How Does Microsoft’s Updated Outsourcing Licensing Terms Impact Your Business?

Companies and enterprises are moving to the cloud from physical servers and infrastructure every day. Cloud-based computing is now the primary element that allows both SMEs and corporates to efficiently scale their operations to adjust to market and consumer demand.

When it comes to cloud computing service providers, three of the biggest brands in the market are Microsoft Azure, Amazon Web Services (AWS), and Google Cloud. Together, those 3 service providers take up more than 90% of market share in the cloud computing services industry.

Recently, an official news notification from Microsoft detailed a fair number of modifications that the company is poised to bring into effect starting October 1, 2019. Read on to find out what this means and how it could impact your business:

Microsoft’s current licensing terms

Microsoft Azure, as well as Amazon AWS and Google Cloud, have traditionally allowed a Bring Your Own License (BYOL) policy. Customers could purchase licenses for server workloads from Microsoft, then deploy those on say Amazon’s cloud. Essentially, this allowed customers a choice to select their cloud hosting services provider. If they wanted the functionality of Microsoft’s workloads with the pricing of Amazon AWS, they could do that.

At the time of writing this article, it is possible for a customer to deploy Microsoft Server applications on any other cloud platform (AWS or Google Cloud) seamlessly. However, Microsoft released an official notification on August 1, 2019 which stated the change of licensing terms in starting from October 1, 2019.

Microsoft’s licensing changes explained

Effective October 1, 2019, Microsoft will no longer permit on-premises licenses of its applications to be deployed on dedicated hosted clouds offered by public cloud service providers including Alibaba, Amazon, Google, and others. Those would be only permitted if licenses were purchased with Software Assurance and mobility rights. Microsoft will refer Azure’s competitors as ‘Listed Providers’ hereafter.

Additionally, not all of Microsoft’s applications qualify for Software Assurance and mobility rights. If the application to be deployed is not eligible, the customer needs to directly purchase it from the cloud hosting services provider where it shall be part of the infrastructure utilized by them.

What is the reason behind this change?

Microsoft’s reasoning for its modifications to the licensing terms stems from the point that the emergence of dedicated hosted cloud services has made them ever more like on-premises hosting. Hence, the organization believes that both scenarios should be governed by a specific set of terms. Another likely reason for Microsoft to pass those modifications is to promote its own Azure dedicated hosted cloud.

Benefits of updated Microsoft’s licensing policy

Microsoft shall offer several benefits to its customers who choose Azure Dedicated Hosted cloud when moving their on-premises licenses over the offerings of Listed Providers in form of both significant cost savings and added features.

For example, you can use your existing software licenses for workloads such as Windows Server or SQL Server on Azure’s dedicated hosted cloud for better pricing, your applications such as Windows Server Datacenter and SQL Server Enterprise Edition can deploy any number of VMs depending on your requirements and the capacity of the server, and workloads such as Windows Server 2008 R2 as well as SQL Server 2008 R2 shall continue to receive extended security updates at no extra cost.

To add to this, with Azure dedicated hosted cloud, you will not need to pay high fees for purchasing applications (those not covered under Software Assurance and mobility benefits) from other cloud hosting providers. Hence, it all sums up to big savings for your company.

Azure Hybrid Benefit vs License Mobility

Considering the recent modifications to Microsoft’s terms and policies regarding dedicated hosted cloud services, two terms including ‘Azure Hybrid Benefit’ and ‘License Mobility’ have become commonly used terms. Hence, you must understand how they are different.

Let’s say your organization requires two Microsoft workloads including Microsoft Server 2008 R2 and SQL Server 2008R2 and you want to move to the cloud. In this case, there are two possible cases:

• Case 1 – You opt for a fully-loaded VM from Azure that includes the licenses of both Microsoft Server 2008 R2 as well as SQL Server 2008 R2, this is assuming you did NOT have the licenses for deploying either workload before.
• Case 2 – You separately purchased the licenses for Microsoft Server 2008/R2 and SQL Server 2008/R2 and then moved to the Microsoft Azure cloud.

Case 2 is referred to as the BYOL or ‘Bring Your Own License’ policy. Depending on whether you ‘brought’ those licenses of Microsoft Server 2008/R2 and SQL Server 2008/R2 to Azure or to a Listed Providers’ cloud (such as Google Cloud or Amazon AWS), the rules set by Microsoft for their server workloads are different.

If you brought your own license of the workloads to the Microsoft Azure cloud, you would enjoy what’s called ‘Azure Hybrid Benefit’ or AHB. Essentially, Azure Hybrid Benefit is Microsoft’s BYOL policy for the Azure cloud.

However, if you brought the Microsoft Server 2008 R2 license for deploying the workload on Amazon AWS cloud, for example, the correct term would be License Mobility (in place of Azure Hybrid Benefit).

In both cases, however, the licenses for the applications may either be used on-premises or in the cloud (Azure or those of Listed Providers’). However, there are exceptions to this such as the Windows Server Datacenter Edition which under Azure Hybrid Benefit can be used both on-premises as well as in the Azure cloud.

What is the impact on current server workloads?

Considering that you are running Microsoft’s workloads on the dedicated hosted clouds of Microsoft’s Listed Providers, you can continue to work with your existing licenses on the cloud infrastructure offered by Listed Providers, but you shall not be able to add workloads from licenses purchased or bought from October 1, 2019, to the dedicated hosted clouds of Listed Providers. At that point, there are two options; either you can purchase cloud services directly from the Listed Providers or if you have any licenses that offer Software Assurance, they can be used with dedicated hosted cloud infrastructure under Azure Hybrid Benefit (or License Mobility) feature.

What should you do?

As a customer, if you have already deployed Microsoft applications and server workloads on dedicated clouds by Listed Providers, new rules will apply to you till your license renews. After the cut-off date, you will need to purchase your application licenses directly from your cloud services, which are not covered under Software Assurance and mobility rights.

Microsoft’s latest move seems to be a step towards incentivizing the use of its own cloud service. But looking from an outsider’s perspective, deploying Microsoft applications on Azure seems to be significantly cheaper option in comparison with Amazon’s AWS. Azure offers plenty of benefits for a fraction of the cost.

If you want more information on Microsoft’s licensing and require solutions for your business strategy, talk to our Azure consultants right away. Call us now!