Learn Microsoft Licensing
Microsoft prices three different ways. Pick the model you're dealing with — Microsoft 365 / Office 365 billed per seat, Azure billed by usage, or Copilot, which mixes both. Building an actual renewal? Use the Explorer to compare plans against the capabilities you need.
How Microsoft licensing works
Almost everything Microsoft sells falls into seven pillars. Microsoft 365 is really one per-user subscription that bundles several of them together: Microsoft 365 = Office 365 + Windows Enterprise + Enterprise Mobility + Security. Stepping up from E3 to E5 means paying the difference to add the Defender Suite, Purview Suite, voice, and analytics.
1. Productivity
per-userOffice 365
Word, Excel, Outlook, Teams, Exchange, SharePoint, OneDrive.
2. Devices & OS
per-userWindows Enterprise
Windows 11 Enterprise, plus deployment and management.
3. Identity
per-userMicrosoft Entra
Sign-in, SSO, MFA, Conditional Access (Entra ID P1/P2).
4. Device management
per-userIntune / EMS
Enroll, manage, and secure devices and mobile apps.
5. Threat protection
mostly per-userMicrosoft Defender
Defender for Endpoint, Office 365, Identity, Cloud Apps.
6. Data security & compliance
per-userMicrosoft Purview
Sensitivity labels, DLP, retention, insider risk, eDiscovery.
7. Cloud / Azure
consumptionSentinel, Defender for Cloud
SIEM and cloud-workload protection.
The one thing to remember: per-user vs. consumption
Pillars 1–6 are bought per user — your cost is simply seats × price, and a licensed user is covered however much they use it. Pillar 7 (Azure) is consumption — you pay for what you run (per GB of data ingested, per server protected), so cost scales with workload and lands on the Azure bill. The common mix-up: Defender for Endpoint is per-user, but Defender for Servers / Defender for Cloud is per-resource consumption.
Prices and packaging change often — Microsoft has announced increases for several plans. Model your renewal against the new rates, not today's.
Source: Microsoft Licensing News — 2026 Microsoft 365 packaging & pricing update FAQOfficial Microsoftreviewed 2026-06-03⚠ verifyA simplified learning model — Microsoft doesn't publish these exact seven labels. It mirrors the bundle map below. For the deepest community reference, see m365maps.com (community, ~95%, not official Microsoft), or build a renewal with the Explorer.
Compare & explore plans
Pick a family and read left to right — each step keeps everything from the tier before (dimmed) and adds the highlighted pieces. Or search any plan or add-on to drill into exactly what it includes.
1 · Choose a bundle family
2 · Choose a Enterprise plan
Microsoft 365 E3
$36/user/month, annual commitmentThe enterprise baseline: desktop Office, email, and Teams, plus identity, device management, and entry-level security in one per-user license.
Microsoft 365 E5
$57/user/month, annual commitmentEverything in E3 plus Microsoft's advanced security, compliance, identity, voice, and analytics — consolidating many point products.
Microsoft 365 E7 (Frontier)
$99/user/month, annual commitmentThe “Frontier” suite: Microsoft 365 E5 with Microsoft 365 Copilot and Agent 365 built in.
Highlighted New items are added at that tier; dimmed items are inherited from the tier to the left. Prices are Microsoft list estimates — verify with a quote.
Azure — usage-based, not per seat
Most of Microsoft 365 is billed per user, per month. Azure is the other model: you pay for what you consume. That distinction is why Copilot has a metered side at all — agents and Security Copilot bill through Azure consumption, not a flat seat. Below: the shape of the usage world first, then the toolkit to keep that consumption under control.
Azure meters the resources you actually use — compute, storage, networking, AI — and bills in arrears. There's no per-seat license; cost scales with usage, which is powerful but needs budgets and guardrails so it doesn't drift.
Larger customers often sign a Microsoft Azure Consumption Commitment: agree to spend a set amount on Azure over the term for better pricing and terms. Eligible Microsoft and Marketplace purchases — including some Copilot Credit pre-purchases — can draw down that commitment, which makes it a quiet negotiation lever at renewal.
Pay-as-you-go Copilot Credits (for agents) bill through an Azure subscription, and Security Copilot is metered in Security Compute Units — both consumption, not per seat. So your Azure billing and your Copilot agent spend can end up on the same invoice and the same commitment.
The consumption-control toolkit
Usage-based billing is powerful but drifts without guardrails. These are the main levers to pull the rate down and keep spend visible — worth lining up alongside your Microsoft 365 seats at renewal.
Two ways to trade flexibility for a lower rate vs pay-as-you-go. Reservations commit you to a 1- or 3-year term for specific resources and auto-apply a discount to matching usage. A savings plan for compute commits you to a fixed hourly compute spend for 1 or 3 years and discounts eligible compute up to that commitment, with anything beyond it billed at pay-as-you-go. Right-size before you commit — an over-sized commitment locks in spend you may not use.
Cost Management budgets set a spend threshold on a subscription or resource group and fire alerts when actual or forecasted cost crosses the percentages you set — email plus, optionally, an Azure Monitor action group for automated responses. Treat them as an early-warning system, not a hard cap: by default they notify rather than stop spend, so consumption still needs an owner watching it.
A MACC is a forward Azure spend commitment, and eligible Microsoft and Marketplace purchases — including some Copilot Credit pre-purchases — draw it down. So your Azure consumption, your agent spend, and the commitment can all sit in one negotiation: size the commitment against realistic usage, and use reservations/savings plans to lower the rate on the baseline you're confident you'll run.
Copilot licensing in brief
- Copilot Chat is included free with most Microsoft 365 commercial plans — web-grounded chat with enterprise data protection, no add-on required.Source: Microsoft Learn — Microsoft 365 Copilot overviewOfficial Microsoftverified 2026-06-07
- Microsoft 365 Copilot is the paid per-seat add-on that puts Copilot inside the Office apps and grounds it in your tenant data — on top of a qualifying base license.Source: Microsoft 365 Copilot pricingOfficial Microsoftverified 2026-06-03
- Microsoft 365 E7 (Frontier)bundles Copilot (and Agent 365) into the top suite, so it's built in rather than bought separately — worth modeling against E5-plus-add-ons.Source: Microsoft 365 E7 (Frontier Suite)Official Microsoftverified 2026-06-01
How Copilot is priced — seat vs consumption
Beyond which Copilot is which, the bigger renewal question is how you pay. Microsoft now runs two models side by side — a flat per-seat add-on, and a metered "Copilot Credit" currency that an uncapped pay-as-you-go bill can ride on. Here's the shape, with sources to confirm before you rely on any figure.
Per-seat Microsoft 365 Copilot is a predictable add-on on top of a qualifying base license — a licensed user's own in-scope agent use is not separately metered. Copilot Chat is included with most commercial plans, but the agents it runs against your tenant data are billed by consumption. The seat and the meter are mutually exclusive per user.
The same credit pool covers Copilot Chat agents, Copilot Studio, and Dynamics first-party agents. You can buy in pay-as-you-go through Azure (no commitment), as prepaid monthly capacity packs (they reset each month and don't roll over), or as a one-year pre-purchase plan with tiered discounts. Microsoft renamed the unit from 'messages' to 'Copilot Credits' in September 2025 with no change to the rate.
Each action draws a set number of credits — a generative answer, an agent action, grounding a prompt in your tenant graph — and one interaction can stack several of those meters at once, so a single tenant-grounded prompt runs to roughly a dozen credits. Users licensed for Microsoft 365 Copilot aren't charged for this, subject to fair-use limits.
Prepaid capacity stops custom agents at 125% of the pack — a built-in brake. Turning on pay-as-you-go removes that brake: overage simply bills to your Azure subscription. So the real controls are preventative — set per-agent monthly consumption limits, add a budget limit with email alerts, and watch the overspend alert in the admin report.
Up-front, one-year plans buy consumption at a discount, but three separate instruments look alike: the Agent pre-purchase plan (Agent Commit Units) spends across Foundry, Copilot Studio, Fabric, and GitHub; the Copilot Credits plan (sometimes called P3) covers Copilot Credits only; and GitHub has its own. All auto-renew and are final once bought — and the tier prices Microsoft shows are illustrative examples, not a rate card.
Security Copilot bills in Security Compute Units (with a newer E5/E7 inclusion allocation rather than per-seat), and Power Platform's AI Builder is folding its standalone credits into Copilot Credits — so check what your licenses still seed before budgeting either.
Will Copilot pay for itself?
Model seats, adoption, and time saved — and compare à la carte vs the E7 bundle — in the Copilot ROI calculator (a Pro feature on the Calculator).
Ask about Microsoft licensing
Same advisor as the Ask tab — it counts toward your question limit the same way. Ask how a bundle compares, what you can drop, or how a change hits your renewal.
Ask anything about Microsoft licensing.
Plain-English answers, cost estimates, and the details that are easy to miss.
Independent estimates to help you prepare for your Microsoft renewal — cited sources, not quotes, and not legal, tax, or financial advice (using this tool creates no advisor relationship). Figures are directional and may differ from a Microsoft or partner quote. Not affiliated with or endorsed by Microsoft.
Independent estimates to help you prepare for your Microsoft renewal — cited sources, not quotes, and not legal, tax, or financial advice (using this tool creates no advisor relationship). Figures are directional and may differ from a Microsoft or partner quote. Not affiliated with or endorsed by Microsoft.