Be Our Guest, Put SharePoint Licenses to the Test

Unsure of how SharePoint Online Guest Licensing works? You’re in a club that’s far from exclusive. The number of organizations who bought Microsoft licenses grew extensively in the last couple of years, driven by the need to facilitate hybrid work as well as gain access to the impressive range of functionality available through the licenses. That rapid growth, and the effort needed to assess such a complex set of features, makes it difficult to unpack the full value available.

In the case of SharePoint Online, clients are experiencing significant productivity gains for collaborating at scale with colleagues, but also want to extend that value to external stakeholders, while retaining high security and preserving the ability to work with the Microsoft productivity suite. Many have heard that there’s something called a “SharePoint Guest License,” but are unsure of how to confirm its existence and put it to use. They may remember a 1:5 active user to guest licensing ratio, but that actually was for Azure AD, and in fact hasn't applied since 2020.

How Did We Get Here?

It helps to start with a brief history lesson. When Microsoft introduced Azure B2B in mid-2017, the licensing model specified that for every paid user license, one could invite up to five users into the M365 tenant. For example, if one has 20 user licenses, one can invite up to 100 guest users without incurring added Microsoft licensing.

Clear, right? Not so much because the documentation didn’t supply key details. The actual licensing said that the 1:5 ratio applied if the client used premium Azure AD features (Azure Active Directory Premium P1 vs P2 Features Comparison). If a user was simply logging into SharePoint Online using AAD free capabilities, no licensing ratio applied, and one could technically have unlimited users coming into the tenant.

A Simpler Approach

In September 2020, Microsoft simplified guest licensing when it introduced an updated billing model for Azure AD external identities (Both B2B and B2C). Key to this simplicity was the move to Monthly Active Users (MAU)-based pricing. MAU is calculated on a unique user login over the course of a month up to a given threshold. With MAUs, even if using AAD Premium P1 or P2 features, license costs don’t get triggered until a client exceeds 50,000 MAUs. Even then, the costs are minimal.

So now Azure AD B2B guest licensing is easy to figure out.

• If you are not using Azure AD Premium licensing in your tenant, you have always been able to and continue to be able to invite as many guest users as you want
• There are benefits to Azure AD Premium for all size tenants. If you do have Azure AD Premium (P1 or P2), you can invite unlimited guests, and as long as your MAU is less than 50,000, there are still not additional costs
  • For example, Betty logs in as a guest to a tenant 60 times in a month, and she only counts as one MAU towards the 50,000-user limit.

What does this mean for Microsoft 365?

• SharePoint, Teams and Yammer have always and continue to allow unlimited guests for no additional costs
• Other areas of Microsoft 365 have different rules
  • Power BI requires the same license whether you are a member or guest
    • Guests can use their organizational license, or they can have one assigned in the tenant they are coming into
    • You can also use Power BI Embedded and our Data Portal product to allow unlimited users in through a capacity model rather than user licensing
  • Power Platform has a variety of external user licenses that are required

The revamped licensing approach means one needs to have a lot of monthly users to hit a threshold where added Microsoft licensing is needed. In the case of extranets, some users don’t use the resource every month so MAUs can extend the value of SharePoint Online significantly.