Services: All Office apps, email and calendaring, advanced security, compliance tools, and information protection.
    • Best For Larger businesses need robust productivity tools with enhanced security and compliance features.

Office 365 Enterprise Plans

Office 365 enterprise plans are designed for larger organizations with advanced IT needs.

Here are the critical enterprise plans:

  1. Office 365 E1:
    • Services: Web-based Office apps, email, 1 TB of storage per user, Microsoft Teams, standard security.
    • Best For Enterprises needing basic Office apps and services.
  2. Office 365 E3:
    • Includes everything in E1.
    • Adds: Desktop Office apps, unlimited personal cloud storage, advanced security, and compliance tools.
    • It is best For Organizations requiring a full range of productivity tools and enhanced security and compliance capabilities.
  3. Office 365 E5:
    • Includes everything in E3.
    • It adds advanced analytics, voice capabilities, and comprehensive security and compliance tools.
    • Best For: Large enterprises requiring the most advanced analytics, communication, and security tools.
  4. Office 365 F3 (Frontline Workers):
    • Services: Web-based Office apps, email, Microsoft Teams, limited cloud storage.
    • Best For: Frontline workers requiring essential Office tools and cloud services.

Differences Between Business and Enterprise Plans

  • Scale: Enterprise plans support a more significant number of users and provide more advanced features that are suitable for large organizations.
  • Advanced Features: Enterprise plans offer more in-depth security, compliance, and analytics tools.
  • Customization and Control: Greater administrative and customization options are available in enterprise plans.

Each plan is tailored to suit different sizes and types of organizations, from small businesses to large enterprises, with varying needs regarding productivity tools, security, and compliance.

Choosing the Right License for Your Needs

o365 license types

With the lay of the land in front of us, how do you decide which license suits your needs? Here are a few things to consider:

  • User Requirements: What applications and services do your users need to perform their tasks effectively?
  • Budget: How much are you willing to spend on Office 365 licenses?
  • Future Growth: How might your needs change as your organization grows?

Enterprise license types

Office 365 E1

Think of E1 as the foundation of the Enterprise licenses. It offers web-based Office applications such as Word, Excel, and PowerPoint.

Moreover, it provides various online services like Microsoft Teams, OneDrive, SharePoint, Yammer, and Exchange. In terms of communication and collaboration, you get online meetings, video conferencing, and chat functionality.

Yet, there’s a catch. E1 doesn’t include the desktop versions of the Office applications. That means you’ll need an active internet connection to access your Office apps.

Office 365 E3

Office 365 E3 takes everything E1 offers and throws in desktop versions of the Office apps for good measure. That means you can keep working online or offline without a hitch.

But the fun doesn’t stop there. E3 also offers added security features, including encryption of emails and data loss prevention. That’s a biggie for organizations dealing with sensitive information.

Also, with E3, you get more storage space – 100GB of mailboxes and unlimited personal cloud storage.

Office 365 E5

E5 is the big kahuna of Enterprise licenses. It includes everything in E1 and E3, then adds advanced features.

These include advanced security features like Advanced Threat Protection and Advanced Compliance. The former helps protect your organization from malicious attacks, while the latter assists with managing compliance features.

E5 also offers advanced analytics with Power BI Pro and MyAnalytics. These tools provide insights into business data and personal productivity, respectively.

Finally, E5 includes Microsoft’s phone system and audio conferencing capabilities, allowing for seamless integration of your communication systems.

Pricing Breakdown for Enterprise Licenses

The pricing for Microsoft Office 365 Enterprise plans in USD is as follows:

  • Office 365 E1: Starts at $10 per user per month. This plan includes essential features like email, calendars, enterprise social networking, and web versions of Office applications.
  • Office 365 E3: Starts at $23 per user per month. This plan includes everything in E1 plus full Office suite licenses for multiple devices per user, enhanced cloud storage, and additional security and compliance features.
  • Office 365 E5: Starts at $38 per user per month. This top-tier plan includes all E3 features, advanced security, analytics tools, and voice capabilities.

Top 5 Recommendations for Choosing the Right Plan

Selecting the right Microsoft 365 plan is crucial for aligning with your organizational needs.

Here are our top 5 recommendations:

  1. Assess Your Needs: Evaluate the specific requirements of your organization, including the number of users, required applications, and storage needs.
  2. Consider Scalability: Choose a plan that fits your current needs and offers flexibility for future growth.
  3. Balance Cost and Features: Analyze the cost-effectiveness of each plan. Sometimes, investing in a higher-tier plan can be more economical in the long run due to the additional features.
  4. Review Security Requirements: For organizations handling sensitive data, prioritize plans that offer advanced security features like Azure Information Protection.
  5. Explore Integration Capabilities: Ensure the plan supports seamless integration with other tools and services used by your organization.

Best Practices in Office 365 License Management

Best Practices in Office 365 License Management

Efficient management of Office 365 licenses is critical to maximizing the investment.

Here are some strategies to follow:

  • Regular Audits: Regularly audits your Office 365 licenses to ensure they are fully utilized and align with your current needs.
  • Understand Licensing Terms: Be clear about the terms of each license type to avoid compliance issues.
  • Train Your Team: Ensure your team is well-trained on the features of your chosen plan to maximize usage and productivity.
  • Stay Informed: Keep up-to-date with any changes in Microsoft 365 offerings and pricing to ensure your plan continues to be the best fit.
  • Use License Management Tools: Utilize Microsoft’s built-in tools or third-party solutions for efficient license management.

FAQs on Office 365 Licensing Types

What is the difference between E1, E2, and E3 licensing?

Office 365 E1, E2, and E3 licenses offer progressively more features. E1 offers essential online services and web-based Office apps. E2 is no longer available for purchase but is provided as a mid-tier option between E1 and E3. E3 offers all the features of E1, desktop versions of Office apps, and enhanced security features.

What is the E5 license used for?

5 is the most comprehensive Office 365 license. It’s used for organizations that need advanced features, including more extensive security options, business analytics, and integrated communication systems.

How many licenses does Office 365 have?

Office 365 offers a variety of licenses, including Personal, Home, Business Essentials, Business, Business Premium, and Enterprise licenses (E1, E3, E5). It also provides specialized grants like F1 for frontline workers.

What is the difference between EMS E3 and M365 E3?

EMS E3 (Enterprise Mobility + Security E3) is a component of Microsoft 365 E3. While EMS E3 focuses on security features and mobile device management, M365 E3 includes everything in EMS E3 plus Office 365 E3 and Windows 10 Enterprise.

What is the difference between E1 and F1 licensing?

Both E1 and F1 are aimed at different user groups. E1 is designed for typical users who need access to all essential Office 365 applications and services. F1, on the other hand, is intended for first-line workers – those who don’t sit at a desk but are the first point of contact with customers, like sales and support staff.

Do all users need an E5 license?

Not necessarily. The E5 license is the most comprehensive—and expensive—option. Whether a user needs an E5 license depends on their specific needs in terms of features and security.

What is the difference between E3 and E4 licenses?

E4 was a previous version of the Enterprise license that is no longer available. It was similar to E3 but included features like enterprise voice capabilities in Skype for Business. These features are now part of the E5 license.

What is the difference between O365 E5 and M365 E5?

O365 E5 focuses on Office applications and services, while M365 E5 includes everything in O365 E5, plus Windows 10 Enterprise and Enterprise Mobility + Security.

What is the difference between Office 365 and Microsoft 365 licenses?

Office 365 licenses focus on Office applications and services. Microsoft 365 licenses include everything in Office 365, plus additional services like Windows 10 Enterprise and Enterprise Mobility + Security.

hat are the two versions of M365?

Microsoft 365 has two main versions: M365 Business (up to 300 users) and M365 Enterprise (for larger organizations).

Is Office 365 E5 worth it?

Whether Office 365 E5 is worth it depends on your organization’s needs. It offers the most extensive features, including advanced security and analytics, which may be invaluable for some organizations.

Is the Office 365 license per user or device?

Office 365 licenses are per user, not per device. Each user can install Office applications on multiple devices.

What is the difference between Office 365 E3 and F3 licenses?

E3 is designed for typical users and includes both online and desktop versions of Office apps. F3, however, is designed for frontline workers, offering access to essential Office 365 services but only providing web-based Office apps.

What happens when Office 365 E3 license expires?

When an Office 365 E3 license expires, access to Office 365 services gets restricted. While data won’t be lost, you must renew the license to regain full access.

Does M365 include a Windows license?

Microsoft 365 licenses include Windows 10 Enterprise, Office 365, and Enterprise Mobility + Security.

Can you buy Microsoft Office for a lifetime?

Microsoft primarily offers Office as a subscription service, but they offer a standalone version, Office 2019, which you can purchase for a one-time fee for a single device. However, this version doesn’t include updates or access to cloud-based features.

Does an F3 license include teams?

Yes, an Office 365 F3 license includes access to Microsoft Teams, enabling frontline workers to communicate and collaborate effectively.

What are the different Office 365 licenses?

Office 365 offers a range of licenses, including Office 365 Business (Basic, Standard, Premium), Office 365 Enterprise (E1, E3, E5), Office 365 Education, and Office 365 Nonprofit.

What are the different types of Microsoft licenses?

Microsoft provides several types of licenses, such as Retail or Full Packaged Product (FPP), Original Equipment Manufacturer (OEM), Volume Licensing, and Subscription Licensing (like Office 365 or Microsoft 365).

What are the levels of Office 365 subscription?

Office 365 subscriptions are mainly divided into Business and Enterprise levels. The Business level includes Basic, Standard, and Premium, while the Enterprise level includes E1, E3, and E5.

What are the levels of Office 365 subscription?

Office 365 subscriptions are mainly divided into Business and Enterprise levels. The Business level includes Basic, Standard, and Premium, while the Enterprise level includes E1, E3, and E5.

How many licenses does Microsoft 365 have?

Microsoft 365 offers various licenses that cater to different user groups, including Microsoft 365 Business Basic, Business Standard, Business Premium, Enterprise E3, and Enterprise E5.

What are the 4 types of Microsoft Office?

The four main types of Microsoft Office are Microsoft 365 (formerly Office 365), Office Home u0026amp; Student 2019, Office Home u0026amp; Business 2019, and Office Professional 2019.

What are the 3 types of Windows licenses?

The three types of Windows licenses are Retail, OEM (Original Equipment Manufacturer), and Volume Licensing.

Why is E5 better than E3?

5 is a higher tier than E3 in the Office 365 Enterprise suite. It includes all the features of E3 plus advanced security, voice, and data analysis tools. It’s designed for businesses requiring a robust productivity, collaboration, and security tools suite.

What is Office 365 E3 and E5?

Office 365 E3 and E5 are part of the Office 365 Enterprise suite. E3 provides core collaboration and productivity tools, while E5 adds advanced security, analytics, and voice capabilities.

Does an E1 license include Teams?

Yes, an Office 365 E1 license includes Microsoft Teams alongside other cloud services like Exchange, SharePoint, and OneDrive.

What is the difference between F3 and E3 license?

The F3 license, formerly F1, is designed for first-line workers who do not need full access to Office 365 services. The E3 license is more comprehensive, providing full access to Office 365 services, including the downloadable Office app.

What is the difference between Office 365 F1 and E3 license?

Office 365 F1 (now F3) is designed for first-line workers and includes essential features of Office 365 but lacks full access to services like OneDrive and downloadable Office apps. The E3 and other licenses provide full access to all Office 365 services.

How does Office 365 licensing work?

Office 365 licensing operates on a per-user basis. When a license is assigned to a user, that user can install and use the Office 365 services across multiple devices. The specific services available will depend on the license type purchased.

What is an open license for Microsoft Office?

An Open License for Microsoft Office is a volume licensing program for small to medium-sized businesses that allows the purchase of multiple copies of software at a discounted price.

What is M365 E3 license?

Microsoft 365 E3 license is a comprehensive subscription plan designed for enterprise-level businesses. It includes Office 365, Windows 10 Enterprise, and Enterprise Mobility + Security.

Why choose Microsoft 365 E5?

Microsoft 365 E5 provides the most comprehensive productivity, collaboration, and security features in the Microsoft 365 suite.

It includes advanced features like Power BI Pro, advanced threat protection, and phone system capabilities, making it an excellent choice for businesses that require robust functionality and the highest level of security.

How many devices can use E5 license?

A Microsoft 365 E5 license permits users to install Office 365 apps on up to five PCs or Macs, tablets, and smartphones.

What apps are included in a Microsoft 365 E5 license?

Microsoft 365 E5 includes a full range of productivity and security apps, including Word, Excel, PowerPoint, Outlook, OneNote, Access, Publisher, Exchange, Teams, OneDrive, SharePoint, Power BI Pro, and advanced security and compliance tools.

What 365 licenses include P1?

Azure Active Directory P1 capabilities are included with Office 365 E3 and E5, and Microsoft 365 Business Premium, E3, and E5 licenses

Does E5 include Intune?

Yes, Microsoft 365 E5 includes Intune, a part of Microsoft’s Enterprise Mobility + Security service, which provides mobile device and application management.

What is the difference between EMS E3 and E5?

Enterprise Mobility + Security (EMS) E3 provides basic device management and security features. EMS E5 provides more advanced features, including Azure Active Directory P2, Azure Information Protection P2, and Microsoft Defender for Identity.

Does E1 license include a mailbox?

Yes, the Office 365 E1 license includes a mailbox with a 50 GB storage limit and access to the web-based version of Outlook.

What is the difference between Microsoft 365 E1 vs E3?

E3 has a much more complete package; you can read the comparison.

What is the difference between E1 and E5?

Comparing Microsoft E1 and E5 Licenses:

  • Microsoft E1 License:
    • Basic online Office apps (Word, Excel, PowerPoint).
    • Core services like email, calendar, and Microsoft Teams.
    • Ideal for businesses needing essential productivity tools.
  • Microsoft E5 License:
    • Includes all E1 features plus full desktop Office apps.
    • Advanced security, compliance tools, and analytics (Power BI Pro).
    • Suitable for larger organizations with complex security and compliance needs.

What are the differences between Microsoft E1 and F3 Licenses?

F3 is for frontline workers, and E1 is for office workers.

With these answers in hand, you should better understand the nuances of Office 365 licensing types.

Remember, it’s all about aligning the license with your organization’s needs. So, feel free to dig deep and ask the tough questions. It’s your organization’s productivity and efficiency on the line!

Office 365 Licensing Services by Redress Compliance

Redress Compliance offers expert guidance and services related to Office 365 licensing, helping organizations navigate and optimize their licensing needs:

  • License Selection Advice: Assisting organizations in choosing the right Office 365 licenses that align with their business requirements.
  • Optimization Strategies: Providing insights on how to optimize existing Office 365 licenses for cost-effectiveness and efficiency.
  • Negotiation Assistance: Offering expertise in negotiating Microsoft enterprise agreements and other related contracts to ensure favorable terms.
  • Customized Solutions: Tailoring services to meet each organization’s unique needs, whether small businesses or large enterprises.

For organizations looking to make informed decisions about Office 365 licensing or seeking assistance with their Microsoft licensing strategy, contact Redress Compliance.


  • Fredrik Filipsson

    Fredrik Filipsson brings two decades of Oracle license management experience, including a nine-year tenure at Oracle and 11 years in Oracle license consulting. His expertise extends across leading IT corporations like IBM, enriching his profile with a broad spectrum of software and cloud projects. Filipsson's proficiency encompasses IBM, SAP, Microsoft, and Salesforce platforms, alongside significant involvement in Microsoft Copilot and AI initiatives, enhancing organizational efficiency.