Microsoft 365 licensing models explained
How Microsoft 365 is sold — direct, CSP, EA, MCA, NCE — and which model fits which organisation.
Microsoft 365 is the same product no matter how you buy it, but the way you buy it affects price, flexibility, support, and contract terms. There are four main models, plus a few variations.
Direct from Microsoft
Sign up on the Microsoft 365 website with a credit card. Best for:
- Small businesses that want the simplest path.
- Trial accounts.
- Self-serve teams without procurement involvement.
Pros: instant provisioning, simple billing, no negotiated commitments. Cons: list price (no discounts), limited support, no procurement help.
Cloud Solution Provider (CSP)
Microsoft sells to a partner — typically an IT services or consulting company — who resells to you with added services. Best for:
- Small to mid-size businesses wanting a partner relationship.
- Organisations that need integration with broader IT services (help desk, security, advisory).
- Tenants in regions where Microsoft doesn't sell direct.
Pros: partner-added services, often better support, flexibility on monthly vs annual. Cons: partner mark-up, dependence on the partner relationship.
Enterprise Agreement (EA)
The traditional 3-year volume licence agreement for organisations with 500+ users. Best for:
- Large enterprises with predictable headcount.
- Customers wanting deep discounts and negotiation leverage.
- Organisations bundling many Microsoft products (Azure, Dynamics, Office, Windows).
Pros: lowest unit price, predictable cost, single contract for many products. Cons: 3-year commitment, true-up complexity, harder to scale down.
Microsoft has signalled the EA programme will eventually wind down in favour of MCA — but it's still widely used as of 2026.
Microsoft Customer Agreement (MCA)
The modern digital agreement Microsoft is moving everyone to. Best for:
- Customers transitioning from EA.
- Multi-product Azure-heavy customers.
- Pay-as-you-go and monthly commitments.
Pros: digital and simpler than EA, flexible commitments, unified across Azure and Microsoft 365. Cons: less negotiation room than legacy EAs, model still maturing.
New Commerce Experience (NCE)
NCE isn't a separate model — it's Microsoft's overhaul of how subscriptions are sold in CSP and (increasingly) MCA. Under NCE:
- Subscriptions are monthly, annual, or 3-year.
- Cancellation windows are 7 days from purchase.
- Mid-term reductions are restricted — you can't drop seats arbitrarily mid-term.
- Price changes are pegged to the term you committed to.
NCE made CSP behave more like EA — commitment-based, with stricter cancellation. The change caught many CSP-buying organisations off guard in 2022–2023.
Add-ons and special programmes
- Microsoft 365 for non-profits — discounted plans for qualifying non-profits.
- Microsoft 365 Education — discounted plans for schools (A1 free, A3, A5).
- Microsoft Partner Network — Microsoft Internal Use Rights (IUR) for partners.
Which to pick
| Headcount | Right model | | --- | --- | | 1–50 | Direct or CSP | | 50–300 | CSP | | 300–500 | CSP or MCA | | 500+ | EA (transitioning to MCA) | | 5,000+ | EA, sometimes EA Plus |
Beyond size, factors that matter: relationship with a Microsoft partner, breadth of Microsoft products consumed, internal procurement processes, regulatory geography.
Whatever the model, renew with intent: licensing is the single biggest Microsoft cost lever for most organisations, and active engagement at renewal time pays back.