The Economics of Windows Server on Azure VMware Solution

by Greg Kaffenberger

This article will analyze the cost of Microsoft Windows Server Datacenter running on Azure VMware Solution compared to running on-premises and in Azure VM (Azure Native IaaS)

Azure Hybrid Benefit (AHub) is a licensing benefit provided by Microsoft for customers who own Microsoft Windows Server and SQL server, with Software assurance. The benefit allows customers to bring the licenses purchased for on-premises hardware to Azure. 

This article will not discuss Azure Hybrid Benefit in its entirety, only related to the economics of Azure VMware Solutions and other comparative solutions. We will primarily focus on the economics of Azure Hybrid Benefit (Ahub) of Microsoft Windows Server Datacenter.  Microsoft SQL server will be covered in a later article.

To learn more about Azure Hybrid Benefit please refer to my Azure Hybrid Benefit Quick Reference blog.

How Azure Hybrid Benefit applies to Azure VMware Solution

Azure Hybrid Benefit has two main methods of allowing customers to bring licenses to Azure. First, there is a conversion from physical cores to vCPUs. You would use this conversion method to move to a multi-tenant offering such as Azure VM or a SQL service.  The second option is to apply the licenses to the physical cores of dedicated servers in Azure. The physical core method is how Windows Server and SQL Server are licensed in Azure VMware Solution. [1]https://www.microsoft.com/en-us/licensing/licensing-programs/software-assurance-license-mobility?activetab=software-assurance-license-mobility-pivot%3aprimaryr2

What about Client Access Licenses (CALs)?

When writing this article, it is unclear if Client Access Licenses are required for Windows Server licenses brought to Azure using the Azure Hybrid Benefit. Azure FAQ says, “No. Windows Server CALs are not required for accessing Windows Server running in the Azure environment because the access rights are included in the per-minute charge for the Virtual Machines.” [2]https://azure.microsoft.com/en-us/pricing/licensing-faq/ This does not specify if it applies when you don’t choose to pay for Windows Server along with the Virtual Machine.

For this article, I will assume Client Access Licenses ARE required. It’s better to error on the side of caution when talking about money. The CALs don’t significantly impact the analysis either way.

Examining the cost of Windows Server in Azure

For this discussion, we will be using public information. The on-premises licensing covered will be an open license example and comparing it to an Azure OS subscription. It’s worth noting that larger organizations will most likely have an Enterprise Agreement with some discount level applied.  Talk to your Microsoft Licensing and Azure Specialist or partner to compare your actual costs.

Let’s examine a use case for the imaginary company, Super Spoons

Super Spoons has 4 VMware Hosts on-premises running 80 virtual machines. To keep the math simple, we will choose a VM configuration that aligns with Azure Instances and a host configuration that aligns with Azure VMware Solution. Super Spoons has a total of 800 employees that will access server resources.

Host Configuration
Qty
Cores

4

36

 

VM Configuration
Qty.
vCPU

20

1

20

2

20

4

20

8

Since we are only looking at Microsoft Windows Server Licensing, licensed by core, the ram and storage are irrelevant. If we were extrapolating a full TCO, licensing would be one dimension of many to be included.

On-Premises Licensing

Super Spoons would need 36 core licenses of Windows Server Datacenter per host with Software Assurance and Client Access Licenses for 800 employees. Their current cost for 2 years of Microsoft licensing, using available online pricing, is $75,168 plus $29,599.84 in CALs. This is assuming Super Spoons has no current Microsoft Licenses and starting from scratch.

QTY
Description
Online Price

9

16 core pack w/SA

$8,352.99 [3]https://www.newegg.com/windows-server-datacenter-edition-license-software-assurance-16-cores-microsoft-qualified/p/N82E16832397734

16

50 user CAL

$1,849.99 [4]https://www.trustedtechteam.com/collections/microsoft-server-cal-products/products/windows-server-2016-50-user-cals?variant=8146899271771

Moving your licenses to Azure VMware Solution

Super Spoons is considering four (4) AV36 hosts in Azure VMware Solution (AVS). Because they have the same size hosts on-premises, Super Spoons has all the Windows Server Licenses they need on Azure VMware Solution (AVS)

The Azure Hybrid Benefit makes migrating your Windows Server Licenses to Azure VMware Solution (AVS) very easy. In fact, it’s so easy you bring the licenses with you.

Moving your licenses to Azure VM (Azure Native IaaS)

Super Spoons has 80 VM’s of 4 configuration types using 300 virtual CPUs (vCPU). Super Spoons have previously purchased licenses to cover 144 physical cores.

The rule for Windows Server to Azure VM under Azure Hybrid Benefit is, “Each 2-processor license or each set of 16-core licenses are entitled to two instances of up to 8 cores, or one instance of up to 16 cores.”  A much simpler way to describe this is, every 8 cores of on-prem licenses equals 8 vCPUs as long as they are on the same VM.

Super Spoons has 6, 16 core, and 6, 2 core licenses. Luckily, Super Spoons doesn’t have any virtual machines over 8 vCPU, which makes the math very easy.

We take 144 core licenses and divide by 8 equaling 18 (144/8=18) to figure this out. We can move our on-premises licensing to 18 virtual machines with 8 vCPU or fewer. Super Spoons has 80 virtual machines that need Windows Server licensing. The Azure price calculator shows a Windows Server cost of 67.16 per month. If we take the same two-year time, horizon Windows Server would cost $128,847.20 (67.16*80*24). When we apply our Azure Hybrid Benefit to 18 virtual machines, the price drops to $99,934.08. That is a 29,013.12 savings!  

We don’t recoup our original $75,168, which means it doesn’t make sense to buy perpetual Microsoft Windows Server licenses to move to Azure VM. I find it’s more helpful to think of it as a pro-rated discount based on licenses already owned and in use.

Many use cases will be more economical licensed by core

As you can see in the previous use case example, the price advantage of licensing Microsoft Windows Server by Core and applying it to Azure VMware Solution dedicated hosts is significant. Even if you have to buy Windows Server licenses when you buy your Azure VMware Solution hosts, you are saving $24,079.36 ($128,847.20 – $104,767.84= $24,079.36) in the first two years.  Years three and four have even greater savings as you only have to buy software assurance in year three for $12,885.12.00 [5]https://softwaremedia.com/shop/windows-server-datacenter-edition-software-assurance-only-2-cores/. Savings for years 3 and 4 are $124,842.20 ($128,847.20 – $12,885.12 = $115,962.08).

Are there other products core licensing could be used in Azure?

For this article’s purposes, we are only discussing Windows Server mobility rights as allowed by Azure Hybrid Benefit. Many Microsoft products have mobility rights, and the economics may or may not have similarities to Windows Server. [6]https://www.microsoft.com/en-us/licensing/licensing-programs/software-assurance-license-mobility?activetab=software-assurance-license-mobility-pivot%3aprimaryr2

If, for whatever reason, Azure VMware Solution is not a fit for your business, but you are interested in a core-based Windows Server licensing model for Microsoft Azure, Azure Dedicated Host may be an option.

What about if I don’t have Windows Server Datacenter?

If you use Windows Server Standard for virtualization at some point, you have done the math to decide “stacking” core licenses of standard are more economical than purchasing Datacenter. With Windows Server Standard, you are licensed for two virtual machines per server license. A server licensed with Windows Server Standard must conform to the number of cores AND the number of virtual machines on the server. Each Microsoft Windows Server License licenses two core and two VM’s, making the math easy; your VM count can’t exceed your core count. When the virtual machine count exceeds the core count, you have to buy additional core licenses for the additional VM’s, i.e., “stacking.”

 

Azure Hybrid Benefit works the same way for Standard as Datacenter. You count the number of cores and either bring them for Azure VMware Solutions or convert them for Azure VM.

The one difference with Standard, you can only run the license in one place, either on-prem or in Azure. Microsoft provides a 180-day grace period for migration. With datacenter, you can run both on-prem workloads and azure workloads simultaneously with no time limit.  For companies that want to run fully hybrid configurations with workload on-prem and in Azure, Windows Server Datacenter is the way to go.

Is Azure Hybrid Benefit exclusive to Azure?

Azure Hybrid Benefit is exclusive to Azure. The ability to bring your Microsoft licenses to other clouds such as AWS or Google Cloud is defined by the license mobility rights granted by software assurance, per product. Some software titles have mobility rights, and others do not. Microsoft Windows Server does not have mobility rights of any kind under Software assurance as of this article’s publish date. The only way to “bring” Windows Server to Azure is with Software Assurance plus Azure Hybrid Benefit.

Conclusion

When considering adding or moving to any cloud platform each company is going to have unique economics. With every analysis, “the devil is in the details” so to speak. I believe there is tremendous economic advantages to Azure VMware solution, the licensing benefit is just one example of many. The Azure Hybrid Benefit is a clear advantage for customers running Microsoft software and looking to move to Azure.

If you found this article helpful, feel free to share. If you are looking for more information on Azure VMware Solution, you can find that here – https://azure.microsoft.com/en-us/overview/

If you would like more information about Azure Hybrid Benefit you can find that here – https://azure.microsoft.com/en-us/pricing/hybrid-benefit/

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