2019’s Biggest Microsoft Licensing Change: What You Need To Know

Microsoft has made a new move in the Battle of the Clouds, with licensing changes that restrict competing clouds – while simultaneously making things more attractive when run inside Azure.

Editors note: This blog is an excerpt from a longer article on Microsoft licensing changes, originally published by the ITAM Review on August 13, 2019. You can read the full article here.

This article gives you an outline of exactly what you need to know about new Microsoft licensing changes for the cloud.

Microsoft licensing in the cloud

What’s the current situation?

When it comes to putting Microsoft application licenses into the cloud, there have long been 2 options:

  • Purchase the license with Software Assurance (SA) to get License Mobility rights
  • Put the license on a server dedicated to your use

Microsoft’s rules kick in when software is installed on “shared servers” – that’s where your instance is simply one of many virtual machines running on that physical server. That scenario is where SA is required, giving the additional rights required to run you on-premises licenses in that cloud environment.

The other option is to put your software on a dedicated server – so still hosted in the 3rd party data center but used only by you. No other organization’s instances are run on that physical hardware, it’s just for your organization. In this case, because the server isn’t shared, SA isn’t needed for the licenses to be used in this scenario.

Table showing Microsoft licensing options for the cloud
Current situation prior to October 1, 2019

Microsoft licensing scenarios

What’s changing?

Microsoft has announced that as of October 1, 2019, License Mobility rights – typically granted & acquired by purchasing SA – will be required even on dedicated hosts from specific public cloud providers. Henceforth knows as “Listed Providers”, they are:

  • Microsoft
  • Alibaba
  • Amazon (including VMware Cloud* on AWS)
  • Google

These cloud licensing changes will apply to licenses purchased from October 1, 2019 – while any licenses purchased before that date will retain the rights to be used on dedicated hosts with the Listed Providers. For Software Assurance customers, upgrading to a new version released post-October 1, 2019 will require you to comply with the new licensing rules.

*It’s interesting that they call this out but not the corresponding offerings on Azure and Google Cloud Platform. I assume that is an oversight rather than anything else.

If you work in Software Asset Management (SAM), it’s time to pay attention. SAM managers, this means you should start tracking the purchase dates of your Microsoft applications, as well as tracking which licenses are assigned to applicable 3rd party dedicated environments. You also need to be aware of upgrading existing Windows Server licenses, as that causes the new rules kick in.

So if you already have Windows Server 2019 with SA in an Amazon Dedicated Environment, that’s fine…but if, when the time comes, you use your new version rights to upgrade that instance to Windows Server 2022 (or whatever the next release is called) – you can no longer run it in that dedicated environment.

Questions about Microsoft licensing? Protect your Microsoft investment with our suite of Software Asset Management solutions.

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Microsoft windows server

The change requires licenses to have mobility rights to run on the dedicated hardware, and Windows Server does not include License Mobility rights – even with Software Assurance. This means that Windows Server cannot be used with the Listed Providers post-October 1, 2019 – even in a dedicated environment. It also means that Windows Server licenses have never been eligible to be moved into a shared server environment – the only option for using your on-premises Windows Server licenses in the public cloud is Microsoft’s Azure Hybrid Rights.

Once the change kicks in, you’ll need to acquire Windows Server licenses from the provider via SPLA…unless, that is, you’re using Microsoft’s new Azure Dedicated Host service – where Windows Server Azure Hybrid Rights can be used. See below for more information on this new offering.

Microsoft windows desktops

If you have Windows desktops deployed on dedicated hardware with the Listed Providers – such as Amazon Workspaces – this rule changes affects you there too.

At your SA renewal, to continue running Windows Enterprise in this scenario will require Windows VDA E3/E5 per user licenses.

Of course, those licensed with Windows 10 E3/E5 or Microsoft 365 E3/E5/F1 can use Windows Virtual Desktop instead.

Why are these Microsoft licensing changes happening now?

Microsoft feels that:

“The emergence of dedicated hosted cloud services has blurred the line between traditional outsourcing and cloud services”

And that dedicated hosts, with the Listed Providers at least, offer many features that are similar to shared servers – including elasticity, on-demand provisioning, and a pay-as-you-go model.

How do these Microsoft licensing changes impact software license compliance?

If you’re currently running Microsoft software on dedicated hardware with the Listed Providers, you don’t need to make any changes. However, if you plan to add additional licenses into those environments post October 1, 2019, you’ll have to have Software Assurance on those additional application licenses – and of course, make sure that the application in question supports License Mobility rights.

You will also be unable to deploy newly purchased Windows Server licenses into a dedicated environment, so you’ll need to look at costs for acquiring via SPLA with your Listed Provider. Alternatively, look at migrating your dedicated environment to Azure Dedicated Hosts and use Azure Hybrid Rights.

Microsoft Azure Dedicated Hosts?

That’s right. Microsoft’s latest Azure release offers physical hosts dedicated to the use of a single organization – which is exactly the type of environment at which these new licensing rules take aim. While Windows Server licenses purchased post October 1, 2019, even with SA, cannot be used in dedicated environments from Amazon, Alibaba, and Google – Microsoft have extended Hybrid Use Rights to work in their own environment. See more in my article here.

What about SPLA?

Microsoft is clear that this change doesn’t apply to providers other than those listed and that there will be no changes to the SPLA (Services Provider License Agreement) program.

Bottom line for Microsoft licensing changes

This is quite a bold move by Microsoft, seemingly aimed at reducing the appeal of dedicated environments with Amazon, Alibaba, and Google – and, one assumes, hopefully causing people to migrate to Azure Dedicated Hosts and/or Azure public cloud services. Even if customers choose to stay with the other providers, it will reduce their reliance on “old school” on-premises licensing – which is one of Microsoft’s key goals – and see a (small?) uptick in SPLA revenue via the 3 competing providers.

Want to learn how the public is reacting to these Microsoft licensing changes – and what the greater impact on ITAM is? Read my original article on the ITAM Review website.

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