Understanding Microsoft’s Azure Dedicated Hosts Announcement

Microsoft have announced the introduction of Azure Dedicated Hosts, bringing their cloud platform offerings in line with AWS and Google who offer “Dedicated Hosts” and “Sole Tenancy Nodes” respectively.

The announcement of Azure Dedicated Hosts allows customers to run Linux and Windows virtual machines on single tenant physical hosts within Microsoft’s data center.  Each host will have a set number of vCPU on which a customer can choose a prescribed list of VM series offerings allowing any type of VM within a series family to deploy on their host.

Within the announcement from Microsoft there were some less publicized changes to Microsoft’s licensing terms announced.  Historically, customers have been allowed to allocate their licenses to dedicated hardware offered through outsourcers.  This allowed customers to treat the dedicated hardware as if it was part of their internal infrastructure and use traditional on-premises licenses to cover their consumption of Microsoft technology.  These rights have been heavily used by customers of Amazon Web Services and Google as a way to license dedicated hardware within these cloud services. However, as of the 1st of October 2019, this is no more……. Or at least for new license purchases.

Microsoft announced;

“The emergence of dedicated hosted cloud services has blurred the line between traditional outsourcing and cloud services and has led to the use of on-premises licenses on cloud services. Dedicated hosted cloud services by major public cloud providers typically offer global elastic scale, on-demand provisioning and a pay-as-you-go model, similar to multitenant cloud services.

As a result, we’re updating the outsourcing terms for Microsoft on-premises licenses to clarify the distinction between on-premises/traditional outsourcing and cloud services and create more consistent licensing terms across multitenant and dedicated hosted cloud services. Beginning October 1, 2019, on-premises licenses purchased without Software Assurance and mobility rights cannot be deployed with dedicated hosted cloud services offered by the following public cloud providers: Microsoft, Alibaba, Amazon (including VMware Cloud on AWS), and Google. They will be referred to as Listed Providers.”

From https://www.microsoft.com/en-us/licensing/news/updated-licensing-rights-for-dedicated-cloud

What this means to customers is that for any license or renewal of Software Assurance (as new Microsoft terms are accepted at this point) you will only be able to apply licenses to a dedicated host within “listed providers” under License Mobility through Software Assurance or through Cloud Services with the license included within the subscription.  Azure will gain the additional Azure Hybrid Benefit Rights.  This means that Azure will be the only Microsoft Service where you can license the server operating system through your volume license agreement.

If you currently use this model to cover some of your use with a traditional service they will provide their licensing through the SPLA agreement.

License Mobility includes only the below products and requires a License Mobility Verification form to be submitted to Microsoft:

  • Exchange Server
  • SharePoint Server
  • SQL Server Standard Edition
  • SQL Server Enterprise Edition
  • SQL Server Business Intelligence Edition
  • Skype for Business Server
  • System Center Server
  • Dynamics 365
  • Project Server
  • Visual Studio Team Foundation Server
  • BizTalk Server
  • Forefront Identity Manager
  • Forefront Unified Access Gateway
  • Remote Desktop Services
  • Azure DevOps Server

In reality this is restricting the competitions ability to offer Microsoft’s products at the same price point as Azure.  Azure Hybrid Use rights on Windows Server including additional deployment rights on Windows Server Data Center allows customer to buy long term licensing at a much more advantageous price point than procuring their Windows Server license through the cloud service.

What are the next steps?

As a customer you only accept changes to the product terms when you upgrade to a new version, procure new licenses or renew software assurance. This means if you have procured or procure licenses before 1st October 2019 you will be able to carry on utilizing dedicated hosts with your on-premises licensing.

There are products such as SQL Server where you may require Software Assurance to gain unlimited virtualization rights or mobility across a server farm rights.  If you procure the license with SA before the 1st of October you will maintain the historical rights but the moment you renew Software Assurance or upgrade you will be bound by the new license terms.

However, for products which you do not need Software Assurance for addition use rights, such as Windows Server Data Center, you can run any licenses procured before the 1st of October and apply to your dedicated hosts.  Only when you need to upgrade will you need to transition to an alternative license model.

This additional focus on license rights and how this maps to dedicated hosts will require the tools, people and process to manage this potential licensing minefield.  Firstly, you will need tooling which will manage and collate your entitlement.  A mechanism to inventory the dedicated environment in addition to your on-premises estate so all license demand can be identified. Most importantly of all, you then need to ensure the right license is applied to the right server so new licenses with different terms are not applied to cloud based host.

Ben Simpson

Ben Simpson

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