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Flexible Virtualization

Microsoft announced a massive change in its licensing – Flexible Virtualization benefit. It affects both end clients and service providers.

Microsoft has confirmed that it will officially roll out the changes on October 1, 2022. For now, we only have a couple of blog posts from Microsoft themselves.

In addition, the community is buzzing with rumours and leaks of what may be considered confidential preliminary information, so we're trying to be careful with it. The information is still partial and ambiguous but provides enough food for thought.

Unfortunately, some IT-news-related outlets and blogs have already tried to cover this announcement having diddly squat of knowledge about Microsoft licensing, especially in the hosting area. So we feel obliged to publish this piece ASAP. We will be updating it as the situation develops. 

This article was last updated on 09 September 2022.

MS Blog Announcement Flexible Virtualization

What is the Flexible Virtualization benefit?

"Under this benefit, customers with Software Assurance or subscription licenses will be able to use their own licensed software to build and/or install solutions and run them on any outsourcers' infrastructure (except Listed Providers') — dedicated or shared." (sic)

Disclaimer: it is a quote from the announcement, not yet from Product Terms.

The quote is confusing. Here's why. Even now (before the announced changes are in effect), end customers with Software Assurance and subscription licences may use "their own licensed software" as described above. However, currently, there are limitations:

  • Subscription licenses must have Software Assurance. Therefore, CSP licences are currently ineligible.

  • You may only take ("bring, BYOL") your licenses to an authorized provider – a "License Mobility Partner".

There's even an official name for this current licensing right – "License Mobility through Software Assurance". 

So, there must be a reason or two to introduce a new licensing right – "Flexible Virtualization". What could those reasons be? Let's take an educated guess.

The announcement says: "with Software Assurance and subscription licenses". Their article also mentions hosting changes to the CSP program, so we believe Flexible Virtualization will extend to CSP subscriptions. As of now, CSP subscriptions may only be taken to Azure. If this limitation is removed, it will significantly improve the benefits of CSP licences, which are currently somewhat limited compared to Enterprise Agreement and other volume licenses.

Here's a high-level view of how we see it, in a table:

Bring Your Own License

Today

From October 2022

BYOL for Volume licenses with Software Assurance

- Permitted to any provider on dedicated hardware. - Multi-tenant ("public Cloud") BYOL is only permitted to providers with the License Mobility Partner status.

(preliminary, subject to official confirmation) - Permitted to any SPLA provider. No difference between dedicated and shared hardware. - Lister providers (AWS, GCP, Alibaba, Azure) are excluded.

BYOL for Office 365 Apps and Windows 11 VDI

- Permitted to any provider on dedicated hardware. - Multi-tenant ("public Cloud") BYOL is only permitted to providers with the QMTH status.

as above

BYOL for Server subscriptions via CSP

- Permitted to Azure via Azure Hybrid Benefit. - Permitted on dedicated hardware, excluding Listed providers.

as above

Please let us know if you find any errors in the table above.

"Any outsourcer"?

The "any outsourcer" bit in the announcement is even more confusing; however, we are getting preliminary explanations for that term from undisclosed sources:

  • It will not be, as it may seem, any IT company with a data centre;

  • From October 01, 2022, only the existing SPLA hosters will qualify for the Flexible Virtualization BYOL benefit;

  • It will include all SPLA hosters, and QMTH will no more be required for Office 365 Apps and Windows 11 VDI BYOL;

  • As Microsoft will be expanding the new CSP hoster programme after the initial rollout, more outsourcers may become authorized, but according to our source, even Microsoft is currently unsure about how it will be developing;

  • "Listed providers" – Amazon AWS, Google GCP, Alibaba, and even Microsoft Azure – are excluded.

We also have a preliminary confirmation that SPLA is not going anywhere, and the CSP hoster programme is to augment and expand, not replace SPLA.

More flexibility for Microsoft 365 apps

Nowadays, you may not deploy Microsoft 365 apps to a Cloud provider's datacentre unless they have a rare QMTH ("Qualified Multi-tenant hoster") authorization. It is a severe limitation to what Microsoft customers may do with Microsoft 365 apps. 

Good news: Flexible Virtualization will address that. What we know and what we don't know yet:

  • We are confident that every current License Mobility partner hoster will be eligible for Flexible Virtualization hosting;

  • We are unsure but pretty optimistic that the License Mobility Partnership will not be required for Flexible Virtualization hosting, but that is subject to official confirmation. We keep hearing the words "any partner will benefit from it".

Windows Server virtual core licensing

"With the virtual core licensing option, customers can elect to license Windows Server by the number of virtual cores they are using in virtual machines, making Windows Server easier to license when virtualizing or outsourcing." (sic)

Let's highlight the key bits:

  1. You will become able to take Windows Server licenses to an outsourcer, service provider, or Cloud provider. As of now, this right is limited to dedicated hardware only. From October 1, 2022, Microsoft will extend it to multi-tenant environments.

  2. You will have an option to license Windows Server virtual machines per virtual core. Today, you may only license Windows Server at the hardware level, depending on the number of physical processor cores.

  3. It's an "option", so the current licensing models will perhaps remain. It will introduce both flexibility and additional complexity. It will also provide an additional opportunity to optimize licensing costs.

We expect it to work similar to Azure Hybrid Benefit but not necessarily 100% identical.

We also reasonably believe it will only work for Software Assurance or subscription licences. Perpetual licences won't get these rights. All of it, of course, is yet to be seen.

Rejoice! It's not only for Europe.

We have previously published an article on the upcoming changes to Microsoft licensing. Judging by the latest update, Microsoft seems keen to deliver on its promises. Moreover, it has expanded the promised benefits to a much wider audience. 

The original changes were to affect European Cloud Providers only. However, the more recent update seems to address the worldwide audience. So, rejoice if you are in the USA, Australia, Africa, and almost anywhere else. There is good news for you too.

Talk to our Microsoft Licensing experts.

If you want more clarity on how this may affect your Cloud and licensing strategy, please send us your questions using the form below. We'll help you prepare and re-strategize if necessary. 

We expect these changes to positively impact end-customer licensing and digital transformation. We aren't that sure about service providers yet.