9 min read

Microsoft 365 101: The Ultimate Guide to Microsoft Office 365 Licensing


Microsoft 365 vs. Office 2021

The confusion between the Microsoft 365 bundle and the Office 365 bundle can be traced back to 2017, when Microsoft announced Microsoft 365 as a new productivity bundle geared towards businesses. The confusion increased as people learned that Microsoft 365 actually included Office 365. Further confusion surfaced as people learned that Office 365 is now called Microsoft 365. To end the confusion once and for all here is an overview of both Microsoft 365 and Office 2021. 


What is Office 2021?

Office 2021 is a cloud-based suite of apps centered around business productivity. Within this license SKU, customers will receive Office Apps like Excel, Word, and PowerPoint. Unlike the other subscription license models, Office 2021 is sold as a one-time purchase that is available for both PC's and Macs. 

The main caveat to this license is that there are no upgrades included with your purchase which means that if a new version of the software rolls out, you will have to purchase the license at full price again. 


What is Microsoft 365? 

Microsoft 365 is the Microsoft Office Suite and/or email in the cloud. We’re referring to the cloud-enabled versions of Microsoft Office productivity applications, plus email and additional online services for both home and business. All Microsoft 365 plans are paid for on a subscription basis. Microsoft 365 for Business plans include various combinations of popular Microsoft Office applications, as well as other online services.

Learn more about how get the most of out your Microsoft 365 licenses.


Compare Microsoft 365 Subscription with Office 2021 



Office 2021- One Time Purchase

Microsoft 365 Subscription - Monthly Subscription


Pay a single one-time cost 

Pay monthly fee or save by paying for annual subscription

Office Applications

Get Office apps like Excel, Word, and PowerPoint

Get the latest Office Apps and receive upgrades on standard and security features

Feature Updates

Upgrades are not included in this license 

Always receive the latest features and updates as well as bug fixes and security upgrades. 



Types of Microsoft 365 License Agreements 


Microsoft Open Licensing

Designed primarily for small-to-medium organizations, Open Programs allows customers to acquire perpetual or subscription licenses and, at the customer's election, rights to future versions of software products over a specified time period. Open Programs have several variations to fit customers' diverse ways of purchasing. Under the Open License Program, customers can acquire licenses only or licenses with software assurance. They can also renew software assurance upon the expiration of existing volume licensing agreements.


Microsoft Cloud Agreement 

This type of agreement is designed for transactional licensing for commercial, government, and academic organizations with one or more users/devices seeking to fully outsource the management of their cloud services through CSP. CSPs offer an easy way to license the cloud services you need through the Microsoft Cloud Agreement in combination with the value-added services offered by your systems integrator, hosting partner, or born-in-the cloud reseller partner.


Microsoft Service Provider Licensing Agreement (SPLA) 

The Microsoft Services Provider License Agreement (SPLA) is a program targeted to service providers and independent software vendors (ISVs) allowing these partners to provide software services and hosted applications to their end customers. Agreements are generally structured with a three-year term and partners are billed monthly based on consumption. 


Microsoft Enterprise Agreement Licensing (EA) 

Enterprise agreements are targeted at medium and large organizations that want to acquire licenses to Online services and/or software products, along with software assurance, for all or substantial parts of their enterprise. Enterprises can elect to either acquire perpetual licenses or select non-perpetual licenses under the Enterprise Subscription Program. 


Agreement Type Comparison Chart


Microsoft 365 License Guide

Now that you have a brief understanding of the different types of license agreements, lets dive into the types of licenses that fall within the Microsoft 365 category starting with Microsoft 365 Business and then moving on to Microsoft 365 Enterprise. 


Microsoft 365 Business License



License Type Pricing Features 

Microsoft 365 Business Basic 

$5.00 per user/per month 

Includes web and mobile versions of Outlook, Word, PowerPoint, Excel, and OneNote. Host email with a 50 GB mailbox 

Microsoft 365 Business Standard

$12.50 per user/ per month 

Includes desktop versions of Office apps for PC and Mac. Also includes the Microsoft bookings feature to manage your business. 

Microsoft 365 Business Premium

$20.00 per user/ per month 

Includes advanced security features not included in other license sku's. Also includes device management features to let you automatically deploy Office apps to Windows 11 or 10 PCs.


Note: Each license type listed above is available for annual subscription and autorenewals 

Optional Additional Add-ons for Microsoft 365 

  • Audio Conferencing: Gain the ability to join a Microsoft Teams meeting on the go, without an internet connection

  • Business Voice: Add Microsoft Teams phone, a cloud-based phone system with advanced features including call transfer, multilevel auto attendants, and call queues

  • Windows 365: Securely stream your Windows experience - including apps, content, and settings- from the Microsoft Cloud to any device

See how to take complete control of your Microsoft 365 with Managed Services.


Microsoft 365 Enterprise


License Type Pricing Features

Microsoft 365 E3 

$32.00 per user/ per month

Receive all Microsoft 365 apps combined with core security and compliance capabilities for your enterprise. 

Microsoft 365 E5 

$57.00 per user/ per month

Gain Azure Active Directory Premium Plan and advanced analytical tools like Power BI Pro 

Microsoft 365 F3 

$8.00 per user/ per month

Formerly known as Microsoft 365 F1. Receive productivity apps and cloud services that allow them to do their best work. 


Download Comparison Table


What are the benefits of Microsoft 365? 

Microsoft 365 is the office productivity suite that is most utilized by small to medium businesses and enterprises worldwide. Listed below are the benefits of Microsoft 365: 

  • Cost Savings: Microsoft 365 is a bundled cloud service and costs less than typical on-premise solutions

  • Security: Microsoft has placed a great amount of focus on the security of its software applications 

  • Minimal Maintenance: Through automatic updates and upgrades there is very minimal maintenance that your IT admin will have to do to maintain your licenses

  • Mobile Compatibility: Microsoft 365 gives users access to their applications from any device connected to the internet

  • Solutions Integrations: Through seamless integrations, Microsoft 365 can be used on any users devices 

  • User Community: Microsoft 365 had a large user community, so information on best practices is only a web search away.

    See our article about best Microsoft Office 365 backup solutions comparison guide  [2021].

Next Steps? Contact Datalink Networks

Begin your journey to the cloud by contacting Datalink Networks today. As a dedicated Microsoft gold partner, Datalink Networks can work with you to ensure your organization is maximizing your Microsoft investment by auditing your Microsoft 365 tenant and optimizing your environment.  Contact us today to get started transforming your cloud environment! 






Contact Datalink Networks

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