Microsoft Dynamics 365 Licensing Guide

Microsoft’s 2022 Official Licensing guide is a 62-page download that digs into every licensing option and user type across its expansive selection of modules and add-ons.

You don’t need to scroll far before realizing that the D365 licensing structure is a complex puzzle. A puzzle you’ll need to solve if you want to avoid taking a massive hit to your bottom line, your reputation, even your ability to, well, stay in business.

While this all might sound ominous, it’s important to understand that the biggest risks come from poor planning or a lack of preparation. And–when you’re dealing with something like licensing or choosing a plan, it’s easy to assume it’s as easy as signing up for Netflix or Spotify. In reality, figuring out Microsoft’s licensing structure easily demands as much effort as gathering business requirements or auditing your current ERP system.

In this guide, we’ll go over the basics: user types, licenses by module, and what to consider before diving head first into a D365 implementation.

How is Microsoft Dynamics 365 Licensed?

Dynamics 365 applications are licensed under a few different models.

Assigned licenses grant access to a specific user or device, while unassigned licenses unlock access to modules, features, or services at the tenant level.

Within those categories, you’ll have a few different options.

Assigned licenses, for example, allow you to grant users full access permissions–or provide limited access via “Team Member” licenses. Unassigned licenses allow users to pay for extra capacity or cross-application access.

Additionally, Enterprise and Professional licenses cannot be mixed and matched. Meaning, you can’t access Dynamics 365 F&SCM modules if you’re subscribed to a Business Central plan.

We’re just scratching the surface, but as you can see, there are a ton of variables that can influence pricing–as well as things like productivity, accuracy, and access to critical information.

In these next few sections, we’ll take a closer look at different license types.

Assigned Licensing

Most Dynamics 365 applications–including all core ERP and CRM modules–are licensed via named user subscriptions. In other words, licenses are assigned to a specific user or device, usually on a per user, per month basis.

Assigned user subscriptions fall into two main categories: full user and additional user.

Full users have access to the full suite of features under a D365 Professional or Enterprise license. In most cases, you’ll probably opt for full user licenses – which provide dedicated access on a per user, per month basis.

Additional user licenses are designed for users who don’t need full privileges for the entire system. These subscriptions come in a few different flavors:

• Team Members license. The Team Members license is assigned to individual users who are not connected to a specific function. The license provides read-only access to D365 data from apps like Finance, SCM, HR, Project Operations, Commerce, Sales, and Service. It also provides access to basic functionality–think–specific tasks within a certain module like updating service logs or entering expenses. It does not extend to custom apps.
• Operations Activity license. This assigned license type is for additional users who need more capabilities than you’d get with the team member license, but don’t need the same access as a full user.
• Device licenses. Device licenses are assigned to shared devices like tablets, HoloLens 2 headsets, or even shared computers. Shared licenses can be assigned to Sales, Customer Service, Field Service, Operations, and BC devices.
• Human Resources Self-Service license. A self-service license, assigned to an individual user, that allows them to manage their own HR activities. This includes managing benefits or time-tracking without a full user license for the HR module.

As an example, here’s how Finance security roles vary by license type (full users are represented by the “Finance” column).

In this case, Team members have limited permissions, based on their role. For example, a marketing director might approve the budget for an upcoming campaign. Or–a sales rep might take payment from a customer as they’re closing a deal.

They might also have read-only permissions that enable them to use financial data in reports – but they won’t be able to make changes to those records.

Assigned licensing is designed with flexibility in mind. You can add or remove users any time, bring on new hires, add temporary workers for a specific project, or grant access to ISVs/VAR partners, etc.

The point is, you’re not locked into a contract that either forces you to pay for seats you don’t need or limits your ability to add new users as needed.

Base Licenses + Attach Licenses

According to Microsoft, users that only need access to one application can subscribe to that application as a “base license,” with the option to license additional products at a discounted rate.

For example, you might initially pay for the standalone Sales module, and later, as your client base grows, you might add Field Service and Customer Service apps to the mix for an extra $30 per user per month.

Consider the impact better service and proactive client management can have on the bottom line–more repeat purchases, higher retention rates, fewer service calls, etc. Assuming you only need 2-3 modules, this licensing model has the potential to transform your business without breaking the bank.

Do note that not all base licenses are compatible with all attach license options.

Business Central, for example, only allows users to add Sales Pro or Customer Service Pro to their plans. The reason is, BC was designed to cover all (most) core business functions an SMB needs to manage their business and drive growth.

Sales and CS add-ons directly support their growth strategy and maximize profitability.
But, orgs that need several advanced solutions for Commerce, Project Operations, HR, etc. are likely better off with an Enterprise system.

Basically, if you need advanced solutions to support most of your business units, you’re probably dealing with a complex business model that BC isn’t equipped to handle.

Now, you look at the table below, you’ll notice a lot more options for Enterprise plans like Finance and Supply Chain Management.

This is because those modules don’t cover the entire business like Business Central.
Instead, larger organizations can select the modules they need to run their business, and avoid paying more for features they’ll never use.

Unassigned App Licensing

Unassigned licenses apply to apps that provide tenant-level access to Dynamics 365 apps rather than specific users or devices.

Microsoft uses this model to license applications designed to enhance the value of its core ERP and CRM modules, including:

• Customer Insights
• Customer Voice
• Electronic Invoicing
• Fraud Protection
• Intelligent Order Management
• Marketing

Within the broader “unassigned” category, subscribers can choose from a few different license types.

• Full application licenses. Full licenses are the main licensing model for unassigned applications like D365 Marketing, Customer Insights, or Fraud Protection, all of which are only offered on a per tenant basis.
• Cross-application access licenses. Cross-app licenses provide access to some D365 apps in some situations, offering an alternative to assigning licenses to individual users.
• Capacity licenses. Capacity licenses include limits or allowances for things like transaction volumes, data storage, customer records, case routing requests, etc. Apps come with default capacities, with the option to purchase add-on licenses as needed.

Here’s an example of how unassigned licenses and assigned licenses co-exist within the broader ecosystem.

Here, you’ve got a Supply Chain Management subscriber paying for the ERP module on a per (named) user, per month basis.

Say they need to extend SCM’s out-of-the-box capabilities.

Adding more storage or predictive AI insights requires users to subscribe to an additional app (and pay for a full application license) – that connects to the main ERP system.

If that user wants additional asset management capabilities or intelligent order management, they’ll need to pay for extra capacity. In these cases, you’re building on capabilities that are already part of the system–bringing in more intelligence, extra storage space, etc.

Final Thoughts

Hopefully this guide shed some light on what Dynamics 365 licensing entails and why reading the 60+ pages of fine print is an essential step toward a successful D365 implementation.

Look–we get it, Microsoft Dynamics 365 licensing isn’t the most exciting part of your transformation journey, but understanding them is critical when it comes to maximizing the value of your investment.

Whether you’re overwhelmed by the licensing process, need help selecting modules & ISVs, or are looking for a trusted partner to support your transition to the cloud, Velosio can help.

You don’t have to do this alone. Learn how Velosio can help you achieve your organizations goals as an ISV Partner.