Dynamics 365 Licensing Models
Microsoft Dynamics 365 is a cloud-based CRM and ERP application suite whose licensing model is both modular and continually evolving. Understanding the core licensing models is the foundation for an effective cost-control strategy. For a deeper dive into licensing metrics and capacity models, see our guide to Dynamics 365 Licensing Metrics and Models.
| Licensing Model | How It Works | Best Suited For | Approximate Cost |
|---|---|---|---|
| Per-User (Full User) | Named user subscription per specific app. Each user requires a licence for each Dynamics 365 module they access. | Power users who work extensively in the system — sales reps, finance managers, service agents | CRM: ~$105/user/month; ERP: ~$210/user/month |
| Team Member | Low-cost licence for basic read and limited write access across all Dynamics 365 apps. Users can view data, update contacts, enter timesheets, and create notes — but cannot execute core business processes. | Executives viewing dashboards, HR staff submitting expenses, assistants with limited data-entry needs | ~$8/user/month |
| Attach Licence | Discounted add-on for users who already hold a Full User licence for one app and need access to additional apps. Provides identical functionality to a full licence at a fraction of the price. | Multi-role users — e.g., a service manager who also needs Sales access, or a finance controller who also uses Supply Chain | ~$20/user/month |
| Operations Activity | Mid-tier licence for ERP scenarios, bridging Team Member and Full User capabilities. Allows more than basic read access — e.g., approving invoices, updating inventory — without full ERP functionality. | Warehouse supervisors, purchasing clerks, operations staff with defined transactional tasks | ~$50/user/month |
| Per-Device | Licences a specific shared device (not a named user). Unlimited users can access Dynamics 365 on that device — e.g., a retail POS terminal or warehouse kiosk. | Shift-based environments: retail stores, factory floors, call centres with shared workstations | Approximately equal to a Full User licence for that app |
| Legacy Plan (Retired) | Bundled licences such as the Customer Engagement Plan or Unified Operations Plan — retired by Microsoft in 2019 in favour of the modular base-plus-attach model. | Organisations grandfathered on old agreements. Should be reviewed at renewal for modern alternatives. | Varies (often more expensive than current modular licensing) |
For a detailed comparison of CRM vs ERP application licensing, see our guide to Licensing Dynamics 365 CRM & ERP Applications.
The single most impactful licensing decision is correctly mapping each user to the minimum licence tier that covers their actual needs. Organisations that conduct a role-based licensing analysis typically find 15–25% of their full-licence users could be reassigned to Team Member or Activity licences — yielding six-figure annual savings without reducing anyone's actual system access.
Bundling Strategies and the Base-Plus-Attach Model
The base-plus-attach licensing model is Microsoft's primary mechanism for controlling costs when users need access to more than one Dynamics 365 application. It replaced the retired bundled plans in 2019 and is now the standard approach for multi-app licensing. For a comprehensive walkthrough, see our CIO Playbook: Dynamics 365 Licensing Strategy.
How Base-Plus-Attach Works
Every user must have at least one "base" licence at the standard price — this is their primary app. Once a base licence is assigned, any additional Dynamics 365 apps for that user can be purchased as attach licences at ~$20/user/month, regardless of the app's full price. The attach licence provides identical functionality to a full licence.
📊 Cost Scenario: Multi-App User
A customer service manager needs both Sales Enterprise and Customer Service Enterprise access.
Without attach model: $105 (Sales) + $105 (Customer Service) = $210/month
With attach model: $105 (Sales base) + $20 (Customer Service attach) = $125/month
Critical Rules for Base-Plus-Attach
| Rule | What It Means | Common Mistake to Avoid |
|---|---|---|
| Most expensive app must be the base | The first Dynamics app assigned to a user must be the highest-priced one they need. All cheaper apps are attached. | Assigning a CRM app ($105) as base when the user also needs an ERP app ($210) — the ERP must be the base |
| No limit on attach licences per user | A user can have one base plus multiple attaches — e.g., Finance (base) + Sales (attach) + Customer Service (attach) + Field Service (attach) | Purchasing multiple full licences for the same user instead of using the attach model |
| Cannot mix Professional and Enterprise editions | You cannot have Sales Professional and Sales Enterprise users in the same environment. Choose one edition per app for the entire organisation. | Starting with Professional edition to save money, then discovering you cannot attach Enterprise-tier apps |
| Tenant must have at least one Full User licence | You cannot run Dynamics 365 solely with Team Member licences. At least one full admin user is required. | Attempting to deploy Dynamics with only Team Member licences for a small pilot |
Need help optimising your Dynamics 365 licence mix? Our independent advisory team can identify savings.
Microsoft Optimisation Services →Common Pitfalls in Enterprise Dynamics 365 Licensing
| Pitfall | What Happens | Risk Level | How to Avoid It |
|---|---|---|---|
| Duplicate entitlements | Users end up with two full licences for different apps when an attach licence would suffice — common when departments purchase in silos | High | Centralise licence management; run reports to find users with multiple full licences |
| Misclassified users | Power-user licences assigned to people who only view dashboards; or Professional edition chosen when Enterprise features are needed later | High | Conduct role-based analysis; map each role to minimum required licence tier |
| Over-licensing (shelfware) | More licences purchased than users who actually log in; modules bought "just in case" that go unused | Medium | Track active vs. assigned users quarterly; reclaim licences from inactive accounts (90+ days) |
| Under-licensing | Users accessing Dynamics functionality without the correct licence — through shared logins, wrong security roles, or missing Team Member restrictions | Critical | Enforce licence-to-role mapping; use Azure AD groups for assignment; note Microsoft's increasing technical enforcement |
| Not using attach model | Multi-app users carry two or more full-price licences instead of base + attach | High | Policy: no user gets a second full licence without attach evaluation first |
| Ignoring Team Member opportunities | All users given full licences out of simplicity, even those who only need read access or limited input | Medium | Identify light users; assign Team Member licences where usage fits within strict limitations |
| Multiplexing / indirect access | Custom portals or middleware funnel multiple users through a single Dynamics licence, violating Microsoft's terms | Critical | Every internal user who benefits from Dynamics data must be licensed; design integrations with licensing in mind |
| Overlooking add-on costs | Exceeding included Dataverse storage, API call quotas, or add-on capacity (marketing contacts, AI Builder credits) generates unexpected charges | Medium | Monitor capacity in Power Platform Admin Center; pre-purchase capacity rather than paying overage fees |
Microsoft is progressively implementing automated compliance controls. Starting in 2025, Finance and Supply Chain modules will block unlicensed users from accessing the service — a shift from the previous trust-based model. Under-licensing that was previously invisible will increasingly cause system access failures and business disruption. Self-correcting before enforcement is far cheaper than reacting after it.
Price Optimisation Strategies
Controlling Dynamics 365 costs is an ongoing discipline, not a one-time purchasing decision. For the latest on pricing changes and industry trends, see our analysis of Key Changes in Microsoft Licensing and Microsoft Licensing Trends 2025–2026.
| # | Strategy | Expected Impact |
|---|---|---|
| 1 | Right-size licence types to user needs: Deploy a tiered licensing model. Not every user needs a $105–$210 full licence. Switching dashboard-only users to Team Member licences at $8/month yields immediate savings. | Typically 15–25% reduction in per-user spend |
| 2 | Maximise attach licence adoption: Audit all users with multiple Dynamics apps and convert second/third licences to attach pricing at ~$20/month. | 10–20% cost reduction for multi-app deployments |
| 3 | Eliminate shelfware before renewal: Identify unassigned and inactive licences (90+ days no login). Reduce counts before entering renewal negotiations. | 5–15% reduction in total licence count |
| 4 | Consider Power Platform alternatives: For peripheral use cases, a Power Apps per-app licence may be cheaper than a full Dynamics licence — provided users don't access restricted Dynamics entities. | Variable; often $5–$20/user/month savings for specific roles |
| 5 | Use volume licensing and long-term agreements: Enterprise Agreements (EAs) offer price locks and potential discounts for 3-year terms. CSP subscriptions offer flexibility but at slightly higher unit cost. | 3–15% savings from commitment-based pricing |
| 6 | Reallocate before purchasing new: When new employees or projects need access, first check for reclaimable licences from departed staff or completed projects. | Avoids incremental spend; maintains budget discipline |
| 7 | Monitor Microsoft promotions: Microsoft runs promotions for competitive migrations, bundle discounts, and new module adoption. Align timing with genuine needs to capture discounts. | 10–20% on new module rollouts when promotions align |
📊 Cost Scenario: Right-Sizing a 500-User Deployment
An enterprise with 500 Dynamics 365 Sales Enterprise licences ($105/user/month) discovers through usage analysis that 75 users only view dashboards and 50 users also need Customer Service access.
Current annual cost: 500 × $105 × 12 = $630,000
Optimised cost: 425 Full ($105) + 75 Team Member ($8) + 50 CS Attach ($20) = (425 × $105 + 75 × $8 + 50 × $20) × 12 = $555,300
True-Up Management and Audit Exposure
Enterprises licensing Dynamics 365 through multi-year Enterprise Agreements face annual true-up obligations and potential compliance audits. For guidance on managing cloud agreements, see our CIO Playbook: Managing Microsoft Cloud Agreements and Subscriptions.
How True-Ups Work
Under an EA, you commit to a licence count for a 3-year term. Each year at the anniversary, you report any additional licences added beyond your initial commitment — this is the true-up. Crucially, EAs do not allow reducing licence counts mid-term — even if usage drops, you pay for the original quantity until renewal. This makes accurate forecasting and active management essential.
Audit Exposure
Microsoft (and its partner auditors) have the right to audit your compliance with licence terms. Cloud telemetry means Microsoft already has visibility into usage patterns — audits increasingly focus on licence misclassification, multiplexing, and under-licensing rather than simple headcount. Key audit triggers include unassigned active users, excessive use of features beyond licence entitlement, and suspected indirect access scenarios.
If audited, Microsoft will review your user lists, licence purchases, and usage logs. Shortfalls typically result in forced purchase of back-dated licences at list price — potentially with penalties and no discounts. The best defence is a proactive quarterly internal audit: reconcile active users against allocated licences, resolve gaps immediately, and maintain documentation. Organisations that self-correct receive significantly more lenient treatment than those caught by Microsoft's compliance team.
Renewal Management
The renewal of your Dynamics 365 agreement is the most important commercial moment in your Microsoft relationship. Begin preparations 6–12 months in advance. For a comprehensive renewal framework, see our guide on Dynamics 365 Licensing and Renewals: A CIO's Advisory Playbook.
| Renewal Step | Key Actions | Timing |
|---|---|---|
| Assess current usage | Review all licence types, active user counts, and shelfware. Identify excess that can be cut and underserved areas that need expansion. | 12 months before |
| Forecast future needs | Collaborate with business units to project Dynamics user counts and module requirements. Factor in new projects, divestitures, and workforce changes. | 9–12 months before |
| Review pricing and product changes | Check the latest Microsoft Dynamics 365 Licensing Guide for pricing updates, new SKUs, and retired offerings. | 6–9 months before |
| Identify expiring discounts | If your current agreement includes introductory or promotional discounts, these may expire at renewal. Plan to negotiate extensions or tapering strategies. | 6 months before |
| Coordinate with other Microsoft renewals | If Dynamics 365 is part of a broader EA (with M365, Azure, etc.), negotiate holistically. Microsoft considers the full relationship when structuring deals. | 6 months before |
| Initiate renewal discussions | Contact Microsoft or your reseller. Express intent to review and optimise. Early engagement prevents deadline pressure (which always favours the vendor). | 4–6 months before |
Negotiation Levers and Best Practices
Microsoft expects enterprise customers to negotiate — list price is a starting point, not the final number. These are the most effective levers we see in practice:
| Lever | How to Use It | Expected Impact |
|---|---|---|
| Competitive benchmarking | Obtain quotes from Salesforce (CRM) or SAP (ERP) and present them credibly. Even if you're committed to Dynamics, Microsoft sales teams respond to competitive pressure. | 5–15% additional discount on contested modules |
| Full Microsoft relationship leverage | Bundle Dynamics negotiation with M365, Azure, and Power Platform. A holistic deal gives Microsoft account teams more room to offer cross-product discounts. | Variable; often unlocks concessions unavailable on standalone deals |
| Timing to Microsoft's fiscal calendar | Microsoft's fiscal year ends June 30, with quarter-ends in March, June, September, December. Aligning your renewal with quarter-end gives Microsoft sales reps urgency to close. | Significant — quarter-end deals routinely yield 10–20% better terms |
| Multi-year commitment | Committing to a 3-year EA (vs. annual CSP) demonstrates loyalty and gives Microsoft revenue predictability. Use this as leverage for deeper discounts. | 3–10% discount for commitment length |
| Escalation to Microsoft leadership | If negotiations stall with your account team, escalating to Microsoft's regional or segment leadership can unlock additional discount authority. | Often the difference between a standard and exceptional deal |
| Flexibility and growth promises | If you plan to expand Dynamics usage (new modules, more users), offer this growth commitment in exchange for better pricing on existing licences. | 5–15% on existing licences in exchange for growth commitment |
Navigating a Microsoft Dynamics 365 Renewal or Negotiation?
Our independent advisory team helps enterprises optimise Dynamics 365 licensing, negotiate EA renewals, and eliminate compliance risk. We work exclusively in your interest — never for Microsoft.
Governance and Power Platform Integration
Dynamics 365 doesn't exist in isolation — it sits within the broader Microsoft ecosystem alongside Power Platform, Microsoft 365, and Azure. Effective governance requires understanding the licensing interactions between these products.
Power Platform Licensing Interactions
Dynamics 365 licences include certain Power Platform entitlements — such as the right to use Power Apps and Power Automate within the context of the Dynamics app. However, if users build Power Apps or Power Automate flows that access Dataverse tables outside of their licensed Dynamics 365 app, additional Power Platform licences may be required. This is a frequent compliance gap that catches organisations by surprise.
Governance Framework
| Governance Area | Recommended Practice |
|---|---|
| Licence ownership | Assign a licensing manager or team with cross-functional authority. Dynamics licence decisions should not be made by individual departments in silos. |
| Quarterly usage reviews | Run reports from the Microsoft 365 Admin Center showing active vs. assigned licences, inactive users, and users with multiple licences. Review in a governance committee meeting. |
| Request approval workflow | Implement an internal approval step for new licence requests. A licensing specialist should verify attach eligibility before any new full licence is purchased. |
| Admin training | Train Dynamics admins on attach licensing, Team Member limitations, and the consequences of misassignment. Frontline awareness prevents most pitfalls. |
| Storage and capacity monitoring | Monitor Dataverse storage consumption, API call quotas, and add-on capacity in the Power Platform Admin Center. Set alerts before you hit limits. |
| Integration compliance | Document all Power Platform and third-party integrations with Dynamics data. Verify that every user accessing Dynamics data — even indirectly — is properly licensed. |
CIO Checklist: 7 Actions to Take
- 1Map roles to licence types: Conduct a role-based analysis of your entire user base. Determine which users need Full licences (power users), which can use Team Member or Activity licences (light users), and which shared workstations qualify for Device licences.
- 2Audit for duplicate and unused licences: Run a report of all Dynamics 365 licence assignments. Flag any user with two or more full licences (convert to attach), any unassigned licences, and any user who hasn't logged in for 90+ days. Reclaim and reduce immediately.
- 3Implement the attach model organisation-wide: Make it policy that no user receives a second full-price Dynamics licence without first evaluating the base-plus-attach model. Educate IT admins on how to assign attach licences correctly.
- 4Establish governance and quarterly reviews: Create a licensing governance committee with representatives from IT, finance, and procurement. Review usage reports quarterly, identify optimisation opportunities, and maintain a year-round licence tracker for true-up accuracy.
- 5Prepare for renewal 6–12 months early: Assess current usage, forecast future needs, identify expiring discounts, and coordinate with other Microsoft renewals. Build a renewal dossier documenting what you need and what you're willing to pay.
- 6Address compliance gaps proactively: Reconcile active users against licences quarterly. Ensure no Team Member users have access to restricted features. Document integration architectures and verify Power Platform licensing compliance.
- 7Engage independent licensing expertise: For large or complex environments, have an independent licensing expert perform a health check. They can spot duplicate entitlements, misclassified users, and negotiation opportunities that internal teams typically miss.