When attempting to add Veeam Backup for Microsoft 365 to Veeam ONE, the connection fails with:

Failed to connect to "<hostname>". Veeam Backup for Microsoft 365 server license type is not
compatible with Veeam One license type.

As documented in the Veeam Backup for Microsoft 365 7 Release Notes:

Monitoring Veeam Backup for Microsoft 365 infrastructure and data protection operations with Veeam ONE v12, requires a new Veeam Backup for Microsoft 365 license file with the M365Suite package value. To download the license file manually, go to my.veeam.com.

You can verify if the installed Veeam Backup for Microsoft 365 license has the M365Suite package by opening the License Information window from the Main Menu (☰) of Veeam Backup for Microsoft 365, and checking for a line entry that says Package M365Suite.

To resolve this issue, acquire and install a new Veeam Backup for Microsoft 365 license file.

• Within the License Information window, click the Update Now button to update the license file.
  
  or
• Download and install a new Veeam Backup for Microsoft 365 license from: https://my.veeam.com/#/licenses/production.
  
  or
• Generate a new Veeam Backup for Microsoft 365 License via the VCSP Pulse Portal.

The Veeam Backup for Microsoft 365 license file can be opened using any text editor.

Note: Do not modify the license file, as that would cause the license file to become invalid.