Bacho Foto -

Microsoft licensing terms change will impact some cloud customers

Microsoft customers who want to deploy its software on dedicated cloud hosts, including Microsoft Azure, face new licensing terms as of Oct. 1.

A shake-up in Microsoft's licensing terms could lighten the wallets of customers who want to use its software on dedicated hosts at certain cloud providers, including Microsoft itself.

Microsoft currently allows customers to deploy its software licenses on hardware provided by what it calls "traditional outsourcers," but the rise of cloud computing has changed how customers run software and pay for licenses, according to a Microsoft statement.

"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," the statement adds. This distinction between old-school hosting outfits and the likes of AWS, Azure and Google warrants the change, Microsoft said.

As of Oct. 1, customers who buy on-premises licenses without Software Assurance, Microsoft's volume licensing program, as well as mobility rights, can't use them on top of dedicated hosted cloud services from Azure, Alibaba, AWS (including VMWare Cloud on AWS) and Google, according to Microsoft. Licenses purchased prior to Oct. 1 won't be affected by the change, the company said.

This is a perfectly reasonable clarification of the rules
Duncan JonesAnalyst, Forrester Research

Examples of dedicated hosted cloud service options include AWS EC2 Dedicated Hosts, single-tenant compute nodes on Google Cloud and Microsoft's own newly launched Azure Dedicated Host. For customers who want the latter deployment type, Microsoft will offer a cost advantage over other clouds, through Azure Hybrid Benefit. Under that program, customers can get a lower rate for Azure Dedicated Hosts if they have Windows Server and SQL Server licenses that carry Software Assurance. In addition, Windows Server Datacenter edition and SQL Server Enterprise edition users will have leeway to deploy VMs on Azure Dedicated Hosts up to their maximum capacity, according to a FAQ.

Tweaks to Microsoft licensing terms rankles the competition

Ultimately, Microsoft's move aims to drive more customers to shift workloads away from rival clouds such as AWS and onto Azure. To that end, the licensing change drew a stern rebuke from Amazon CTO Werner Vogels on Twitter.

Vogels' response is a departure of sorts, as company officials rarely reference competitors publicly, with the exception of occasional slams against Oracle. It also doesn't speak to AWS' own reputation for costliness.

Nevertheless, one observer characterized Microsoft's move as fair.

Duncan Jones, Forrester ResearchDuncan Jones

"This is a perfectly reasonable clarification of the rules, closing what some customers may have perceived, incorrectly, as a loophole," said Duncan Jones, an analyst at Forrester who advises sourcing and vendor management professionals.

For example, Microsoft offers two ways to license SQL Server: a fixed-capacity/named processor model, or under a sub-capacity/concurrent processor model if customers pay for Software Assurance, Jones said.

"You need the latter model if you operate in a highly virtualized environment on premises that mixes SQL workloads with non-Microsoft workloads, or if you use a public cloud service," he added. "This announcement merely makes it clear that Microsoft will treat dedicated hosted cloud services the same as full public cloud or an on-premises private cloud that offers similar flexibility. That seems perfectly fair to me."

All three types of environments give customers flexibility to add processing power on demand, switch hardware types if desired, and mix different versions of SQL Server in the same virtual server pool, Jones said. "All you need to do is to cover your licenses with [Software Assurance] and you only pay for the maximum capacity you reach."

This is good news for customers, because the database market keeps the software providers in check, Jones added. "Customers will move to other databases and development platforms if Microsoft increases SQL server's TCO too much," he said.

A notable exception from the list of cloud providers affected by the changes in Microsoft licensing terms is Oracle. It's unclear whether this is related to the two companies' recently formed alliance to make their respective clouds more interoperable, but the connection is not difficult to draw.

Oracle's public cloud offering lags well behind AWS, Azure and Google in terms of market share. The Microsoft partnership is meant to entice customers to use both companies' clouds in tandem, such as the ability to run Oracle applications on Azure infrastructure and tie them back to a database on Oracle's cloud.

Dig Deeper on Cloud provider platforms and tools

Data Center