Microsoft Plays It's Cards - Raises Licensing Cost

“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.”

Heard this news?

Microsoft has updated it’s licensing terms which would be applicable to all the licenses purchased after October 1, 2019.
Rolling this change, Microsoft has played it’s monopoly for it’s trade mark software and have sent a shock wave across the IT industry.

Why this change?

Here’s what Microsoft has to say,
“Currently, our outsourcing terms give on-premises customers the option to deploy Microsoft software on hardware leased from and managed by traditional outsourcers. 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.”

So what’s the impact?

If you want to run on-premise Microsoft software on a dedicated hosted cloud service by AWS (Including VMware Cloud on AWS), Alibaba, Microsoft Azure, or Google Cloud Platform, you’ll have to pay additional fees on top of the standard license cost.
This additional fee is Software Assurance and mobility rights which enables you to deploy certain server application licenses purchased under your Volume Licensing agreement in an Authorized Mobility Partner’s datacenter.
In other words or very simple words, your dedicated hosted cloud services are going to cost you more than before.

How do I save this additional cost?

Well as of now, if you are already running your services on Azure, you can avail a steep license discount if you bring your on-prem Windows Server or SQL Server licenses to Azure. The discount, called Azure Hybrid Benefit, can cut your total cost for running Windows Server VMs by more than 40 percent, for example, the cost of SQL Server VMs by as much as 75 percent, and SQL Database by 35 percent, according to Microsoft.
And if you’re on any other cloud provider, wish that they also cut down some cost of their instance, else get ready to pay!

How does the Azure Hybrid Benefit work for Windows Server/SQL Server licenses on Azure Dedicated Host?

Customers can use the value of their existing Windows Server and SQL Server licenses with Software Assurance, or qualifying subscription licenses, to pay a reduced rate on Azure Dedicated Host using Azure Hybrid Benefit. Windows Server Datacenter and SQL Server Enterprise Edition customers get unlimited virtualization (deploy as many Windows Server virtual machines as possible on the host subject to the physical capacity of the underlying server) when they license the entire host and use Azure Hybrid Benefit. All Windows Server and SQL Server workloads in Azure Dedicated Host are also eligible for Extended Security Updates for Windows Server and SQL Server 2008/R2 at no additional charge.

What happens to old licenses?

This change won’t impact the use of existing software versions under licenses purchased before October 1, 2019.

Microsoft’s new licensing rules apply to all its on-premises software being deployed on dedicated cloud hosts sold by the providers listed above. Companies can use existing licenses in those clouds without change beyond October 1st, but they’ll have to cough up the extra dough if they want to add workloads or upgrade to new releases.
Example: If you are running SQL Server on the AWS cloud with Dedicated Host without software Assurance (SA) (which is allowed today) and want to upgrade to a newer version after October 1, you would be required to purchase a new SQL Server license with SA

Reactions from IT Industry?

This announcement send a shock wave across the industry and prompted the IT Giant Head to pass on an angry response.

Here’s what AWS CTO Werner Vogels has to say:

Google Cloud’s president, Robert Enslin also posted a tweet and expressed his anger and accused Microsoft using the tricks of 90s.

However, there were some happy faces too. Here’s what IBM Cloud Solutions Director, Michele Lajeunesse has to say on this.

If you want to run on-prem #Microsoft sw on a dedicated hosted #cloud svc by AWS (incl VMware Cloud on AWS), Azure, Alibaba Cloud, or Google Cloud, you’ll have to pay add'l $ on top of standard license cost. No changes if you’re using @IBM #IBMCloud https://t.co/wPJnUgzzHA

— Michele Lajeunesse (@ChelLajeunesse) August 7, 2019

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