Decoding Microsoft’s Licensing Shift: The Case of O365 F3’s Removal

December 08, 2023
IT Microsoft

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On a monthly basis, Microsoft can change the use rights and offerings for their license agreements and these changes can be found on their Product Terms page. This page isn’t very intuitive, and changes are often hard to spot. One such example is the recent removal of O365 from Microsoft’s Enterprise Agreement offerings.

In the third quarter of 2023, Microsoft quietly changed the availability of some of its Frontline offerings. This included the removal of Office 365 F3 from all programs except the Microsoft Customer Agreement (CSA or Direct).

The Frontline licenses have been a great addition to Microsoft’s licensing options, but can only be assigned to users who satisfy one or more of the following conditions:

  • Uses a primary work device with a single screen smaller than 10.9”
  • Shares their primary work device with other qualifying Microsoft 365 or Office 365 Frontline Worker licensed users, during or across shifts

What Does O365 F3’s Removal Tell Us?

It is Microsoft’s prerogative to change the licensing terms for their products as they see fit. Compared to some of Microsoft’s other licensing adjustments, the removal of O365 F3 is not that big of a change. But it does impact customers as the alternatives are not apples-to-apples in terms of cost or capability. It also provides a glimpse into Microsoft’s licensing strategy and perhaps where it could be going in the future.

O365 F3 didn’t fall neatly into Microsoft’s Enterprise Products or Additional Products categories.  Enterprise products, such as Office 365 E1/3, EMS E3/5, Windows E3/5, and M365 E3/5, carry contractual requirements. Each qualified user must be licensed with the appropriate Enterprise product.  A qualified user is a person who: (1) is a user of a qualified device, or (2) accesses any server software requiring an Enterprise Product Client Access License or any Enterprise Online Service.

Additional Products means any Product identified as such in the Product Terms and chosen by the Enrolled Affiliate under the Enterprise Enrollment. Additional Products do not have any contractual requirements and a customer can pick and choose which Additional Products to cover with Software Assurance via the Enterprise Agreement. O365 F3 was an outlier to the Additional Product offerings in that there are pre-qualifications to buying it (see above).

Implications of the Removal of O365 F3

The removal of O365 F3 from Microsoft’s Enterprise Agreement offerings suggests the vendor is no longer interested in the licensing granularity that was possible with O365 F3. Instead, Microsoft wants to force customers to license Frontline workers with either the M365 F1 suite or the M365 F3 suite.

While O365 F3 was an economical option for Frontline workers, it is important to note that these replacement options include the full Enterprise Mobility and Security Suite E3, at a fraction of the cost of the standalone EMS E3 offering.

It will be interesting to see what changes, if any, Microsoft make to their product offerings under the Enterprise Agreement moving forward. As Microsoft’s product and revenue strategy evolves (particularly as it related to AI), enterprise customers should have resources at the ready to spot and interpret licensing changes as well as model cost impact and alternative licensing scenarios. This understanding will go a long way in helping Microsoft EA customers effectively strategize purchases and renewals with an eye towards cost optimization.

Interested in learning more about Microsoft’s recent licensing changes? NPI’s Microsoft Cost and License Optimization experts can help. Contact us to learn more.