Hybrid Licensing with Microsoft 365 and On-Premise Solutions:
- Combine Cloud and Local: Use both Microsoft 365 and on-premises services.
- Azure AD Connect: Sync identities between cloud and on-premises.
- Hybrid Exchange: Keep mailboxes in both environments.
- License Overlap: Ensure proper licenses cover both setups.
- Best for Gradual Migration: Ideal for transitioning to full cloud over time.
Hybrid Licensing with Microsoft 365 and On-Premise Solutions
Hybrid licensing combines the best of both worlds—cloud-based flexibility and on-premise control. It is a powerful approach for businesses looking to leverage modern productivity tools while still relying on existing on-premise infrastructure.
Integrating Microsoft 365 with on-premise solutions provides businesses flexibility, security, and a future-proof strategy for managing IT resources.
Let’s explore what hybrid licensing entails and how it can benefit your organization.
What Is Hybrid Licensing?
Hybrid licensing refers to a strategy that involves using Microsoft 365 services alongside on-premise solutions such as Exchange Server, SharePoint, or Windows Server. It allows companies to transition to the cloud without upgrading existing on-premise infrastructure.
- Microsoft 365: Provides cloud-based services, including Office applications, OneDrive, SharePoint, and Teams.
- On-premise solutions refer to locally installed servers, storage, and applications often used for security and data control.
Example: Imagine a healthcare organization that needs on-premise data control for sensitive patient information but also wants to leverage Microsoft Teams’ collaborative tools. Hybrid licensing allows for a combination of Microsoft 365 cloud services and on-premise servers to meet security and productivity needs.
Benefits of Hybrid Licensing with Microsoft 365
Hybrid licensing offers several benefits that cater to organizations that need cloud capabilities and on-premise reliability.
Flexibility
- Hybrid licensing enables businesses to move workloads to the cloud as needed while keeping sensitive data on-premise.
- You can scale up or down based on evolving business requirements.
Example: A finance company can use cloud services for everyday document sharing and collaboration while storing sensitive financial records on an on-premise server.
Security and Compliance
- You can keep sensitive data and applications on-premise for regulatory compliance while moving less sensitive operations to the cloud.
- Ensures data sovereignty and adherence to regulations like GDPR and HIPAA.
Example: A government agency may use Microsoft 365 for collaboration but keep confidential documents in an on-premise data center to meet specific data handling regulations.
Cost Optimization
- Hybrid licensing can help reduce infrastructure costs by utilizing cloud services for some workloads instead of managing all resources on-premise.
- Subscription-based pricing with Microsoft 365 can reduce capital expenses.
Example: An educational institution may use on-premise servers for their student database but shift to cloud-based Teams for classroom collaboration, saving costs on server infrastructure.
Setting Up Hybrid Environments
Setting up a hybrid environment requires proper planning and configuring of on-premise and cloud systems to work together.
Hybrid Configuration Wizard
Microsoft provides the Hybrid Configuration Wizard (HCW) to connect on-premise environments like Exchange Server to Microsoft 365 services. HCW helps manage:
- Synchronization between on-premise directories and Azure Active Directory (AAD).
- Mail routing between on-premise Exchange and Exchange Online.
- Single sign-on (SSO) capabilities for easier user access.
Example: By running the Hybrid Configuration Wizard, you can link your existing Exchange 2016 server to Exchange Online, allowing users to access their email seamlessly through either environment.
Directory Synchronization
- You will need Azure AD Connect to synchronize on-premise Active Directory (AD) with Azure AD.
- This ensures that all user credentials are consistent across both environments, allowing users to access resources with one set of credentials.
Example: A medium-sized company wants its users to log in with the same username and password for both on-premise and Microsoft 365 services. Azure AD Connect enables this integration.
On-Premise Licensing Requirements
When setting up a hybrid solution, it’s important to understand the licensing requirements for both on-premise and Microsoft 365 components.
Server Licenses
- On-premise servers such as Exchange or SharePoint will require appropriate server licenses.
- Each server will also need a Client Access License (CAL) for each user or device that connects to it.
Example: If a business runs Exchange Server 2019 on-premise, it must purchase server licenses and CALs for each employee who uses the server.
Microsoft 365 Licenses
- To connect on-premise servers to Microsoft 365, you need the appropriate Microsoft 365 subscription for each user.
- Depending on the plan, Microsoft 365 Enterprise licenses can include cloud services and rights to on-premise installations.
Example: An organization using a Microsoft 365 E5 plan can deploy Exchange Server on-premise and still have access to advanced features in the cloud, such as Microsoft Defender for endpoint security.
Common Use Cases and Examples
Email and Collaboration
A hybrid Exchange setup allows businesses to keep some users on-premise and others in the cloud. This setup is ideal for organizations that:
- Need to migrate users in phases.
- Cloud-based collaboration tools like Teams are required while maintaining some email storage on-premise.
Example: A retail company with regional stores may keep store email servers on-premise while using Exchange Online for headquarters staff.
File Storage and Compliance
Hybrid licensing helps companies meet compliance needs by providing cloud storage options while keeping critical files in local data centers.
Example: A law firm may use SharePoint Online for document collaboration but keep sensitive client files stored locally on a Windows Server to comply with data retention laws.
Challenges and Best Practices
Implementing a hybrid licensing solution is challenging, but following best practices can mitigate potential issues.
Complexity of Management
Managing both on-premise and cloud infrastructure requires specialized knowledge and coordination.
- Best Practice: Use Microsoft System Center or other management tools for a centralized view of both environments.
Example: An IT team could utilize the System Center Operations Manager (SCOM) to monitor performance issues in on-premise servers while using the Microsoft 365 Admin Center to manage cloud services.
Security and Data Protection
Balancing the security between on-premise and cloud environments can be complex.
- Best Practice: Implement multi-factor authentication (MFA), secure network configurations, and role-based access controls (RBAC).
- Consider using Microsoft Defender to add a layer of security for hybrid environments.
Example: A financial services company could use MFA to ensure that access to sensitive cloud and on-premise data requires additional verification steps, thereby reducing the risk of unauthorized access
FAQ for Hybrid Licensing with Microsoft 365 and On-premise solutions
What is Microsoft 365 On-Premise Integration?
It combines Microsoft 365 cloud tools with existing on-premise infrastructure for enhanced data access.
Can Microsoft 365 work with on-premise email servers?
Microsoft 365 can integrate with your on-premise email servers, like Exchange.
Is data stored locally with Hybrid Licensing?
Hybrid setups allow businesses to store sensitive data locally while utilizing cloud tools.
How is user management handled in hybrid setups?
User management can be centralized through Active Directory, synced with Microsoft 365.
Can on-premise applications connect with Microsoft 365 apps?
Yes, hybrid licensing enables seamless communication between local and cloud-based applications.
Do I need separate licenses for hybrid solutions?
Yes, a hybrid environment may require both on-premise and Microsoft 365 licenses.
Does hybrid licensing support legacy systems?
Yes, on-premise solutions allow businesses to continue using older software alongside Microsoft 365 tools.
Is security different in hybrid licensing?
Hybrid licensing incorporates both local and cloud-based security measures.
Can I use Microsoft 365 offline in a hybrid setup?
Files and applications can be accessed offline when integrated with on-premise systems.
Does hybrid licensing require constant internet access?
No, you can still access on-premise resources without an internet connection.
Are cloud services mandatory in hybrid licensing?
No, hybrid setups let you use a mix of cloud and on-premise services.
How does disaster recovery work in hybrid licensing?
Hybrid licensing supports cloud backups while maintaining local backups for critical data.
What industries benefit most from hybrid licensing?
Businesses with data-sensitive operations like healthcare and finance benefit from hybrid solutions.
How is software updated in a hybrid environment?
On-premise software updates are managed locally, while cloud apps update automatically.
Can I migrate fully to the cloud from a hybrid setup?
Yes, hybrid environments offer the flexibility to transition entirely to cloud-based solutions.
