Licensing Advent Calendar – Day 1 – Introduction and History

Welcome to the first post of the Dynamics 365 license enforcement Advent Calendar. In the post, you will get an introduction to why Microsoft made the decision to go for license enforcement. What happened this year and even before?

History

Dynamics 365 Finance and Operations (aka AI ERP) is the successor of Dynamics AX and Damgaard Axapta products. Damgaard introduced the licensing based on concurrent users. It had a validation when it reached the maximum of concurrent users via either the client application or the web interface. The licensing based on concurrent users was used until AX 2009.
Microsoft Dynamics AX 2012 was the version where Microsoft took the opportunity to make a lot of changes. Next to, e.g., the concept of an unlimited number of financial dimensions by configuration, also the security model changed dramatically. Microsoft also moved from a concurrent user-based licensing to a named user licensing. They introduced several levels of users: Enterprise, Functional, Task, and Self-serve. The enforcement logic was not changed; all licenses got a default of 30000 users to be able to bypass the old logic on concurrent users. At that time, other enterprise software, like SQL Server, was based on trust. This was also “implemented “copied” to Dynamics AX 2012. There was a license miner that collected the number of required users per license SKU periodically. A batch job collected this once a week. This could be used to prove compliance and start discussions for license renewals.

Microsoft Dynamics 365

When Microsoft released the first cloud-based version of Dynamics (named Microsoft Dynamics AX) in 2016, the available SKUs were changed from 4 to 3 levels: Enterprise, Activity, and Team members. Still, there was no license validation implemented. Shortly thereafter, the product got renamed several times before it got split into different product SKUs, such as Finance, Supply Chain Management, and Commerce. At that time, Microsoft already mentioned under NDA that license enforcement was one of the goals. Enforcement was at that time considered impossible as there were many different types of contracts, SKUs, and custom SKUs for the Dynamics 365 F&O products. Even a new product was introduced, splitting the project management and accounting features from Finance into Project Operations.

In the documentation, Microsoft already mentioned assigning a license to a user as a step for creating a user in Dynamics 365. See: Create new users – Finance & Operations | Dynamics 365 | Microsoft Learn

This step was overlooked by a lot of partners and clients using Microsoft Dynamics 365 F&O. Apart from that, there was no fully correct functioning license report available. You could see what role requires what license. There was a report for base licenses only, but it did not have a total count and was excluding users with the Operations – Activity and Team members SKUs.

User license enforcement

On March 28, 2025, Microsoft released a blog post announcing the user license enforcement. Initially, unlicensed users would get a soft warning, granting (limited) time to reconfigure security roles and acquire additional licenses. After the warning period, users would be blocked from accessing the application. The announced dates were pushed ahead in time once clients started complaining, and Microsoft realized that work needed to be done for correct functioning license reporting.

Soft-warning historical dates

May 15, 2025

September 1, 2025

Enforcement historical dates

August 1, 2025

November 1, 2025

New start date

While Microsoft introduced new licensing calculation logic, there were still too many issues, even with discrepancies between the Dynamics 365 Licensing Guide and the outcome of the User License reporting. Also, based on other feedback, Microsoft changed the start date and introduced a staged approach. The new start date for license enforcement is January 15, 2026, but the exact date for each client depends on the contract date, which is different for each client. You can read more in Microsoft’s blog or open the door of the Advent Calendar tomorrow.

There is more…

During the Advent period, each day in December, I will share some thoughts and tips related to the Dynamics 365 user license enforcement. If you have questions about this topic, feel free to contact me via LinkedIn, the comments section below, or the contact form on this blog. I will then either update one of the planned blogs for the coming 24 days or answer questions in a new post.

Dynamics 365 Licensing Enforcement Advent Calendar

I do hope you liked this post and will add value for you in your daily work as a professional. If you have related questions or feedback, don’t hesitate to use the Comment feature below.


That’s all for now. Till next time!