The lifecycle of Exchange Server 2016 and 2019 versions is approaching its end – October 14, 2025 – which means that organizations still using these versions must now make a decision: either upgrade/migrate to the Exchange Server Subscription Edition (SE) model or migrate to Exchange Online within the Microsoft 365 service.
In this article, Pasi Jalonen from Above IT provides a high-level overview of Exchange SE licensing options and what they mean for companies committed to on-premises infrastructure.
What is Exchange SE?
Exchange SE is Microsoft’s new subscription-based model for on-premises email infrastructure. Unlike previous perpetual licensing models, Exchange SE requires customers to maintain an active subscription to receive future updates, support, and security fixes.
This change also aligns Exchange SE with Microsoft’s modern lifecycle policy, ensuring continuous service and support without fixed end dates. More information on the release of Exchange SE can be found in the Microsoft Exchange Team’s article: Exchange Server Subscription Edition (SE) is now available | Microsoft Community Hub
Microsoft Exchange SE Licensing Options
Microsoft Exchange SE introduces a subscription-based licensing model for on-premises deployments, replacing the traditional perpetual license model. This change is part of Microsoft’s broader strategy to align on-premises products with existing cloud service lifecycle policies, thereby ensuring continuous product updates and support functions. More information: Modern Lifecycle Policy – Microsoft Lifecycle | Microsoft Learn.
On-premises Server Licensing
Exchange SE is available in two versions:
- Standard Edition: Supports 5 mailbox databases, a feature familiar from older versions. This version is an ideal solution for small and medium-sized organizations, as well as for Exchange servers in larger organizations where roles other than the mailbox role are in use.
- Enterprise Edition: Supports up to 100 mailbox databases. Designed for large organizations with complex email infrastructure needs.
Each Exchange SE server software requires a server license, which must be maintained under an active Software Assurance (SA) agreement. If an organization does not have a valid SA agreement, the license can be acquired through a Microsoft 365 subscription. The Exchange SE license is included with all Microsoft 365 Enterprise E3 and E5 User Subscription Licenses (SLs).
Client Access Licenses (CALs)
CALs are required for every user or device accessing an Exchange server. There are two types:
- Standard User Experience: includes basic features such as email, calendar, contacts, tasks, Outlook on the web, and role-based access control.
- Enterprise CAL: This is sold as an add-on to the Standard CAL. It enables additional features such as In-Place Archive, In-Place Hold, multi-mailbox search, journaling, and data protection features.
Using Enterprise features requires that the user has both a Standard CAL and an Enterprise CAL.
Enterprise CAL Versions
To make licensing less straightforward, the Enterprise CAL is still available in two versions:
- With Services: Includes Exchange Online Protection (anti-malware and anti-spam) and cloud-based Data Loss Prevention (DLP) in Microsoft 365.
- Without Services: Does not include cloud-based protection. Exchange Online Protection can be purchased separately if needed.
Licensing via Microsoft 365
Organizations can also license Exchange SE through Microsoft 365 subscriptions:
- Microsoft 365 E3/E5: These service packages include Exchange Online and grant rights for Exchange SE deployment in a Hybrid configuration.
- Hybrid Key Activation: Available to customers with Microsoft 365 licenses. This enables the deployment of Exchange SE for Hybrid use. A condition for Hybrid use, familiar from other versions, is that the on-premises server must not contain any mailboxes. A new condition for hybrid use is also that the on-premises Exchange server must not be used, for example, as an SMTP Relay server.
Pricing Changes
With the launch of Exchange SE, Microsoft has also introduced significant price increases:
- +10% for standalone on-premises server products.
- +15% for on-premises Core CAL Suite.
- +20% for on-premises Enterprise CAL Suite.
These changes came into effect on August 1, 2025.
Upgrade Paths
For organizations currently using Exchange 2019, the upgrade path is straightforward – CU15 supports an “in-place” upgrade to SE. Exchange 2016 can be upgraded to SE using the traditional ‘legacy’ upgrade model.
Hybrid and Cloud Options
While Exchange SE offers a supported path for continuing on-premises server use, Microsoft primarily recommends the adoption of cloud services. Exchange Online, part of the Microsoft 365 ecosystem, provides a scalable, secure, and fully integrated email infrastructure for organizations of all sizes. It reduces the operational burden of maintaining on-premises servers and integrates seamlessly with services such as Teams and SharePoint.
Strategic Considerations
For organizations still hesitant about adopting Microsoft 365, it is now, at the latest, time to re-evaluate internal workflows and collaboration culture, as well as the need for on-premises servers in their infrastructure.