Exchange Online is licensed via a subscription model in which each user needs a User Subscription License (USL). Three types of subscriptions are available: Exchange Online Kiosk, Exchange Online Plan 1, and Exchange Online Plan 2. These subscriptions can be purchased on their own or as part of an Office 365 plan that includes SharePoint Online, Skype for Business Online, and Office ProPlus.

Here’s a breakdown of all the license options for Exchange Online, and what features each license has.

Your normal users are probably going to have some sort of business package applied to each user – one of the most common is Office 365 Enterprise E3, but generally not value for money for a single purpose service account.

The Exchange Online Kiosk plan is the cheapest, but limited.  Also note that there’s the Office 365 F1 plan which includes Exchange Online Kiosk, but again is a more expensive package with features you probably don’t need. Although this license can also be used to access another mailbox, there are many limitations such as “Exchange Online Kiosk does not provide access rights for utilization with on-premises servers.” and the ability to access the mailbox using Microsoft Outlook. It also can’t use Exchange Web Services (EWS) which is one of the more modern ways that a developer will read or manipulate emails.

Exchange Online Kiosk has the brief description of “Basic messaging and calendaring plan with Web email and POP access.” If you purely want to send emails via SMTP using Office 365’s SMTP connector, then this is what you need.

For most other functions, you’ll need at least Exchange Online Plan 1. This is the next cheapest option, and gives you a standard fully working Exchange Online account with a fully functional mailbox.

There is another option around all this; if you’re happy to run Exchange Hybrid but have all your mailboxes in Exchange Online, you’re entitled to a free Exchange Server license. With that in place, you can use SMTP relays to allow your on-premises accounts to use that connecter without a license, and have that relay back to Office 365. It’s also possible to do ignoring  Exchange Hybrid if you build your own IIS server and SMTP Relay. Both of these options are great for devices like printers that may be sending emails anonymously, or to avoid changing configuration of all your devices with the new Office 365 SMTP server smtp.office365.com .

As you’ll need to do license management and probably be looking at month to month charges, it’s important to understand licensing and allocate in the most cost effective way. Of course, all this may change so please check official Microsoft documentation to ensure you’re getting what you need.