Microsoft Azure Hybrid Benefit – Great Way to Save on Cloud or Compliance Trojan Horse?

By Joshua Osborne

Director of Client Services – Microsoft, NPI

March 25, 2019

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In its quest to outshine Google and AWS – specifically when it comes to cost – Microsoft introduced the Azure Hybrid Benefit for Windows Server. Per Microsoft’s website:

The Azure Hybrid Benefit for Windows Server allows you to save up to 40% on Windows Server VMs in Azure by utilizing your on-premises Windows Server licenses with Software Assurance. With this benefit, customers need to only pay for the infrastructure costs of the virtual machine because the licensing for Windows Server is covered by the Software Assurance benefit. The benefit is applicable to both Standard and Datacenter editions of Windows Server for the 2008R2, 2012, 2012R2 and 2016 releases. This benefit is available across all regions and sovereign clouds. All you need to qualify for the benefit is an active Software Assurance or Subscription License such as EAS, SCE subscription or Open Value Subscription on their Windows Server licenses.

Each Windows Server 2-processor license with active SA/Subscription, and each set of 16 Windows Server core licenses with SA/Subscription, entitles the customer to use Windows Server on Microsoft Azure on up to 16 virtual cores allocated across two or fewer Azure Base Instances (virtual machines). Each additional set of 8 core licenses with SA/Subscription entitles use on up to 8 virtual cores and one Base Instance (VM).

It’s not difficult to understand the motivations behind this benefit. The race between Microsoft and AWS for cloud leadership is tighter than ever as evidenced by both organizations’ latest quarterly earnings. In the fourth quarter of 2018, AWS’s revenue increased 45 percent. Meanwhile, Microsoft saw its commercial cloud revenue grow 48 percent year over year and Azure revenue increase by 76 percent.

To increase Azure adoption and revenues, Microsoft is trying to convince customers that Microsoft software is best run in Microsoft’s cloud, and the vendor understandably structures its cloud services, software licensing and product use rights to give it maximum advantage.

Warning – Azure Hybrid Benefit Could Mean Compliance Shortfall

As you read through the details and coaching provided by Microsoft, it’s apparent that the ability to leverage your on-premise licenses and spin up Window Server VMs at any given time in Azure can put you at risk of falling out of compliance very quickly – unless you have strong internal software asset management processes that span on-premise and cloud assets. In this case, the right hand really needs to know what the left hand is doing!

If you take advantage of this benefit and do end up over-reaching your on-premise entitlements, depending on what type of licensing program you are purchasing under, you may have months or only days to ‘true up’ more required licenses. Keep in mind that Microsoft is very adept at identifying customers that lack strong software asset management hygiene. Once on Microsoft’s radar, the vendor likes to target these customers with software license audit activity – either a SAM engagement (an informal audit, for the most part) and/or a formal audit.

Our advice? If you use this Microsoft benefit, pay particular attention to who in your organization has access to your Azure cloud and who has permissions to spin up VMs, and create specific protocols for real-time accounting for the interplay between the on-premise licenses and the cloud licenses.