AAD B2B Licensing

Guests that use features of paid editions of Azure Active Directory (AAD) (Premium P1, or Premium P2) must be licensed. Microsoft emphasizes that employees do not qualify as guests and must be licensed with a User Subscription License (User SL) of the appropriate level of AAD Premium or a suite that includes it.

The licensing model for AAD Business to Business (B2B) recently changed, and organizations should familiarize themselves with the new monthly active user (MAU) model, as the old model appears headed toward retirement based on changes documented in the Jan. 2021 Product Terms licensing document.

Old Licensing Model

For each User SL that a customer assigns to a user, up to five additional External Users are permitted to access the corresponding AAD service level of that licensed user. 

For example, a tenancy that has 150 User SLs for AAD Premium P1 that apply to members would also be licensed for up to 750 AAD B2B guests. In documentation, Microsoft sometimes refers to this as the “5:1 licensing rule.”