Navigating Your Microsoft Dynamics 365 Licensing Needs

Note: Quintin Hunkin of Microsoft contributed to this article.

Microsoft Dynamics 365 licensing can be complex, with various options tailored for different business needs, user scenarios, project situations, and architectures.

Microsoft publishes a detailed Licensing Guide with periodic updates to explain the various Dynamics 365 product licenses. It is a dense document that can be difficult to review and understand. This article will break down the essential licensing models, key concepts, and cost considerations for Dynamics 365 applications. It will also help you to improve your understanding of the licensing guide. 

Licensing for Dynamics 365 applications still works largely on the honor system, meaning they do not have controls that stop you from over-using based on your licenses, whether adding more users, integrating more order lines, or exceeding storage allotment. However, as a customer you are supposed to ‘true up’ those costs. It is important to utilize applications responsibly to avoid surprise costs at the yearend if and when Microsoft reviews your organization’s usage.  

What are the different ways to buy Dynamics 365 products licenses? 

Enterprise Agreement (EA)

Microsoft’s Enterprise Agreement (EA) is designed for large organizations that require flexible and scalable licensing. It provides volume discounts for businesses that commit to Microsoft products for three years. EA is ideal for organizations with over 500 users and offers centralized license management. EA allows true down 30 days prior to anniversary. 

Server and Cloud Enrollment (SCE)

SCE is a licensing option within the EA that allows businesses to standardize on Microsoft server and cloud technologies. SCE is similar to the EA, however many Dynamics 365 customers who don’t qualify for EA organization-wide use it as a vehicle to achieve similar benefits if there is significant Dynamics 365 spend, with base commit for licenses. Customers are usually unable to true down for the duration of the agreement, however.

For either EA or SCE, the benefits include:

• Deeper discounts, while Microsoft gets commitment for minimum licensing for 3 or 5 years. 
• Microsoft directly has an agreement with the customers (pricing and discounts are under NDA between customer and Microsoft).  
• Use of a LAR (large account reseller), an organization like Zones or CDW, that acts as the custodian of the agreement. 
• Microsoft Partners are paid by Microsoft directly for their contribution through the CPOR (Cloud partner of record) process. It is important for customers to sign a POE (proof of execution) with the partner that helped them in the pre-sales decision making that lead to the purchase.

Cloud Solution Provider (CSP)

The CSP model enables businesses to purchase Dynamics 365 licenses through a partner rather than directly from Microsoft. CSP offers a more flexible, pay-as-you-go structure, making it suitable for businesses that need scalable licensing options without long-term commitments. 

• Customers can buy 3-year SKUs with annual payments to protect themselves from price increases. Customers are billed on a per user, per month basis, but partners can offer their own specific credit terms. 
• Customers with EA/SCE can buy certain short-term licenses on CSP. For example we see customers buying temporary sandbox environments during a project’s testing phase through CSP as these are not committed for the during of the EA. 

Types of licenses

Base and Attach Licenses

Dynamics 365 follows a base and attach license model: