Microsoft Announces New Restrictions on Licensing in the Cloud

Microsoft Cloud Service Provider Policy Change

Microsoft has announced the availability of Dedicated Hosts. In conjunction with this announcement, Microsoft will implement new rules effective October 1, 2019 surrounding the use of traditional on-premise licenses with cloud-based dedicated hosts.

Aimed at services which provide for single-tenant hosts, the move by Microsoft follows Oracle’s treatment of deployments at service providers and might be viewed as a revenue generating tactic.

Policy Change Overview

  • New or upgraded licenses purchased after October 1, 2019 are subject to these new rules. Per the FAQ document published by Microsoft, “Any rights you have today still apply in the future to your use of existing versions under licenses purchased before the October 1, 2019 effective date.”
  • These new or upgraded licenses require Software Assurance – a surcharge of 25% of the prevailing server software license price – in order to be used at the Listed Providers, which currently includes Microsoft, AWS (including VMware Cloud on AWS), Google, and Alibaba.
  • The Azure Hybrid Use Benefit will include the use of Azure Dedicated Hosts which were announced on August 1, 2019. However, the use of Azure Dedicated Hosts precludes the dual deployment option (i.e., running workloads simultaneously in Azure and on-premises) for Windows Server Datacenter Edition. Note that the Azure Hybrid Use Benefit requires active Software Assurance.
  • The new policy allows for the provider’s use of a Service Provider License Agreement or “SPLA,” in which the license rights are included in the cost of cloud services. This is a potential option for subscribers.

Client Software Specifics

  • Windows (client) Enterprise will not be allowed for use on Listed Providers dedicated hosts except for Windows Virtual Desktop Access (“VDA”) Plan E3 or Plan E5 deployments after October 1, 2019. Existing deployments have until October 1, 2020 to relocate these deployments.
  • The use of Office Professional Plus licenses acquired on or after October 1, 2019 on Listed Providers’ dedicated hosted cloud services isn’t permitted with or without Software Assurance because the product is not included within License Mobility. Earlier purchases (i.e., prior to October 1, 2019), are still governed by the use rights in effect during the purchase or upgrade.

This new policy effectively changes the game for organizations that have taken advantage of dedicated host offerings (often from a security or performance perspective) from vendors other than Microsoft. To see how you are affected, please contact Miro.