4 questions customers are asking about licensing Office 365:
Demystify Microsoft licensing with clear answers

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Microsoft has attempted to simplify the licensing of Office 365, but the rules can still be confusing, especially when migrating from a perpetual-based licensing model to a subscription.

To clear the air, we’ve compiled and answered four of the most common licensing questions organizations ask when looking to transition to Office 365.

  1. What is a CAL Bridge?

Microsoft introduced the Client Access License (CAL) Bridge to help organizations transition their on-premises workloads to the cloud while maintaining their enterprise-wide commitment and licensing rights. Each CAL Bridge consists of CAL Suite workloads that aren’t included in the corresponding Office 365 service plan.

Consider this example. The Core CAL Suite grants all of an organization’s users and devices access to on-premises servers that run any of the following workloads:

  • SharePoint Server
  • Windows Server operating system (OS)
  • Skype for Business
  • Exchange Server
  • System Center Configuration Manager
  • System Center Endpoint Protection

When an organization transitions to Office 365 Plan E1, its users gain cloud access to some of those same workloads. However organizations must still remain licensed for the workloads not included in Office 365 plan E1. The Core CAL Bridge accommodates the change in access rights for those users. Instead of licensing users for Core CAL Suite, an organization can license its users for Office 365 plan E1 and Core CAL Bridge for Office 365.

The new licensing configuration divides users’ licensing workloads as follows:

Office 365 Plan E1 gives users licenses to SharePoint Server, Exchange Server, and Skype for Business while Core CAL Bridge for Office 365 provides licenses to Windows Server OS, System Center Configuration Manager, and System Center Endpoint Protection.

In August 2015, Microsoft introduced a new CAL Bridge licensing structure that is more closely aligned with how online services are licensed. Since then, Microsoft has only offered a User Subscription CAL Bridge. Existing customers licensed for CAL Bridge prior to Aug. 1 can transition to the new monthly user subscription option at renewal.

  1. Once I transition to Office 365, can I move back on-premises?

A transition to Office 365 involves a switch from perpetual licenses with Software Assurance (SA) to a subscription-based licensing model, at which time SA or license with SA must be active at the time of transition. Once an organization transitions, it can move back to perpetual licenses with SA under two conditions.

First, SA cannot exceed the number of perpetual licenses in existence at the time of transition. For example, an organization can’t transition 200 perpetual licenses to 200 subscription licenses, add 50 subscription licenses, and then transition back to 250 perpetual licenses. It could only move back to 200 perpetual licenses. Second, an organization can transition back to perpetual licenses as long as there haven’t been any lapses in SA coverage.

  1. What is License Reservation?

Under a traditional Enterprise Agreement (EA) when an organization procures on-premises licenses with SA, new deployment payments take place during the true-up process. The company submits an order to increase the number of desktops or servers, and pays for deployment at its anniversary.

Microsoft introduced the concept of License Reservation to help organizations provision cloud services without the immediate need for a purchase order (PO). The Online Service Administrator for the Enterprise Agreement can go into the VLSC portal to reserve the necessary licenses required. Upon the reservation being completed the services will load to the Office 365 Admin Portal to assign the licenses accordingly. The company has the ability to then use the service upfront without an initial PO.

License Reservation is a financial commitment, therefore it’s important for an organization to understand the services and their costs. License Reservations are typically reconciled as part of the organization’s annual true-up process, which should occur 30 to 60 days prior to the agreement anniversary.

  1. Can I reduce the number of Office 365 licenses under my current service plan?

Under the traditional perpetual license with SA model, an organization cannot reduce its number of licenses. However, License Reduction allows organizations to reduce subscription licenses on an annual basis, under the following guidelines.

In a hybrid environment with both on-premises and cloud licenses:

  • Companies can reduce subscription licenses under an enterprise-wide commitment. However, the total quantity of subscription and perpetual licenses with SA can’t fall below the quantity of qualified devices submitted at initiation. If a company starts its commitment with 500 licenses, it can’t drop down to less than that.
  • Companies can reduce subscription licenses designated as additional online services in the Microsoft product list, even down to zero.

In a cloud-only environment:

  • Subscription licenses can be reduced to a minimum of 500 licenses.
  • Subscription licenses designated as additional online services in the Microsoft product list can be reduced to any quantity, even down to zero.

These are some of the most frequent questions we receive about licensing Office 365.

SHI is one of the world’s most experienced Microsoft partners. Whether you’re a Microsoft EA or CSP customer in need of expert licensing advice, certified cloud planning or help optimizing your next renewal, SHI offers a full suite of services designed to help you realize full value from your Microsoft investment.

Learn more about Microsoft Services from SHI.

This post was originally published in 2014.