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I am having the following problem in understating how the license for sharepoint online works when it comes to external users sharing. now i heard many customers mentioning the following:-

They want to share sites and files with external user (for example users with Hotmail accounts), as no additional license cost is required, unlike adding users to Office 365 which will require license to be paid.

now i tried to test this scenario:-

  1. i configure my Office 365 SharePoint online, to allow Sharing with External users.
  2. then i share a file with an external user, where the external user got an email, containing a link to the shared file. and the external user can access the file, and we did not have to buy a license for this external user.

my questions are:-

  1. so can anyone advice if sharing files or sites with external users do not require additional license? if the answer is Yes, then can i be very naive and ask why not to create Hotmail accounts for all our users and force them to use those accounts to access sharepoint online sites!!

  2. now as i mentioned i shared a file with external user, and this user was able to access the file. but when i checked the Users and Guests inside Office 365, i can not find this user!! but when i share a site with the user the user was added inside the office 365 Users. so i am not sure why sharing a file with a user will not add him to the Office 365 users? while adding a user to the site will add him to the Office 365 users list?

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4 Answers 4

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  1. Yes, you don't need to assign the licence for external users. The Hotmail accounts that you create will have only basic collaboration rights and few features won't be available (like you cannot make them site owners also they cannot install software like Office,Teams from tenant)

  2. It's important to understand 2 types of external users (a) Authenticated external user-Authenticated users are users who have a Microsoft account or a work or school account from another Office 365 subscription. (b) Anonymous external user- no account content is only shared through links without logging in to portal

Your description tells that you have shared link with Anonymous external users, these users are not added to Office365 user list. When you share a site it will ask you for Authentication, if you move ahead this now makes you a Authenticated external user which are added to Office365 user list with #EXT# in their usernames.

More info External Sharing

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  • yes this is exactly what happen, when i first share a file with the Hotmail user, i got a link and the user access the file using the link, also the Hotmail user was not added to the users lists, but when i share the site with the Hotmail user, and the user access the site, the Hotmail user was added to the user list with #EXT# and status - guest.. so now this Hotmail user became an authenticated user inside our office 365??
    – John John
    Commented Mar 3, 2018 at 2:38
  • second question,, what are the main restrctions this external Hotmail user have? other than not been able to add him inside site owner? will this user -if granted the required permission- be able to add lists and libraries, add pages and files, check-in and check-out files, use the search and also create sub-sites??
    – John John
    Commented Mar 3, 2018 at 2:39
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    Enterprise search is not available to external users, they may not be able to perform search rest should work fine user can add edit list as per permissions assigned to them
    – Akshay Randive
    Commented Mar 3, 2018 at 2:45
  • so do you mean external users can not search the site they have access to ?
    – John John
    Commented Mar 3, 2018 at 2:51
  • Yeah, that's the default behaviour but I just saw this blog which says it's possible. I haven't tried this yet but sharing the link wp.sjkp.dk/office-365-sharepoint-search-for-external-users
    – Akshay Randive
    Commented Mar 3, 2018 at 2:57
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Just adding some extra information for the community.

  1. You do not need to buy licenses for adding external users to SharePoint Online. Also, you can add unlimited external users as per Microsoft documentation. Source.These external users will only have limited features and will not have full features of SharePoint Online/o365 like Delve, OneDrive, enterprise search etc.

  2. In SharePoint Online, you can share sites, folders & files with external users. When you share file/ folder to an external users, they do not get added to your tenant. They either access it using a pass code emailed to them while accessing or they access it as anonymous (if shared as anonymous). External users are only added to your tenant if you share a site and only after they accept your invitation.

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As far as I understood the answer from Microsoft the idea about asking our users to sign in as external users is an old one 😊

The short version is that this approach is considered a license violation against the tenant terms, and you will be fined and required to pay for the licenses.

My understanding is that this rule of thumb applies to companies which are "related" (lots of flexibility in that term), so subsidiaries can not use external access as far as licensing goes

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  • can you please explain more your answer in general? what do you exactly mean by The short version is that this approach is considered a license violation against the tenant terms, and you will be fined and required to pay for the licenses. .. why this is considered license violation? as external users do not require to have licenses as far as i know...
    – John John
    Commented Mar 4, 2018 at 1:14
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    The catch is that Microsoft defines which users that can defines as true external users. We have a customer in the frachise business and they asked Microsoft if their stores could be considered external users or not. The answer was that employees in the stores owned the frachise taker are true external users, however employees in stores where the company had a significant part of the shares/ownership will have to be licensed. I fully understand why Microsoft has this clause otherwise nobody would purchase more than one license per tenant 😉
    – Kasper Bo Larsen
    Commented Mar 4, 2018 at 8:50
  • thanks for the info,, so should we check with Microsoft who are considered external and who should be defined as internal ? as in your case that employees in the stores owned the frachise taker are true external users, however employees in stores where the company had a significant part of the shares/ownership will have to be licensed... seems very specific case and confusing... i was thinking is that external user is any user who have a Microsoft account!!
    – John John
    Commented Mar 5, 2018 at 12:08
  • can you please advice on my above comment?
    – John John
    Commented Mar 5, 2018 at 23:36
  • Indeed, you should contanct your friendly Microsoft rep and get an idea about who can be considered external or interal
    – Kasper Bo Larsen
    Commented Mar 6, 2018 at 5:31
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One way you could set this up is by creating accounts without assigning them licenses and then giving those created accounts permission to the SharePoint. This video gives a good summary of how to do it: https://www.youtube.com/watch?v=YbmrnQmSO0k

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