What are the types of Microsoft and Office 365 licenses?

Small and medium-sized enterprises (SMEs) evaluating Microsoft’s cloud productivity suite often face a maze of similar-sounding plans. From Microsoft 365 Business Basic to Office 365 E5, each Microsoft and Office 365 license comes with a different set of features and capabilities.

Choosing the right plan is crucial for both productivity and cost-effectiveness. This guide breaks down the various Microsoft 365 and Office 365 license types—explaining what they include, how they differ, and which type of business each is best suited for.

Complete list of Microsoft and Office 365 licenses

Before we dive into the different Microsoft and Office 365 plans, let’s first glance over the licenses that are available from Microsoft right now. First off, you need to know that there are two main choices when it comes to Microsoft and Office 365 licenses – the business service family and the enterprise service family.

The business category covers up to 300 users and includes the following plans:

• Microsoft 365 Business Basic
• Microsoft 365 Business Standard
• Microsoft 365 Business Premium
• ·Microsoft 365 Apps for business

The next category is the enterprise, which covers more than 300 users and unlimited number of users. The plans include:

• Office 365 E1
• Office 365 E3
• Office 365 E5
• Microsoft 365 E3
• Microsoft 365 E5
• Microsoft 365 F1
• Microsoft 365 F3

Now, let’s dive into each of these Microsoft and Office 365 licenses.

What is the difference between Microsoft and Office 365 licenses?

It’s easy to get confused by the terms Microsoft 365 and Office 365. In essence, Microsoft 365 (often abbreviated M365) is a broader subscription bundle that includes everything Office 365 offers and more.

Microsoft 365encompasses the familiar Office productivity apps such as Microsoft Word, Microsoft PowerPoint etc. and cloud services, plus additional features like device management and advanced security tools​. In other words, Microsoft 365 is a cloud-based subscription suite that not only provides Office applications and online services but also integrates Windows operating system licenses and Enterprise Mobility + Security (EMS) features in certain plans​.

Originally, Office 365 referred to Microsoft’s suite of cloud services (Exchange email, OneDrive, SharePoint, Teams, etc.) and Office applications. In April 2020, Microsoft rebranded most of its small-business Office 365 plans under the Microsoft 365 name​. For example, Office 365 Business Premium was renamed Microsoft 365 Business Standard, and Office 365 Business Essentials became Microsoft 365 Business Basic. Despite the new names, the core productivity features remained the same​.

The rebranding was meant to reflect that the subscription now delivers not just Office apps, but a full platform with cloud services and security enhancements. That said, the Office 365 brand isn’t gone entirely. Microsoft still uses the Office 365 name for some enterprise plans (like Office 365 E1, E3, E5) and certain legacy or specialized offerings​.

Think of it this way: Office 365 is inside Microsoft 365. If you purchase a Microsoft 365 plan, you get the Office 365 productivity suite plus additional features (especially in the enterprise-tier plans). For an SME decision-maker, it’s important to know that when people mention Microsoft 365, it generally includes the Office apps and cloud services you expect, and the difference often comes down to whether things like your Windows 10/11 licenses and advanced security tools are part of the bundle.

In summary, Microsoft 365 is an all-encompassing offering that includes Office 365’s functionality and more, whereas Office 365 (as a standalone term) usually refers to the productivity services without the extra device management or OS components​.

Microsoft and Office 365 licenses for business plans

For companies with up to 300 users, Microsoft offers a set of Business plans that provide an affordable way to get cloud email, Office apps, and collaboration tools. These plans are designed for SMEs and have a user cap of 300 seats per plan.

All business plans include core cloud services like Exchange Online (for email), OneDrive and SharePoint (for file storage and intranet), and Microsoft Teams (for communication), but they differ in whether they include desktop Office applications and advanced security features.

Microsoft 365 Business Basic plan

Microsoft 365 Business Basic is the entry-level offering for small businesses. It provides all the essential cloud services to get your organization up and running with remote productivity.

What’s included?

• Exchange Online (email hosting)
• OneDrive storage (1 TB)
• Microsoft Teams
• Office apps online versions only (Word, Excel, PowerPoint and Outlook)

Who is Microsoft 365 Business Basic for?

Business Basic is ideal for small businesses that need professional email and collaboration tools at a low cost and are comfortable using the online versions of Office apps. If your team primarily works in a web browser or on mobile devices, or if you’re just starting out with a tight budget, this plan covers the essentials.

Price of Microsoft 365 Business Basic: $8.10/user/month

Microsoft 365 Business Standard plan

Microsoft 365 Business Standard is a step up from Basic and is often the sweet spot for many SMEs. It includes everything in Business Basic—Exchange email, Teams, OneDrive, SharePoint, web apps—plus the full desktop Office applications that many users rely on daily​.

What’s included?

• Everything from Business Basic
• Office apps (online + offline versions)
• Microsoft Bookings
• Microsoft Loop workspaces for real-time collaboration
• Clipchamp video editor for creating and editing business videos

Who should choose Microsoft 365 Business Standard?

This plan is best suited for businesses that want the full Office experience on the desktop for each user. If your employees work extensively with Office documents and value the functionality of the desktop apps (or need to work offline at times), Business Standard is the right choice. It’s the recommended plan for many growing businesses because it balances cost with capability – you get significantly more functionality than Basic, at a moderate price point.

Price of Microsoft 365 Business Standard: $17.00/user/month

Microsoft 365 Business Premium plan

Microsoft 365 Business Premium is the top-tier business plan and includes everything in Business Standard, then layers on advanced security and device management features.

What’s included?

• Everything in Microsoft 365 Business Standard
• Microsoft Enterprise Mobility + Security (EMS) such as Azure AD, Premium P1 and Microsoft Intune for device management
• Microsoft Defender for Office 365 (Plan 1)
• Windows Autopilot for easier device deployment

Who is Microsoft 365 Business Premium for?

This plan is recommended for businesses that handle sensitive information or have compliance requirements and thus need more than basic security​. If your company must protect customer data, support remote/hybrid work securely, or if you lack a dedicated IT team and want Microsoft’s help in managing devices and users, Business Premium is an excellent choice. It’s also the natural upgrade once a growing business finds that Basic or Standard lack certain security features.

Price of Microsoft 365 Business Premium: $29.80/user/month

Microsoft 365 Apps for Business plan

Microsoft 365 Apps for Business is a unique plan in the lineup because it only includes the Office applications, without the cloud services like email or Teams. In essence, this is the subscription version of Office for companies that just need the Office desktop apps and cloud storage, and perhaps already have another solution for email/communications.

What’s included?

• Office apps desktop versions (Word, Excel, PowerPoint, Outlook, etc.)
• 1 TB OneDrive storage

Who is Microsoft 365 Apps for Business best for?

Microsoft 365 Apps for Business is a great choice for organizations that need the core Office apps without additional services​. If you already have email and communication tools in place (or don’t need them for specific users), this plan lets you equip users with the latest Office desktop software economically. It’s also sometimes used in mixed environments—for instance, maybe your frontline workers don’t need email accounts, but they do need to open and edit Word and Excel files; you could give them an Apps for Business license.

Price of Microsoft 365 Apps for Business: $11.70/user/month

Microsoft and Office 365 licenses for enterprise plans

As your organization grows beyond 300 users or requires more advanced capabilities, you enter the realm of Enterprise plans. Microsoft’s enterprise offerings come in two flavors: Office 365 E plans, which focus on the core productivity services, and Microsoft 365 E plans, which are comprehensive bundles that include Office 365 services plus additional security and Windows enterprise OS licenses.

Enterprise plans have no seat limit (you can have an unlimited number of users) and include some features not available in the Business tier, such as larger mailboxes, more robust compliance tools, and add-ons for voice calling.

Office 365 E1 plan

Office 365 E1 is the most basic enterprise plan. In many ways, it’s the enterprise counterpart to Business Basic, offering the essential cloud services with web and mobile app access only.

What’s included?

• Exchange Online for email (with a 50 GB mailbox per user)
• SharePoint Online
• OneDrive for Business
• Microsoft Teams
• Office apps for online web browser or mobile device (Word, Excel, PowerPoint and Outlook)
• SharePoint intranet

Who is Office 365 E1 for?

E1 is suitable for large organizations or government/education institutions that need to provide basic productivity tools to a broad user base at the lowest cost. It’s often used for lightweight users or occasional users in an enterprise—people who need email and access to documents, but don’t create complex documents or need desktop Office.

Price of Office 365 E1: $10.50/user/month

Office 365 E3 plan

Office 365 E3 is the mid-level enterprise plan and one of the most popular enterprise subscriptions. It includes everything in E1, plus the full desktop Office apps and additional benefits.

What’s included?

• Everything in Office 365 E1
• Offline versions of Office apps (Word, Excel, PowerPoint, Outlook, OneNote)
• 100 GB mailbox per user
• Exchange Online Archiving (unlimited email archive storage)
• Office 365 Message Encryption

Who should consider Office 365 E3?

This plan is ideal for medium to large businesses that need the full suite of productivity tools and basic enterprise security/compliance features​. Many enterprises standardize on E3 for their information workers because it strikes a balance between functionality and cost. Overall, Office 365 E3 is the go-to for organizations needing a robust, full Office environment with enterprise email and compliance capabilities.

Price of Office 365 E3: $29.30/user/month

Office 365 E5 plan

Office 365 E5 is the most feature-rich (and highest-cost) Office 365 enterprise plan. It includes everything E3 offers and then extends it with a suite of advanced security, analytics, and voice capabilities. Companies that choose E5 are often those with very stringent security requirements or those looking to consolidate additional services into their Microsoft subscription. Here are the key additions in Office 365 E5 beyond E3​:

• Advanced Security: Office 365 E5 comes with Microsoft Defender for Office 365 (Plan 2) built-in, which provides advanced threat protection for email and collaboration. This helps guard against sophisticated attacks like zero-day malware and phishing attempts by scanning attachments and links in real-time​. It also includes Azure Active Directory Premium P2, giving you advanced identity protection features such as Privileged Identity Management and risk-based Conditional Access​.
• Analytics and Business Intelligence: E5 includes Power BI Pro, Microsoft’s powerful data analytics and visualization tool​. With Power BI Pro, your users can create and share interactive dashboards and reports – a capability that would otherwise require a separate license. This is great for organizations that want to foster a data-driven culture without purchasing separate BI software. E5 also provides advanced analytics within Microsoft 365 like MyAnalytics/Viva Insights for personal productivity insights, and organizational analytics to help optimize how the company uses Microsoft 365.
• Advanced Compliance: With E5, organizations get the top-tier compliance solutions. This includes features like Advanced eDiscovery (for legal investigations across M365 data), Customer Lockbox (which lets you control Microsoft support’s access to your content), and advanced auditing capabilities​.
• Voice and Collaboration Enhancements: Office 365 E5 is the only Office 365 plan that includes built-in Phone System capabilities for Microsoft Teams. This means you can use Teams as a full phone PBX system, enabling users to make and receive phone calls to external numbers directly in Teams (with the addition of a calling plan or SIP trunks)​. E5 also includes Audio Conferencing, so users can create Teams meeting invites that include a dial-in telephone number for audio-only participants – helpful for clients or staff who need to join meetings via phone.

Who is Office 365 E5 best for?

Given its comprehensive (and expensive) nature, E5 is typically used by larger enterprises, especially those in highly regulated industries or with extreme security needs​. Office 365 E5 is ideal for organizations that need top-tier security, compliance, and analytics on top of the standard Office 365 services​. It ensures you have the most advanced tools to stay secure and competitive.

Price of Office 365 E5: $50.40/user/month

Microsoft 365 E3 plan

When you see “Microsoft 365 E3” (as opposed to Office 365 E3), it signifies a bundle that includes Office 365 E3 plus additional Microsoft services like Windows 10/11 Enterprise and EMS (Enterprise Mobility + Security). In effect, Microsoft 365 E3 is a superset: it has everything Office 365 E3 offers, and on top of that provides a Windows Enterprise OS license and advanced device management and security features. Concretely, Microsoft 365 E3 includes Office 365 E3’s full productivity suite (desktop apps, 100 GB email, Teams, etc. as described above), and it adds:

• Windows Enterprise E3 license: This allows the user to upgrade their Windows 10/11 Pro to Enterprise edition, which comes with additional features like BitLocker encryption, virtualization rights, and advanced security like Credential Guard. It’s particularly useful if you want all your company PCs to run Windows Enterprise for a standardized, secure environment.
• Enterprise Mobility + Security (EMS) E3: This is a bundle of security tools, the key components being Azure Active Directory Premium P1 (for advanced identity and access management), Microsoft Intune (for mobile device and application management), and Azure Information Protection P1 (for classifying and protecting sensitive documents). These tools enable centralized control over user access, devices, and data security beyond what Office 365 alone provides.

In essence, Microsoft 365 E3 is Microsoft’s “modern workplace” bundle for enterprises, combining productivity, operating system, and device/security management. It includes all the features of Microsoft 365 Business Premium (which also has Intune, etc.) but without the 300-user limit, and with even more capacity and compliance (e.g., the 100 GB mailboxes from Office E3)​. It also introduces some security enhancements that Business Premium might not have.

Who should consider Microsoft 365 E3?

This plan is targeted at organizations that want a holistic solution – productivity + OS + device management – in one package. Large enterprises often adopt Microsoft 365 E3 to simplify licensing (one license per user covers Windows, Office, and EMS). Essentially, Microsoft 365 E3 is best for organizations that need all the features of Office 365 E3 plus unified security and management of users’ devices and PCs. If your business has an IT team aiming to tightly manage devices and data as you grow, M365 E3 provides those tools.

Price of Microsoft 365 E3: $47.60/user/month

Microsoft 365 E5 plan

Finally, Microsoft 365 E5 represents the most comprehensive and advanced bundle Microsoft offers for enterprise customers. Microsoft 365 E5 includes Office 365 E5 (with all the premium features we discussed earlier) and adds the corresponding Windows 11 Enterprise E5 and EMS E5 components on top. It’s effectively a combination of Office 365 E5 + Windows Enterprise E5 + EMS E5.

You get all the Office 365 E5 features: desktop apps, 100 GB email & archive, Power BI Pro, Teams Phone System, Audio Conferencing, Advanced eDiscovery, Defender for Office 365, etc. – everything in the productivity and collaboration realm is included.

• Windows 10/11 Enterprise E5: This includes everything in Windows Enterprise E3, plus advanced security like Microsoft Defender for Endpoint (the top-tier endpoint protection with EDR – Endpoint Detection and Response). It provides cutting-edge features to detect and remediate threats on individual devices. If a user’s PC encounters a sophisticated attack, Defender for Endpoint (part of Windows E5) can alert and help contain it.
• EMS E5: The EMS E5 package brings Azure Active Directory Premium P2 (even more advanced identity management, including Identity Protection and Privileged Identity Management for admin roles), Microsoft Defender for Cloud Apps, and Microsoft Defender for Identity (which monitors on-premises Active Directory signals for threats), among other things​. EMS E5’s capabilities allow an enterprise to implement a zero-trust security model with rich insights and controls over identities, cloud apps, and on-prem identity infrastructure. It also includes features like automatic data classification and advanced audit, as referenced in Microsoft 365 E5 Compliance suite​.

Who is Microsoft 365 E5 for?

This plan is geared towards enterprises that demand the absolute highest level of functionality and security. It’s often adopted by organizations that not only want to protect against cyber threats and comply with complex regulations but also want to empower their business with advanced analytics and voice capabilities in one package.

Price of Microsoft 365 E5: $74.30/user/month

Microsoft 365 plans for frontline workforce

In addition to the Business and Enterprise plans, Microsoft also offers specialized licenses for Frontline Workers. These are labeled as F1 and F3 plans. Frontline workers are employees who are often on the go or on their feet – think retail staff, factory floor workers, customer service reps, nurses, etc.

They typically don’t have dedicated desks or computers but still need access to communication tools and certain company resources. Microsoft 365 F1 and F3 are tailored to provide these users with the tools they need at a lower cost, with some limitations compared to the full Business/Enterprise plans.

Microsoft 365 F1 plan

Microsoft 365 F1 is the most basic offering for frontline staff. It provides essential communication and cloud productivity capabilities while omitting the heavier apps that a desk-bound information worker would use.

What’s included?

• Microsoft Teams
• SharePoint
• Yammer
• Outlook
• Microsoft Viva Connections and Viva Engage

Who is M365 F1 for?

This plan is recommended for organizations with frontline workers who only need basic communication tools and occasional access to information​. If your employees do not require their own email inbox and will not be creating Office documents from scratch, but they do need to be on Teams for messaging or shift scheduling and maybe view content, F1 is extremely cost-effective.

Price of M365 F1: $3.10/user/month

Microsoft 365 F3 plan

Microsoft 365 F3 is the more advanced frontline plan, meant for first line workers who need greater access to productivity tools than F1 provides.

What’s included?

• Everything from Microsoft 365 F1
• Office apps online access
• Exchange Online (2 GB storage)
• Windows Enterprise E3 usage rights
• Intune

Who is M365 F3 for?

Microsoft 365 F3 is recommended for organizations with frontline workers who need a bit more than basic communication – specifically, those who need email and the ability to work on documents​. It’s a more comprehensive frontline solution. In scenarios where frontline staff use shared computers on site, F3 ensures they can log in and use Office on the web and even leverage a Windows 10 Enterprise experience on that shared device. Essentially, choose F3 for any first line employees who are not desk workers but still generate or interact with business information regularly.

Price of M365 F3: $10.90/user/month

How to choose the best Microsoft and Office 365 license plan?

Microsoft’s licensing portfolio may seem overwhelming, but it essentially boils down to matching your organization’s size and needs to the right plan family. In all cases, it comes down to which services do each group of users truly need? The best approach is to align the license to the user’s function. This ensures you’re not over-paying for power users or leaving anyone under-equipped.

Fortunately, all Microsoft 365/Office 365 plans integrate with each other within the same tenant, so collaboration isn’t hindered by different license types. You can have execs on E5, clerks on F3, and office staff on Business Standard all working together in Teams; the main differences are what each can individually do or access.

Finally, remember that you can upgrade or change plans as your business evolves. Microsoft and its partners (such as Gestisoft) can assist with transitioning from one plan to another as needed. Along those lines, the team at Gestisoft would be happy to answer any questions you may have regarding your Microsoft and Office 365 licensing needs. Contact us today to book a free consultation.