LearningCenter Post106

Microsoft Licensing Changes for Dedicated Hosts

On August 1, 2019 Microsoft announced changes to their licensing rules for customers utilizing bring your own licenses (BYOL) on dedicated hosts in AWS, Google, Azure, and Alibaba Cloud environments.  These licensing rule changes come into effect on October 1, 2019.  While these changes will primarily impact Windows and SQL Servers – other Microsoft technology such as SharePoint or Skype could also be affected.

How could this impact you?

While relatively few customers could be impacted today, these licensing rule changes could shape a shift in strategies for how you deploy to these cloud environments in the future.  The reality is that the change may give Microsoft a small licensing cost advantage over their competitors for cloud environments.

In the past, if you wanted to use licenses that you purchased – Microsoft offered two ways to do this:

  • Cloud Mobility Rights – that come with Software Assurance
  • Utilizing Dedicated Hardware Environments

Going forward, you will only be able to use License or Cloud Mobility Rights (if the license includes them – which SQL Server does) or Azure Hybrid Benefit (Windows Server and only available for use on Azure) to license Microsoft technology that is on third party cloud.

For more details you can check out:


Why does this matter?

Microsoft has embedded into their Product Terms, that Microsoft Volume Licenses (i.e. Those licenses you purchase through Enterprise Agreements, MPSA, Select etc.) are not allowed to be used in commercially hosted environments.  Commercial hosted environments are typically multi-tenant environments where two or more unaffiliated companies share the same hardware infrastructure (which represents most Cloud implementations).  This essentially meant that unless the licenses have Server Mobility rights (such as SQL Server), you had to purchase the licenses from the cloud provider vs. bringing your own licenses (BYOL).

What does this really mean?

Some organizations worked with AWS and purchased dedicated hardware.  Since this hardware was not shared hardware, it was treated as not commercially hosted, meaning these customers could utilize a BYOL strategy.  The nice thing about this BYOL strategy was that people may not have required Software Assurance at all and could utilize old perpetual licenses.

Microsoft has stated that licenses purchased prior to October 1, 2019 are exempt from the change.  In order to take advantage of this though, it is recommended that you have a strong Software Asset Management practice in place.

Does this mean Azure will be cheaper than AWS?

Not necessarily.  Licensing costs are only one factor when it comes to cloud computing costs.  On the Azure cloud, Microsoft will attribute upwards of 40% of the costs of Windows Compute to Windows licensing costs.  We just have not seen this to be the case for clients looking to move to AWS dedicated hardware.  Most often the cost of the dedicated hardware outweighed the license savings to move to dedicated hardware.  Clients often moved to dedicated hardware for other reasons such as security.

In order to determine costs, we recommend a cloud-sizing exercise where it can be assessed the costs to move to AWS and compare that to the costs to move to Azure.  This exercise will be best done when we look at the costs over a 12+ month period vs. a one-time (one month) purchase.

If you’d like to discuss this in more depth, please feel free to contact us!

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