The Three Core Licensing Models
Per-user licensing assigns a software licence to a specific individual. That user is then entitled to use the software on multiple devices (work PC, laptop, tablet, phone) without needing separate licences for each device. This model is prevalent for cloud services and user-based subscriptions.
Common examples: Microsoft 365 (Office 365) subscriptions, which allow users to install Office apps on multiple devices. Dynamics 365 user licences. Power BI Pro per-user licences.
Ideal use case: Environments where each employee has a personalised set of devices. A company with 100 staff might assign each employee a Microsoft 365 licence — everyone can access email and Office on their desktop, laptop at home, and tablet on the go, all under one user licence.
Key benefits: Simplicity in tracking (one licence per person) and flexibility for the user. An employee's licence covers all their devices, so you don't need to purchase separate licences as they add or upgrade hardware.
Per-device licensing ties the licence to a specific piece of hardware rather than to an individual. Any number of users can use the software on that licensed device, but the licence does not extend to other devices. This model is common for on-premises software accessed by multiple people on shared workstations.
Common examples: Windows Server Client Access Licences (CALs) purchased per device — each PC or terminal that accesses a server is individually licensed. Windows desktop licences tied to specific hardware.
Ideal use case: Environments with more users than devices — shift workers sharing PCs, public access computers. A public library with 50 shared PCs might opt for 50 device licences for Microsoft Office, enabling any patron to use Office on those machines without needing individual licences. A call centre PC used across different shifts needs only one device licence.
Key benefits: Cost-effectiveness in shared environments. If three employees share one computer, a single device licence covers them all — per-user licensing would require three separate licences for the same scenario.
Capacity-based or per-core licensing is based on the computing resources the software runs on, measured by the number of processor cores. This model is used for server products and focuses on hardware capacity rather than named users.
Common examples: Microsoft SQL Server and Windows Server use core-based licensing. Licences are purchased according to the number of CPU cores in the server instead of users or devices.
How it works: Count the physical cores in the server (or virtual cores allocated to a VM) and acquire that number of core licences (sold in two-core packs). Microsoft imposes licensing minimums: 8 cores per processor and 16 cores per server — meaning even a small 6-core machine needs 16 core licences. These minimums are a common source of under-licensing.
Example: A database server with two 10-core processors (20 cores total) requires licensing all 20 cores. Once licensed, unlimited users or devices can access the database with no additional per-user fees. By contrast, a traditional server+CAL model would require potentially hundreds of separate user/device CALs — illustrating why per-core licensing is preferable when user counts are very high or difficult to track.
Core licensing minimums are easily overlooked. Even if a server physically has only 4 cores, Microsoft requires you to licence at least 8 cores per processor and 16 cores per server. This is one of the most common compliance gaps found in Microsoft audits.
Licensing Metrics at a Glance
| Feature | Per-User | Per-Device | Per-Core |
|---|---|---|---|
| Licence Assigned To | Individual person | Specific hardware | Server CPU cores |
| Covers Multiple Devices? | Yes — user's devices | No — one device only | N/A — server capacity |
| Covers Multiple Users? | No — one user only | Yes — all users of device | Yes — unlimited users |
| Common Products | M365, Dynamics 365, Power BI Pro | Windows Server CALs, desktop OS | SQL Server, Windows Server |
| Best When | Users have multiple devices | Devices shared by many users | High/unknown user counts accessing servers |
| Tracking Complexity | Low — count headcount | Low — count hardware | Medium — count cores + minimums |
| Key Risk | Shared accounts or ghost users | More devices than licences | Under-licensing due to core minimums |
Choosing the right model: Evaluate the ratio of users to devices. If many people share a few devices, device licences make sense. If individuals use multiple devices each, user licences are more efficient. For servers accessed by large or unpredictable user populations, per-core licensing eliminates the need to track individual connections.
Learn how true-ups interact with these metrics
True-Up Best Practices →Common Pitfalls and How to Avoid Them
Even with a solid understanding of these licensing models, organisations often make mistakes in licence management. Here are the most frequent pitfalls.
Wrong Licence Type Selection
Using a user-based licence when a device-based licence would be more cost-effective (or vice versa). Avoid this by aligning your licensing model with your users' and devices' actual operations. Evaluate the ratio of users to devices: if many people share a few devices, device licences make sense; if individuals use multiple devices, user licences are more efficient.
Underestimating Core Needs
Failing to licence all physical CPU cores — or ignoring Microsoft's minimum-per-server core rules — can leave servers under-licensed. Avoid this by counting every processor core when planning licences and adhering to Microsoft's requirements (always licence at least 8 cores per CPU and 16 cores per server). Regular hardware inventory checks prevent unintentional under-licensing of new or upgraded servers.
Static Licensing in a Changing Environment
Sticking with an initially chosen licensing model despite major changes in IT infrastructure or work patterns leads to inefficiencies. An organisation that shifted to mostly remote work might still use device-based CALs that no longer fit its user-centric usage. Avoid this by revisiting your licensing approach whenever significant changes occur — cloud adoption, virtualisation, or workforce shifts. Adjust your model at renewal or true-up.
Why Engage Independent Licensing Experts
Navigating Microsoft's licensing rules and optimising your licence mix can be challenging. Independent licensing experts such as Redress Compliance specialise in analysing your environment and guiding you to the optimal licensing strategy.
Unbiased, Up-to-Date Guidance
Independent advisors don't sell software — their goal is to find the most efficient and compliant setup for your organisation. They stay current with Microsoft's licensing changes and can identify if you're overspending on one model when another would suffice, all without vendor bias.
Licence Compliance Assurance
Experts perform licence audits or "health checks" to spot shortfalls before Microsoft does, reducing the risk of audit penalties. They might catch a scenario where one user licence was mistakenly shared by multiple employees — a compliance issue you can correct before an official audit occurs.
Cost Optimisation
Licensing professionals find ways to save money — identifying unused licences, suggesting more cost-effective programmes or editions, or reassigning licences more efficiently across your user base. Over time, these optimisations yield significant budget savings that might otherwise be missed.
Understanding Microsoft's core, user, and device licensing metrics is a foundational skill for managing software assets. By aligning the licence model with your organisation's actual usage patterns, you can control costs and reduce compliance headaches. Be vigilant about reviewing your licensing needs as your business evolves.
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