Module 4: License Management

📚 M365 Admin Center Course · Module 4 of 9

License Management

MS-102
MS-102 Exam Alignment
MS-102

Objective 1.3 — Manage Microsoft 365 subscriptions and licences: assign and remove licences, manage service plans within a licence, configure group-based licensing, and use PowerShell to manage licence assignments at scale.

  • Know that Usage Location must be set before a licence can be assigned
  • Assign licences per-user via Licenses and apps tab, or in bulk via Billing → Licences
  • Disable individual service plans within a licence (e.g. disable Intune but keep Exchange)
  • Configure group-based licensing — requires Entra ID P1; nested groups are not supported
  • Use Get-MgSubscribedSku to check available seats via PowerShell
Exam Tip: Two of the most tested licence facts: (1) Usage Location must be set before licence assignment — missing this is the most common licence assignment failure. (2) Group-based licensing requires Entra ID P1 and does not follow nested group membership.
Licensing is one of the most operationally important tasks in Microsoft 365 administration. Every user must have the correct license assigned before they can access any M365 service — and with licenses costing money, tracking usage and avoiding waste matters. This module covers how to view your subscriptions, assign and remove licenses, understand service plans, and configure group-based licensing.

📋 Understanding Your License Subscriptions

💡 What Is a License?

A Microsoft 365 license is a subscription entitlement that grants a user access to a bundle of services. For example, a Microsoft 365 E3 license includes Exchange Online, Teams, SharePoint, OneDrive, Microsoft 365 Apps for Enterprise, Intune, and Entra ID P1. Licenses are purchased per user per month and tracked at the tenant level in Billing → Licenses.


M365 Admin Center Billing Licenses
M365 Admin
Microsoft 365 admin center
|
Billing › Licenses
🏠 Home
Users
Active users
Billing
Licenses
Subscriptions

Licenses
SubscriptionTotalAssignedAvailableStatus
Microsoft 365 E3 30024753Active
Microsoft 365 E5 25223Active
Exchange Online Plan 150482Active

M365 E3 — 300 licenses purchased, 247 assigned, 53 still available. Always monitor this before onboarding large groups of users.
M365 E5 — Only 3 remaining. When available seats approach zero, you must purchase more or reclaim licenses before you can onboard new staff.

👤 Method 1 — Assigning via User Properties


M365 Admin Center Users Active users [Select user] Licenses and apps
  1. 1 Go to Users → Active users and click the name of the user you want to modify.
  2. 2 In the user panel that slides in from the right, select the Licenses and apps tab.
  3. 3 Under Select location, choose the user's country. This is mandatory — licenses are region-controlled and a user without a Usage Location set cannot be assigned a license.
  4. 4 Check the box next to the license you want to assign. Expand the license to enable or disable individual service plans if needed.
  5. 5 Click Save changes. The license is provisioned within a few minutes.

🏷️ Method 2 — Assigning via Billing > Licenses

  1. 1 Go to Billing → Licenses and click the subscription name (e.g. Microsoft 365 E3).
  2. 2 Click Assign licenses at the top of the page.
  3. 3 In the search box, type the name or email of each user to assign. You can add multiple users at once.
  4. 4 Review the service plans that will be enabled. Toggle off any services the user should not have access to.
  5. 5 Click Assign to confirm.

⚠️ Usage Location Is Required

Microsoft requires a Usage Location (country) to be set on a user account before any license can be assigned. This is because some services are not available in all countries for regulatory reasons. If you try to assign a license to a user without a Usage Location, the assignment will fail. Always set Usage Location first — either during user creation or via the user's profile settings.

🔧 Service Plans Within a License

Every Microsoft 365 license is actually a bundle of individual service plans. When you assign a license, all service plans are enabled by default — but you can disable specific ones on a per-user basis.

Service Plan (in M365 E3) What It Provides Disable When?
Exchange Online (Plan 2) Mailbox, calendar, email access User only needs Teams/SharePoint access
Microsoft Teams Chat, meetings, calling, collaboration External contractors without Teams access
SharePoint Online (Plan 2) Sites, document libraries, OneDrive Users who should not access SharePoint
Microsoft 365 Apps Word, Excel, PowerPoint, Outlook desktop Users accessing Office Online only (web apps)
Microsoft Intune Plan 1 Device enrolment and management Devices managed via third-party MDM
Microsoft Entra ID P1 Conditional Access, SSPR, PIM Rarely — most tenants need this enabled

👥 Group-Based Licensing

Manually assigning licenses one by one does not scale. Group-based licensing lets you assign a license to a security group, and every member of that group automatically receives the license.

⚠️ Prerequisite — Microsoft Entra ID P1

Group-based licensing requires Microsoft Entra ID P1 (included in M365 E3 and E5, or available as an add-on). Tenants on Business Basic or Business Standard do not have Entra ID P1 and cannot use group-based licensing without purchasing an add-on.

  1. 1 Go to Billing → Licenses and click the subscription you want to assign.
  2. 2 Click Groups tab at the top of the subscription page.
  3. 3 Click + Assign and search for a Security Group or M365 Group.
  4. 4 Select the group, review service plans, and click Assign. All current and future members will automatically receive the license.
  • Automatic provisioning — Adding a user to the group provisions their license within minutes. No manual action required from the admin.
  • Automatic de-provisioning — Removing a user from the group removes their license seat automatically, freeing it for reuse.
  • Conflict detection — If a group license assignment fails (e.g. no seats available), the admin center flags the error on the group's licence assignment status page.
  • Nested groups not supported — Group-based licensing does not follow nested group membership. Only direct members of the assigned group receive the license.

⚡ PowerShell: License Management

PowerShell — View Available License SKUs

Connect-MgGraph -Scopes "Directory.Read.All"

# View all license subscriptions and available seats
Get-MgSubscribedSku | Select-Object SkuPartNumber, ConsumedUnits,
  @{N="Total";E={$_.PrepaidUnits.Enabled}},
  @{N="Available";E={$_.PrepaidUnits.Enabled - $_.ConsumedUnits}}

# View service plans within E3 (SkuPartNumber = SPE_E3)
$sku = Get-MgSubscribedSku | Where-Object {$_.SkuPartNumber -eq "SPE_E3"}
$sku.ServicePlans | Select-Object ServicePlanName, ProvisioningStatus

🎓 Interview Q&A

Q: A user says they cannot log in to Microsoft Teams. You check and they have a valid M365 E3 license. What might be causing this?
Even with an E3 license assigned, the Teams service plan within the license could be disabled. Go to the user's Licenses and apps tab in Active Users and expand the E3 license to check whether the Microsoft Teams service plan is toggled on. Also confirm the user's Usage Location is set — missing usage location can cause partial provisioning failures.
Q: What is group-based licensing and what is required to use it?
Group-based licensing assigns a Microsoft 365 license to a security group or M365 Group. Every member of that group automatically receives the license, and when a user is removed from the group the license is automatically freed. It requires Microsoft Entra ID P1 (included in M365 E3/E5) and does not support nested group membership — only direct members receive the license.
Q: You need to assign a license to a new user but you get an error. What are the two most common causes?
The two most common causes are: (1) No Usage Location — Microsoft requires a country to be set on the user account before any license can be assigned. (2) No available seats — the subscription has no more unassigned licenses. Either purchase additional seats or reclaim licenses from inactive users. Both causes produce clear error messages in the Admin Center and in PowerShell output.

🎯 MS-102 Mock Test
Module 4 — License Management
5 questions · Scenario-based · MS-102 exam style · Pass mark: 70%

Question 1 of 5

An administrator tries to assign a Microsoft 365 E3 licence to a new user but receives an error. The Billing → Licences page shows 50 available E3 seats. What is the most likely cause?

AThe user's account is blocked from sign-in
BThe Usage Location has not been set on the user's account
CThe administrator does not have the User Administrator role
DM365 E3 does not include Exchange Online in the user's region
Correct answer: B. Microsoft requires a Usage Location (country) to be set on a user account before any licence can be assigned. Even if there are available seats, the assignment will fail without a Usage Location. Set it in the user's Account tab or during user creation.
Question 2 of 5

You want all users in the Marketing Security Group to automatically receive an M365 E3 licence when they join the group, and lose it when they leave. What is the most efficient solution?

ACreate a PowerShell script that assigns licences nightly based on group membership
BConfigure group-based licensing by assigning the E3 licence to the Marketing Security Group
CManually assign licences each month when checking group membership reports
DUse the Bulk assign option in Billing → Licences to assign to all Marketing users at once
Correct answer: B. Group-based licensing in Billing → Licences → [subscription] → Groups tab lets you assign a licence to a Security Group. All current and future direct members automatically receive the licence; members who leave the group automatically lose it. This requires Entra ID P1.
Question 3 of 5

An administrator wants to prevent a specific user from using Microsoft Intune device management while keeping all other M365 E3 services active. What is the correct approach?

ARemove the E3 licence and assign a custom licence without Intune
BCreate a Conditional Access policy that blocks the user from Intune
CIn the user's Licenses and apps tab, expand the E3 licence and toggle off the Microsoft Intune Plan 1 service plan
DRemove the user from the Intune device enrolment group
Correct answer: C. Within each assigned licence, individual service plans can be enabled or disabled on a per-user basis. Go to Users → Active users → [user] → Licenses and apps → expand E3 → toggle off Microsoft Intune Plan 1. This keeps all other E3 services active.
Question 4 of 5

Your organisation has 300 E3 licences with 298 currently assigned. 15 new employees are joining next week. What must you do before their accounts can be fully provisioned?

ADelete 13 inactive user accounts to free up enough seats
BPurchase at least 13 additional E3 licences to cover all 15 new employees
CAssign trial licences to the new employees temporarily
DNo action needed — M365 automatically expands seat count to meet demand
Correct answer: B. With 298 of 300 seats assigned, only 2 are available. You need 15 seats for the new employees — a shortfall of 13. You must purchase at least 13 more E3 licences. M365 does not automatically expand seats beyond what is purchased.
Question 5 of 5

Which PowerShell cmdlet retrieves the available licence count and consumed units for all subscriptions in a Microsoft 365 tenant?

AGet-MgUser -License
BGet-MgSubscribedSku
CGet-MgOrganizationLicense
DGet-MgLicenseDetail -All
Correct answer: B. Get-MgSubscribedSku returns all licence subscriptions in the tenant, including SkuPartNumber (the licence name), ConsumedUnits (how many are assigned), and PrepaidUnits.Enabled (total purchased seats). You can calculate available seats by subtracting ConsumedUnits from PrepaidUnits.Enabled.

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