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Microsoft hikes cost of licensing its software on rival public clouds, introduces Azure 'Dedicated' Hosts

Use Microsoft software on dedicated servers hosted on public cloud? Get ready to pay more

Microsoft has introduced a preview of Azure Dedicated Host, which provides a physical server hosted on Azure and not shared with other customers.

Alongside this new service, the company has made licensing changes that will make Microsoft software more expensive for some customers of AWS, Google and Alibaba.

Although an Azure dedicated host is a physical server for use only by one customer, Microsoft said this is not "bare metal as a service" since it is architected for running Azure VMs. Dedicated hosts are still subject to automatic maintenance, though you can set a maintenance time window in order to protect against service interruption.

A physical server can fail, of course, and Microsoft suggests you deploy multiple VMs across multiple hosts. There is an option to "automatically replace host on failure", which is enabled by default. You can deploy servers on two or more Azure Availability Zones for high availability.

There are currently two specifications of dedicated host available. Type 1 is based on a 2.3GHz Intel Xeon E5-2673 v4 (Broadwell), has 64 vCPUs (Virtual CPUs), and costs $4.055 or $4.492 per hour depending on RAM (256GB or 448GB).

Type 2 is based on the Xeon Platinum 8168 (Skylake) with 72 vCPUs and 144GB RAM for $4.039 per hour.

These prices exclude licensing costs – and this is where Microsoft is making some significant changes. Currently, customers can use on-premises licences on dedicated servers rented from hosting or cloud providers. Microsoft now says that:

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."

Microsoft is introduced new licensing terms for public cloud providers

Microsoft is introducing new licensing terms for public cloud providers (click to enlarge)

What does this mean for you?

What are the implications? As usual with Microsoft licensing, making sense of the detail is not trivial. There is an FAQ here (PDF).

Many software deployments that are currently allowed will no longer be permitted on dedicated cloud services from the listed providers. Microsoft is making it harder or in some cases impossible to bring your own licences, forcing customers either to rent the software via SPLA (Service Provider License Agreement), or to purchase licences with software assurance, an annual service charge.

Azure is included in the list of providers, but in some cases Microsoft is giving customers of its own cloud a get-out clause via a specific "Azure Hybrid Benefit".

For example:

  • Windows Enterprise will no longer be permitted other than with Windows VDA (Virtual Desktop Access) E3 or E5. As a concession, affected customers "will have until October 1, 2020, to move their existing Windows Enterprise workloads off Listed Providers' dedicated hosted cloud services".
  • Office Professional Plus will not be permitted with or without software assurance.
  • Exchange and SharePoint will require Software Assurance with License Mobility.
  • Windows Server is not permitted with or without Software Assurance, except on Azure via Azure Hybrid Benefit. You can still license Windows Server from the cloud provider via SPLA, but you cannot bring your own licence.
  • SQL Server will require Software Assurance with License Mobility, or on Azure via Azure Hybrid Benefit, or subscription via SPLA.
  • Unlimited virtualization for SQL Server via Enterprise per-core licensing, and Windows Server via Windows Server Datacenter, will no longer be available other than via Azure Hybrid Benefit.

If you are an AWS customer, the information on this page – which currently says you "can use your own licensed [Microsoft] software on dedicated infrastructure, even without Software Assurance" – will no longer apply, for licences purchased after 19 October.

Wes Miller, a Windows licensing analyst at Directions on Microsoft, described the new license terms as:

Really bad news for Amazon. Kind of bad news for Google … really bad news for Amazon Workspaces in particular.

Amazon Workspaces is a virtual desktop solution. Microsoft's own new Azure-hosted Windows Virtual Desktop is not equally affected since you can use a Microsoft 365 licence.

Note that all these changes only apply to dedicated hosts at the listed cloud providers. Multi-tenant hosts are not affected, though in this case the option to bring your own licence is already limited.

Microsoft may be hoping to boost usage of Azure by making it more expensive to use other cloud providers, but is taking some risks. Upping the cost of running Microsoft software on other public clouds is not only annoying for existing customers, but also gives them more incentive to look for non-Microsoft solutions, such as those based on Linux or open-source software. ®

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