MS-900 Practice Question: Describe Microsoft 365 pricing, licensing, and support
Your company has a mix of on-premises and cloud users. You plan to move to Microsoft 365 and need to support hybrid identity with password hash synchronization. Which licensing is minimally required?
⚠ Common exam trap
The trap is to assume PHS requires a premium license. In reality, PHS is available in the Free edition. Premium editions like P1 add features like conditional access, MFA, or password write-back, but not PHS itself.
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Microsoft Entra ID Free
Password hash synchronization (PHS) is a feature of Microsoft Entra ID available in all editions, including the free tier. It is part of the directory synchronization capabilities provided by Microsoft Entra Connect. Therefore, Microsoft Entra ID Free is the minimum licensing required to support hybrid identity with PHS. Microsoft 365 E3 also works but is not minimal.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Microsoft Entra ID P1
Why it's wrong here
While Microsoft Entra ID P1 does support password hash synchronization, it is an identity-only license and does not include Exchange Online, SharePoint Online, Teams, or other Microsoft 365 productivity workloads. Thus, a standalone P1 license cannot satisfy the organization's need for Microsoft 365 services for its mixed on-premises and cloud users.
- ✗
Microsoft 365 E3
Why it's wrong here
Microsoft 365 E3 bundles Microsoft Entra ID P1 together with the full Microsoft 365 enterprise workload licenses. This gives you password hash synchronization for hybrid identities while also providing access to Exchange Online, SharePoint Online, Teams, and the Office desktop apps, making it the only option that meets both the identity sync and productivity requirements.
- ✗
Microsoft Entra ID P2
Why it's wrong here
Microsoft Entra ID P2 includes everything in P1, such as password hash synchronization, but it adds Identity Protection and Privileged Identity Management features. These extra security capabilities are not required for the scenario, and like P1, P2 is still an identity-only license that lacks Microsoft 365 workloads, making it both overkill and insufficient.
- ✓
Microsoft Entra ID Free
Why this is correct
The Microsoft Entra ID Free tier only supports cloud-only identities and does not support password hash synchronization from on-premises Active Directory. It also provides no Microsoft 365 workloads, so it cannot handle the hybrid directory requirements or deliver the needed productivity services to the organization's users.
Go deeper
Related to this question
Learn chapter
Identity Governance and Entitlement Management
Key term
Password hash synchronization
Password hash synchronization is a Microsoft Microsoft Entra Connect feature that synchronizes a hash of a user's on-premises Active Directory password to Microsoft Entra ID, enabling cloud-based authentication without additional infrastructure.
Key term
Hybrid identity
Hybrid identity is an approach that synchronizes and manages user identities across both on-premises directories and cloud-based services, allowing seamless access to resources in both environments.
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Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
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