businessman holding coins putting in glass with using smartphone and calculator to calculate concept saving money for finance accounting
Image: mrmohock/Adobe Stock

Microsoft licensing is famously complicated. There are consultancies that run workshops to help businesses get the most from their licenses, showing them how they should purchase these many different licenses and plans and how they can remain compliant with the various ever-changing rules. It often seems that the various enterprise licenses are there to take more money out of your pockets.

SEE: Windows, Linux, and Mac commands everyone needs to know (free PDF) (TechRepublic)

While it may look that way at times, there’s a definite method to much of Microsoft’s licensing. It’s how the company directs and guides its customers to new technologies and new ways of working. As Microsoft deprecates tools and services, it increases costs, and as it brings in new tools and services, it offers introductory rates to help you get over the new technology hurdle.

There’s one licensing model that’s remained at the heart of Microsoft’s enterprise business for a long time: Software Assurance. This is probably Microsoft’s most popular volume licensing model, helping manage costs and adding extra benefits, including license mobility and the ability to automatically upgrade to new versions of covered software.

How to use Azure Hybrid Benefit for servers

One of the more useful aspects of licensing agreements like this is Azure’s Hybrid Benefit. Designed to help with the migration from on-premises to the cloud, it lets you use your on-premises SA or other qualifying subscription licenses in Azure virtual infrastructures. There’s no need to buy licenses again, so you can avoid Azure’s pay-as-you-go usage fees. There’s even a 180-day dual use option that allows you to still run on-premises for six months while you complete a migration to the cloud without using additional licenses.

It’s important to remember that while you’re using your licenses for the server software you still need to pay for storage and networking. Azure infrastructures are more than the software you’re using, with everything costing, even if it is only a fraction of a cent an hour. At scale, that can quickly add up, so be sure you have understood the total cost of your application before you start using it on Azure.

Once you’ve decided to move from an on-premises architecture to hybrid or cloud native, you can start to configure your licenses in Azure. There are four ways to apply your Azure Hybrid Benefit. You can use an Azure Marketplace image or upload a custom VM that you’ve built using on-premises resources. You can toggle the license on to an existing Azure VM, switching it away from on-demand pricing or even apply a group of licenses to a virtual machine scale set, ensuring that an auto-scaling application is licensed from your subscription.

Setting up is easy enough – you can apply a license from inside the Azure Portal by ticking the Licensing box during VM configuration. Alternatively, you can include the appropriate license type in your command line server invocation or add it as a property to an ARM template for automated deployments. Microsoft provides Azure CLI commands to check how many licenses you’re using, helping you stay legal.

It’s important to note that you don’t have to enter license keys at any point in the process. What you’re doing is attesting that you have a valid license that’s being used. If at any point you decide to drop your subscription, you will need to change your license type and switch to using Azure’s standard on-demand pricing.

Microsoft provides a basic calculator to help estimate how much you can save using Hybrid Benefit. The numbers are quite impressive. 40 Windows Server virtual machines running in the western US on a D4 instance would cost you over $3,600 each month without using Hybrid Benefit. If you take it into account, it drops down to just over $2,000 a month, saving $1,600. That’s almost $20,000 a year!

More than Windows Server, SQL Server too

As Hybrid Benefit covers SQL Server as well, you can apply those licenses to both VMs and to Azure hosted SQL databases, using either SQL Managed Instances or Azure SQL Database. The biggest savings come if you’re running a VM with SQL Server, as part of a lift-and-shift of a physical on-premises to virtual cloud infrastructure. The savings that come from moving to a managed database are smaller, but still significant, at around $8,000 a year for a reasonably sized Azure SQL Database.

There are other benefits too. For example, you automatically get access to Azure’s extended support window and will receive updates for Azure-hosted server instances that you wouldn’t get on-premises. For SQL Server, a switch to using Hybrid Benefit gets you more CPU for your dollar, with every licensed core translating to four Azure vCPUs, even if you’re using Azure’s platform-as-a-service options.

Azure Hybrid Benefit isn’t only for Windows licenses. You can use it with RedHat and SUSE Linux subscriptions as well. This approach isn’t quite as advantageous as using Microsoft licenses, as you still have to pay for the underlying infrastructure. However as both Linux distributions are supported on Azure, you can take advantage of Azure support and automated updates.

How to use Hybrid Benefit with other Azure savings schemes

You can save even more by combining your SA licenses with other Azure cost-saving schemes. By using reserved instances for your virtual infrastructure, you’re able to pay in advance (either in a lump sum or in monthly installments) for your servers.

This approach allows you to set the resources you need one year or three years out. This lets Microsoft plan how many servers it needs in its data centers, allowing them to save money by pre-booking power and networking, as well as server hardware. In return for your commitment, Microsoft reduces your bill, a saving that can be over 70% on-demand prices.

While Azure Hybrid Benefit has its advantages, it does lock you into Software Assurance long term. You’ll need to balance the utility of working with a subscription model with the savings, and while it’s an attractive option, it’s important to be sure of the commitment you’re making.

Then again, by planning in advance for your infrastructure and software needs, you could save anything up to 80% on a large portion of your Azure costs. And that’s something not to be sniffed at.