Licenses vs. subscriptions

In the Microsoft ecosystem, subscription and license are terms often used interchangeably but they have distinct meanings and implications. Here’s a breakdown of the differences between the two.


A subscription is a payment model that provides access to Microsoft services or products for a specific period (monthly, annually, etc.). Subscriptions are tied to products, applications or services that may include multiple features and capabilities.

Key characteristics

  • Time-Based Access: Subscriptions grant access to services for a defined period. Renewal is required to maintain access.
  • Service Bundles: Subscriptions often bundle multiple services or features. For example, a Microsoft 365 subscription includes access to Office applications, cloud storage, and additional features like security tools.
  • Payment Model: Subscriptions are typically billed on a recurring basis, most commonly monthly or annually.
  • User and Device Assignment: Subscriptions belong to the organization; licenses can be assigned to individual users or devices, enabling access to the services covered by the subscription.
  • Updates and Support: Subscriptions usually include regular updates and support for the duration of the subscription period.


  • Microsoft 365 subscription: Provides access to Office applications, OneDrive, Exchange, Teams, and so on.

    Azure subscription: Provides access to various Azure services like VMs, databases, storage, and so on.


A license is a legal authorization that grants the right to use the products, applications or services included in the purchased subscription.

In the context of a subscription, a number of licenses purchased is a number of seats that can be assigned to people who can then use the services included in the subscription.

Key characteristics

  • Usage Rights: Licenses grant the right to use a specific software or service. They define what the user is legally allowed to do with the software or service.
  • Feature Access: Licenses determine the specific features and capabilities that a user can access. Different license configurations may unlock different sets of features.
  • One-Time or Perpetual: Licenses can be perpetual (one-time purchase) or subscription-based (recurring). For example, Office 2019 is a one-time purchase, while Microsoft 365 is subscription-based.
  • Compliance: Licenses are crucial for compliance, ensuring that users have the legal right to use the software or service.
  • User or Device Specific: Licenses can be assigned to specific users or devices, depending on the licensing model.


  • Windows 10 License: A one-time purchase that grants the right to use Windows 10 on a specific device.
  • Power BI Pro License: A subscription-based license that grants access to Power BI Pro features for a specific user.
  • Microsoft Entra ID P2 License: Provides advanced security features and identity management capabilities.

Key differences between subscriptions and licenses

Feature Subscription License
Definition A payment model for accessing services/products for a specific period Legal authorization to use specific software/services
Time-Based Yes, typically requires renewal Can be time-based (subscription) or perpetual (one-time purchase)
Service bundles Often includes multiple services/features Typically grants access to specific features/software
Payment model Recurring (monthly/annual) One-time purchase or recurring
Assignment   Assigned to users or devices
Updates and support Includes regular updates and support Varies, usually included in the subscription
Examples Microsoft 365, Azure Windows 10, Power BI Pro, Entra ID P2

Practical implications

For Users:

  • Subscriptions provide a comprehensive package, ideal for ongoing access to a suite of services with regular updates.
  • Licenses ensure legal usage rights and may be preferred for specific software needs, whether perpetual or on a subscription basis.

For Organizations:

  • Subscriptions offer flexibility and scalability, especially for cloud services like Microsoft 365 and Azure.
  • Licenses are critical for compliance and can be strategically assigned to ensure cost-effective usage of necessary features and software.

Understanding these distinctions helps in making informed decisions about purchasing and managing Microsoft services and software, ensuring both legal compliance and optimal utilization of resources.

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Updated: Jun 06, 2024