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Making sense of SharePoint licensing models

An expert outlines the differences between three SharePoint licensing models: SharePoint on-premises, SharePoint online and hosted SharePoint.

Just as the seasons change, the Microsoft licensing landscape has undergone shifts. This is especially true as...

the company transitions to offer "services and devices."

After years of working primarily as a vendor of software that is installed and run on-premises, Microsoft is moving away from, though not yet abandoning, its traditional model. The new model increasingly emphasizes annuity payments for Software as a Service and services.

Microsoft's core business is still driven by the traditional licensing model.

So how can customers make sense of this new model amid an already confusing licensing setup? Microsoft has simplified licensing somewhat.

There are three major approaches you can make sense of today:

  1. Traditional SharePoint on-premises
  2. SharePoint in the cloud and Office 365
  3. Hosted SharePoint

Let's go through these models in turn.

Traditional on-premises

Despite myriad changes, Microsoft's core business is still driven by the traditional licensing model. In the context of SharePoint licensing, this means that customers still need to purchase a combination of licenses to host the SharePoint environment within their data centers.

The basic license is the per-server license. This license allows customers to install and run SharePoint within their environment. While many customers are confused by the various versions of SharePoint (e.g., Standard, Enterprise), the server license carries no such distinction. You simply have to purchase one license for every SharePoint server in your farm (e.g., Web front end, search and application server).

After you acquire your server license, the types of users in your SharePoint farm determines the client access licenses (or CALs) you need to purchase. For SharePoint 2013 licensing, Microsoft distinguishes between external and internal users. Internal users require a CAL to access SharePoint; external users do not. This means that for Internet and extranet scenarios, no additional licenses (other than the server license) are required.

If, however, your users are identified employees (nonexternal users), you must acquire CALs. If you want to expose only the standard features to your employees, you need to purchase the standard CAL. If you want to expose the enterprise features to your employees, you also need to purchase the "enterprise" CAL. Note that the enterprise CAL is not a substitute, so you need to buy both.

For information from Microsoft, check out this license primer. Note that there are many programs under which you can license software, and your organization type will determine whether you use programs such as Open, Select, Enterprise Agreement or something else. See Microsoft's licensing program descriptions to find the right program right for your company.

SharePoint Online and Office 365

In late 2007, Microsoft strode confidently into cloud services. In terms of SharePoint, Microsoft introduced SharePoint Online with the 2007 version of the platform. Typically, SharePoint was bundled with other products such as Exchange and called Business Productivity Online Suite, or BPOS. The early program had two flavors that delineated pricing by the degree of functionality available to customers. The same core approach continues with today's SharePoint Online and Office 365.

Office 365 includes four distinct products: Exchange, SharePoint, Lync and Office; it replaced BPOS products. SharePoint Online, however, represents just the SharePoint functionality within the larger suite. As such, as you evaluate licensing options, note that Office 365 provides access to Exchange, Lync, Office and SharePoint. If you need only SharePoint, focus on the SharePoint-specific license options in SharePoint Online.

For SharePoint Online, there are Plan 1 and Plan 2 basic licenses. The differences between the two plans involve features. Plan 1 tracks with the standard functionality in the on-premises installation. Plan 2 tracks with enterprise on-premises functionality. In both cases, licensing is handled exclusively on a per-user basis: $3 a month for Plan 1 and $7 a month for Plan 2.

For more information, check out a full comparison of the two plans on the Microsoft site.

SharePoint hosting

A lesser-known licensing model is hosting SharePoint through a hosting vendor. This approach should not be confused with traditional managed hosting, in which the enterprise is still responsible for licensing SharePoint as if it hosted the platform on-premises. Rather, SharePoint hosting is a way of using hosting provider hardware and a resold SharePoint license. It is similar, but not the same, as using a cloud vendor.

In the SharePoint hosting model, hosting vendors use Software Provider License Agreement licenses (SPLA). This model allows hosting vendors to "rent" software from Microsoft and resell it to customers.

For more on
SharePoint 2013

A guide to SharePoint 2013

A SharePoint introduction

Case studies in migration to SharePoint 2013

The lesser-known features of SharePoint 2013

The rental fee can be attractive because it does not lock a vendor or a customer into a long-term relationship. Vendors purchase licenses from Microsoft for a monthly fee and then resell the license to customers with a markup. The difference between what Microsoft or another cloud vendor provides is that you may still have to license the server software and pay for the hosting services. However, the technology tends to be dedicated (where you are the only customer using the SharePoint farm) and there's little to no maintenance; the hosting vendors manages the servers, network connectivity and, in many cases, basic backups.

For example, PlexHosted provides SharePoint hosting with this model. The vendor charges a base monthly fee for the SharePoint environment (covering the servers, license, network connectivity, backups and support). In addition, there's a per-user license fee. In PlexHosted's case, if you purchase a single-server solution for 20 users, you would pay a monthly fee of $505 for the server and an additional $160 per month for user licenses.

Making the right choice

Ultimately, the SharePoint licensing models presented here are not simple. Along with other vendors, Microsoft has become creative in its hosting and licensing approaches. As a result, enterprises need to carefully consider the hosting and licensing decision. Further, not all solutions provide functional parity. For example, SharePoint Online does not provide all the functionality of on-premises SharePoint implementation (e.g., cross-site publishing and full Web content management capabilities), which may help drive a specific licensing approach.

But, at present, the licensing models and approaches appear stable. Companies now have several licensing options for exploiting the most popular collaboration platform today.

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