Microsoft Exchange & Skype Servers Go Subscription-Only

Microsoft has officially launched subscription-only versions of its on-premises Exchange Server and Skype for Business Server, thereby ending the era of year-numbered releases and perpetual licences.

A Long-Anticipated Transition Becomes Reality

After months of preparation and close calls with support deadlines, Microsoft has made its Subscription Edition (SE) versions of Exchange Server and Skype for Business Server generally available. These editions replace the traditional 2016 and 2019 versions, which are set to reach the end of extended support on 14 October 2025.

Although Exchange Online and Microsoft Teams remain Microsoft’s strategic focus, the software giant has acknowledged that many organisations still require on-premises options. The Subscription Editions were first introduced to select enterprise customers earlier this year but are now widely available to all qualifying customers.

Microsoft says the SE releases reflect its “commitment to ongoing support for scenarios where on-premises solutions remain critical”, noting that these deployments are often driven by regulatory requirements, data residency needs, or cloud-sceptical policies in sectors such as government, finance, and defence.

What’s Actually Changing?

At a technical level, the initial releases of Exchange Server SE and Skype for Business Server SE are nearly identical to their predecessors. Exchange SE is based on Exchange Server 2019 CU15, while Skype for Business Server SE shares its codebase with Skype for Business Server 2019 CU8HF1. As such, there are no new features, removed components, or major structural changes at this stage.

However, the licensing and servicing models are the parts that have changed fundamentally. For example, both servers are now governed by Microsoft’s Modern Lifecycle Policy, which removes fixed end-of-support dates as long as organisations keep systems updated. This transforms them into evergreen products, with two cumulative updates (CUs) planned per year and additional security patches as needed.

Crucially, Microsoft has dropped perpetual licensing in favour of a subscription-only model. Organisations must now pay regularly to continue using the software legally. Stop paying, and you’re effectively frozen at the last supported version, which is now outside Microsoft’s safety net for patches and support.

Why Now and Why Like This?

The timing of the general availability appears to be closely tied to looming deadlines. Both Exchange Server 2016 and 2019, as well as Skype for Business Server 2015 and 2019, are approaching end-of-support in October 2025. Microsoft had promised a transition plan well before this date, and the SE editions are the fulfilment of that promise, albeit cutting it close.

Another driving force is Microsoft’s long-term strategy to encourage cloud adoption. As Rob Helm, analyst at Directions on Microsoft, put it: “The licence price hikes, the cutoff of old versions, the weak link with new Outlook—they all point to a single message: If you care about Exchange email, get off Exchange Server.”

Yet despite the cloud push, Microsoft has also acknowledged the real-world barriers to migration for many organisations. In a blog post accompanying the release, the company said: “Exchange SE demonstrates our commitment to ongoing support for scenarios where on-premises solutions remain critical.”

This includes hybrid deployments, secure national infrastructures, and regions with inadequate cloud access or stringent legal obligations regarding data locality.

A Smooth but Inevitable Upgrade Path

It seems that Microsoft has gone to some lengths to present the upgrade path as low-risk. For those already running Exchange 2019 CU14 or CU15, moving to SE involves minimal disruption, i.e. no schema changes, no removed features, and no new installation prerequisites. Even licence keys remain unchanged (at least for now).

The same applies to Skype for Business Server, where the SE edition uses an identical build number to CU8HF1, minus a few cosmetic updates and the refreshed licence agreement.

However, organisations sticking with older versions will face a steeper climb. Future SE cumulative updates will introduce breaking changes. Exchange SE CU2, for instance, will block coexistence with legacy 2016 or 2019 servers, effectively forcing full migration. Skype for Business SE updates are expected to do the same.

Changing On-Prem Strategy

For Microsoft, this move is part of a broader shift in its on-prem strategy (the software that runs on a company’s own servers, rather than in the cloud), i.e. fewer fixed-version launches, more ongoing subscriptions, and tighter integration with cloud-based tools. Exchange SE and Skype SE will not see the same innovation curve as Microsoft 365 or Teams, but they offer a lifeline for organisations that cannot or will not go all-in on the cloud.

From a competitive standpoint, this opens up opportunities for rivals such as Zoho, Open-Xchange, and Proton, particularly in markets concerned about data sovereignty or vendor lock-in. Microsoft’s insistence on subscriptions may also play into the hands of open-source email and UC solutions, especially in price-sensitive or highly regulated environments.

For businesses, particularly UK-based organisations balancing compliance, cost, and control, the release of SE editions raises key strategic questions. For example, should they embrace the evergreen model and continue with Microsoft’s stack, or use the transition as an opportunity to diversify infrastructure or explore alternative platforms?

The Cost of Staying On-Prem

Perhaps the most controversial element of the announcement is pricing. Microsoft confirmed that all standalone on-prem server products, including Exchange SE and Skype SE, are subject to a 10 per cent price increase. Some licence types may even rise by up to 20 per cent, depending on the channel and configuration.

These hikes do not apply to cloud equivalents such as Exchange Online, Microsoft Teams, or SharePoint Online. The implication is that staying on-premises is becoming not just technically more demanding, but also financially more burdensome.

For organisations required to maintain on-prem email or voice systems, there’s little choice. Running unsupported software is not only a security risk but a compliance red flag, particularly under regulations such as the UK GDPR, ISO 27001, and sector-specific frameworks like NHS DSPT or FCA guidelines.

Operational and Cultural Implications

Beyond licensing and compliance, there are also some broader operational implications. For example, Teams responsible for managing Exchange or Skype for Business deployments will need to adapt to faster patch cycles, modernised update tooling, and shorter grace periods for non-compliance. There’s also a risk that core features might stagnate, with most new innovations funnelled to the cloud-only Microsoft 365 environment.

Microsoft has yet to confirm whether Exchange SE or Skype SE will receive any integration with future Copilot features, AI enhancements, or cross-platform sync improvements. As such, businesses relying on SE products may find themselves maintaining legacy tech in an ecosystem that’s moving on without them.

What Does This Mean For Your Business?

The switch to Subscription Editions may be framed as a practical continuity measure, but it also appears to signal a deeper change in how Microsoft intends to manage its remaining on-premises software. For many UK businesses, particularly those in regulated sectors or with hybrid infrastructure needs, SE offers a necessary bridge, but the subscription-only model means that bridge now comes with ongoing costs, tighter servicing rules, and less certainty about long-term feature investment. While Microsoft maintains that on-prem is still supported, the direction of travel looks like being clearly towards the cloud.

This means that organisations that have built operations around Exchange or Skype on-prem will now have to budget not only for higher licence costs but also for the internal work needed to meet Microsoft’s evolving update requirements. That could mean more testing, faster deployment cycles, and additional pressure on IT teams already juggling hybrid or multi-cloud environments. At the same time, those exploring alternatives may face challenges in interoperability, skills, and vendor maturity, making a full departure from Microsoft’s stack a complex decision rather than an easy switch.

For Microsoft, this shift allows continued servicing of legacy platforms without anchoring itself to ageing support timelines or major version overhauls. For competitors, however, it could create space to target niche on-premise or privacy-first customers that may feel increasingly underserved. For the wider industry, including managed service providers and IT resellers, the move may prompt a reassessment of support models, procurement strategies, and cloud migration readiness. Subscription Editions may keep the lights on for on-prem customers, but they also make clear that Microsoft’s long-term bet is firmly on the cloud.