Microsoft 365 Licensing High Level Overview

By Microsoft MVP and MCT · Pluralsight Author

Published December 5, 2023 · Updated January 15, 2026 · Microsoft 365

Are you wondering if everyone needs the same Microsoft 365 licensing? Get a high-level overview of M365 licensing filled with need in this Pluralsight course clip.

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Video Summary

Here are the key points from the video:

  • Flexibility and Ease of Use: Microsoft 365 is a SaaS offering, so you just buy the license, assign it to a user, and they can start working immediately without any installations.
  • Three Main Components: It includes Office 365 (cloud productivity services), Windows licenses for desktops/laptops, and the Enterprise Mobility and Security Suite (security and compliance features).
  • Different Licensing Options: Various versions like E5, E3, F3, and F1 offer different features and price points. E5 is the most comprehensive, while F1 is the most basic and affordable.
  • Tailored for Different Needs: You can mix and match licenses based on user needs. For example, frontline workers might use F3 or F1, while information workers might use E3 or E5.
  • Cost-Effective: Licensing is priced per user per month, with options ranging from $2.25 to $57, allowing businesses to choose the most cost-effective solution for their needs.

For more information, read the transcript blog below, or watch the video above!

Video Transcript

Now that we know the different Microsoft cloud services, let’s do a quick overview of Microsoft 365 licensing. One of the benefits of Microsoft 365 licensing is really its flexibility, as Microsoft 365 is a software as a service offering. This means there is nothing to install or deploy to start using it; you simply buy the license, assign it to the user, and they can be productive right away. Microsoft 365 offers many options, each with different things included, from Microsoft 365 licenses to only Office 365. You can also buy licenses for standalone products inside of the suite, and there are even add-ons that you can purchase for specific business needs. Licensing is priced per user per month; however, some licenses do require an annual commitment, but not all of them. Before we go deeper into details, I want to say that I always joke that licensing for Microsoft 365 requires a PhD in order to understand it all, and that’s why there are people that specialize in this. In this course, we will really cover the fundamentals, but always check with your licensing professional for any licensing questions that directly apply to your business needs.

Okay, so now let’s break down Microsoft 365 from a licensing and services point of view. Microsoft 365 is made up of three main components. First of all, Office 365, which contains all of your cloud productivity services as well as Microsoft 365 apps, which used to be called Microsoft Office. Microsoft 365 also includes Windows licenses for your desktops or laptops for your users, and finally, the Enterprise Mobility and Security Suite, which is a set of security, compliance, and identity features to protect your data. So those are the three main products inside Microsoft 365, but you also have different versions of Microsoft 365 depending on your needs. The top license at the time of recording this course is Microsoft 365 E5, which, at the time of recording this course in February 2022, is $57 per user per month. It includes Office 365 E5, Windows 11 E5, and Enterprise Mobility and Security E5. We also have Microsoft 365 E3, which is cheaper but contains only the E3 version of each product. Remember when I said this can get quite complicated? Each one of the three products in Microsoft 365 also has multiple licensing versions, each with different services and capabilities. While we will not cover every single detail of the licensing part of Microsoft 365, remember that usually the bigger the number, the more services or capabilities it has. For example, E5 has more services or capabilities than E3.

Now, those two, E3 and E5, are the main offerings for information workers that work at a computer, but Microsoft also has cheaper offerings for field workers, and those will be starting with an F. The first one is F3, which goes all the way down to $8 per user per month. This includes Office 365 F3, which is a version of Office 365 that still has access to all of the different Office 365 services but with more limitations. For example, you cannot install Microsoft 365 apps on a PC, only on mobile devices. Your mailbox limit is only 2 GB, and so on. So really, it focuses on what a field worker or frontline worker might need. Lastly, the cheapest one is Microsoft 365 F1, which is only $2.25 per user per month. This gives you access to some limited Office 365 services. For example, users can still go to SharePoint Online and view the intranet; they can consume documents but not edit them. They have access to 2 GB of OneDrive, so really, again, the basics that a frontline worker might need to stay connected with the company and have access to internal services at a very attractive price point.

For me, where the real flexibility comes into play is that not everyone in the company needs the same license. You can mix and match from the Microsoft 365 licenses that we talked about, or you can only get an Office 365 license for some users since they might not need Windows, for example, if they only work from mobile phones. Even then, Office 365 has multiple versions, similarly named E1, E3, E5, and F3. As you analyze your company needs and what each group of users needs to be productive, you can buy different licenses for each department, again from as low as $2.25 per month to as high as $57 per user per month.