Exchange Server & M365

Trying to determine the licence requirements for on-premise Exchange Servers (part of a hybrid on-prem/O365 environment).

The on prem servers host shared mailboxes plus a small number of user mailboxes. Those users do not have any O365/M365 licences assigned

Product Terms state that users with E3/E5 can install and access Exchange Server

From this I deduce the unlicenced users need Exchange CALs (I think). DO the Exchange Servers need licences too or can they use the hybrid licence, or are they covered by M365?

Can anyone clarify?


Hi Ian,

By “Product Terms; Product Offerings; Online Services; Microsoft 365 - Extended Use Rights for Microsoft 365 E3/E5”, Office Application Servers do not need server license if „access to the above server software is exclusive to those users assigned a Microsoft 365 E3/E5 User SL or External Users.”

If only one user does not have an M365 E3 or E5 subscription but an O365 subscription or CAL, all server instances will require a server license, in case of Exchange Server, Standard or Enterprise edition, depending on the installation.

So the server license exemption only applies to full M365 E3 / E5 coverage.

Note that for Office application server VMs being able to automaticaly move between physical servers, the server licenses must have an SA coverege, if you do not want to multiply the license requirement by the number of the physical hosts (because of the license reallocation rules and the License Mobiloty SA benefit).

Also, you have to decide if the features accessed by the users need Enterprise CALs.
By “Product terms; Product Offerings; Software; Office Servers; Exchange Server; Additional Functionality Associated with Exchange Enterprise CAL”, the following features need Enterprise CAL:

In-Place Archive, In-Place Holds (Indefinite, Query-based, and Time-based), Information Protection and Compliance, Custom Retention Policies, Per User/Distribution List Journaling, Site Mailboxes – Compliance, Data Loss Prevention.

Standalone Exchange Server CALs are additional CALs, so besides Exchange Server Enterprise CAL the user must have a Standard CAL as well. The edition of the required CAL is not related to the edition of the server (a user with Standard CAL can access an Exchange Server Enterprise server if the accessed features are only standard features).

O365/M365 E3/E5 subscriptions has Enterprise CAL equivalences. Also Exchange Online Plan1 has Standard, Plan 2 has Enterprise CAL equivalence for the on-prem Exchange Server.

Don’t forget, that the users must have CALs for the infrastructure under the Exchange Server as well (eg. Windows Server CALs). M365 and Core/Enterprise CAL suites include this, but O365 or Exchange Online plans do not.