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Office 365 Licensing: Analyst Explains All

Licensing Office 365 was the topic of a Directions on Microsoft talk last week, which may be of interest to IT pros, especially since Microsoft is preparing to launch those services sometime this year.

Availability of Office 365 may be just around the corner. In response to a question during the online session last Thursday, Rob Horwitz, research chair at the Directions on Microsoft consultancy, said that Microsoft intends to deliver Office 365 commercially "before July 2011." However, he noted that Microsoft hasn't publicly announced the start date.

Understanding Office 365 licensing doesn't require a slide rule, an advanced computer science degree or a Microsoft certification, but it probably does require expert advice (and maybe you'll want to keep a lawyer on retainer). During the talk, Horwitz sketched out the major licensing information forks to consider amid a preponderance of choices.

Office 365, like the Business Productivity Online Suite (BPOS) it will succeed, will be offered via monthly recurring subscription fees on a per-user basis. Subscriptions will be available via Microsoft's online subscription program or through enterprise agreements (EAs) with Microsoft. Subscriptions will also be available from Microsoft's partners. The EA route enables better discounts, Horwitz said, and most organizations will likely buy Office 365 through that means. If an organization doesn't have an EA in place, one can be started principally to run Office 365, he added. Office 365 isn't available through Select or Select Plus or open subscription licensing, he explained.

Organizations used to licensing on-premises Microsoft solutions through EAs will have some licensing complications to consider if they migrate to Office 365. For those already using Microsoft's BPOS online services, a helpful Microsoft blog post indicates that current BPOS customers will have a year to opt into Office 365, but those who delay their move won't get all of the benefits of the new suite of services. BPOS users considering moving to Office 365 can get more information at Microsoft's Office 365 transition center page.

Bundled Online Offering
Office 365, when available, will offer a bundle of services based on four of Microsoft's on-premises products. Organizations will get automatic software updates through the service, but Office 365 services currently don't have all of the features offered by the on-premises products. The one standout included in the offering is Office Professional Plus, which is a premises-installed software product. Horwitz said that organizations subscribing to Office 365 would likely be responsible for having to maintain Office Professional Plus themselves, including patching and upgrades.

The four services in Office 365 are as follows:

  • Exchange Online 2010
  • Lync Online 2010
  • SharePoint Online 2010, and
  • Hosted Web Apps

Horwitz noted that the Web Apps, which include Word, Excel, PowerPoint and OneNote, have some limitations when compared with their on-premises cousins. For instance, macros don't work in Excel, he said. Moreover, Office Web Apps can only open documents on a SharePoint site.

Microsoft supports mixed use of on-premises products and services in a hybrid approach. Horwitz said that Exchange Online offers the greatest parity with the on-premises Exchange product. The exceptions include no support for public folders with Exchange Online, plus organizations cannot use Outlook 2003 as a client app for e-mail.

Microsoft's blog post flatly declares that Office 365 does not support "Windows 2003 or earlier, Microsoft Office 2003 and Microsoft Office Outlook 2003." In addition, there is no support for Internet Explorer 6, so those organizations with Web apps built on that browser face some choices if moving to Office 365.

Lync Online has some limitations, Horwitz said. It can't be used for call control of a PBX (private branch exchange). It has limited federation capabilities with non-Microsoft solutions. In addition, users currently can't make or receive calls to or from public switched telephone network (PSTN) users.

SharePoint Online has limited integration with existing business systems, Horwitz explained. It has limited compatibility for scorecards or dashboards, he added.

Licensing Dice and Slice
Office 365 licensees will have about a dozen options from a "dice and slice" menu designed to support small businesses, medium-size businesses and deskless workers (now called "kiosk workers" in Microsoft's licensing parlance), Horwitz explained.

Small business users are defined as having up to 25 users at $6 per user per month. There's no support for more than 50 mailboxes, and no support for conferencing with more than 50 users.

Microsoft has four licensing categories for enterprises (E1 through E4), which are nested "like Russian dolls," with E4 being the most inclusive offering, Horwitz explained. These options include Exchange Online e-mail support for mailboxes of 25 GB in size, personal archiving, calendar and contacts.

The E-1 license includes all Office 365 features at $10 per user per month. The E-2 license adds to that by allowing the editing of documents at $16 per user per month. The E-3 license tops the other two by adding voicemail capability at $24 per user per month. Lastly, the E-4 license adds telephony capabilities at $27 per user per month, such as the ability to make or receive PSTN calls -- although Horwitz said this capability will come later. Even when this capability is available, a "special PSTN number" will be required to make it work, he noted.

The above prices apparently are estimates, and Microsoft could change them by the time it releases Office 365. Microsoft did release its own description of Office 365 pricing that is less detailed than Horwitz's description. Microsoft's pricing list settles on a $24 per user per month price for "organizations who want Office Professional Plus desktop software along with the full functionality of Exchange, SharePoint and Lync Online." This pricing description can be accessed here (Word doc download) from Microsoft's Office 365 home page.

Licensing Overlap
Organizations that already have an EA in place will likely experience "licensing overlap" with Microsoft Office, Horwitz said. Microsoft will allow its EA customers to switch their core Client Access Licenses (CALs) for something called the "Enterprise CAL Suite Bridge for Office 365," which will lower their costs.

The Enterprise CAL Suite Bridge option will only be available to organizations that have an organization-wide EA in place. Microsoft will have the customer sign a contract amendment for the CAL Suite Bridge. This licensing change won't be allowed during the first year. It's not until the next anniversary of the EA, called the "true-up" time, that organizations will be able to get the less expensive CAL Suite Bridge option, Horwitz explained.

Microsoft's licensing is fairly complex, even after an explanation. One possible remedy for further clarification is to attend a Directions on Microsoft event. The consultancy plans to offer its next "Licensing Boot Camp" on April 19 and 20 in Las Vegas, with other dates to follow. The talk by Horwitz can be accessed here.

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About the Author

Kurt Mackie is senior news producer for the 1105 Enterprise Computing Group.

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