Microsoft's Updated Definition of External Users: What Enterprise Customers Need to Know

Microsoft recently put up guardrails around the definition of External Users – an update enterprise customers should be aware of as they think about software license compliance.

Currently, the term “External Users” refers to users that are not employees, onsite contractors or onsite agents of Customer or its Affiliates. As of October 1st, the definition of External Users has been modified for products that include External Users’ use rights in the product terms. 

The new definition refers to users that are not (a) employees of Customer or its Affiliates, (b) contractors or agents that typically work for Customer or its Affiliates for more than 30 hours on average per week, or (c) contractors or agents that typically work onsite for Customer or its Affiliates on each working day.

What’s Behind the Change?

The new definition of External users adds a little more precision to Microsoft’s previous definition.  This is important for legal reasons, particularly as it relates to software licensing compliance, where having a precise and unambiguous definition is essential. The updated definition provides more flexibility but also requires organizations to define who is and isn't an external user

Which Products are Affected?

The changed definition only applies to customers who sign an enrollment or agreement on or after October 1, 2024 and applies to the following products:

• Microsoft Teams
• Office Servers
• Office for the Web
• Office 365 Services that include Yammer
• OneDrive for Business
• SharePoint Online
• Microsoft Entra ID
• Dynamics 365
• Windows Server
• SQL Server
• Exchange Server
• Project Server
• SharePoint Server
• Skype for Business Server
• Azure DevOps Server
• Windows Multipoint Server
• Advanced Threat Analytics
• Microsoft Endpoint Configuration Manager
• System Center Data Protection Manager/Protection, System Center Orchestrator/Operations Manager/Service Manager

A Note About Windows and SQL Server



Previously, customers could use the Windows External Connector as an ‘unlimited’ Windows CAL for non-employees, with each server that non-employees access requiring this license. This license still has its place for users that do not meet the new definition for External Users.

The addition of SQL in the product list above is an enigma. SQL already has 2 different models of licensing:

• Server/CAL – this model of licensing is only appropriate when the SQL database is only accessible to employees; the Server would consume a license and each employee would get a CAL. With this model of licensing, External Users would get a CAL, just like a regular employee.
• Per Core – this is an ‘unlimited’ model of licensing, each core on the server would consume a Core license and anyone -employee or non-employee are licensed to access that database.

There remain many products for which there is no exception for External users, and with the addition of Project Server to the list of products, all the remaining products are online services. Given the licensing model for online services, where the vast majority of products are licensed in the per user mode (per user, per month), we don’t anticipate a change to these offerings in the near future.

If you have questions about Microsoft licensing and compliance, NPI can help. Contact us to learn more.