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Microsoft SPLA / CSP-Hosting / BYOL changes and updates

Microsoft SPLA is a relatively "static" licensing programme.

However, recently Microsoft introduced breaking changes in the Service Provider Use Rights (SPUR) document, which may have long-term implications and even cause some providers to review or close their Microsoft hosting services.

What changed in SPLA on December 01, 2022?

In SPUR, there is notable except for the availability of Azure DevOps Server 2022.

However, there are a few clarifications regarding BYOL in Product Terms:

  • SQL Server Technology – SQL Server bundled with other Microsoft software like Azure DevOps Server – may be deployed in shared environments. I.e. it may be deployed on your hosting platforms via BYOL for the qualifying main product.

  • SQL Server Failover nodes may be deployed on shared hosting servers.

What changed in SPLA on October 01, 2022?

  • BREAKING CHANGE if you host your end-client workloads on AWS, GCP, Azure or Alibaba ("Listed Providers") and report SALs through your own SPLA. There is a three-year period until September 30, 2025, at the end of which providers will have to stop "outsourcing licences" to Listed Providers.

  • QMTH providers can start gradually migrating to the new CSP Hoster programme. The migration is voluntary. If you want to remain in QMTH, you may. However, please read the next point.

  • QMTH was made redundant because Microsoft expanded Office 365 Apps and Windows 11 hosting rights to all hosting service providers.

  • Many new products were granted a License Mobility equivalent right called "Flexible Virtualization" (click the link to learn more). BYOL was significantly simplified.

  • Due to the above, the License Mobility partnership status also seems redundant unless you are a Listed Provider. License Mobility is the only way to BYOL to Listed Providers.

  • IMPORTANT: not in SPLA! End-clients with Windows Server subscriptions or Software Assurance finally got the option to license virtual machines based on virtual cores, similar to how SQL Server is licensed. This, however, was not introduced in SPLA SPUR, so providers cannot benefit from it. But you still must know about it because end-clients also got the right to bring their Windows Server licenses to any hosting provider except for AWS, GCP and Alibaba. 

We have already covered the first three points in the linked articles. Let's talk about the impact of the last two because, for some of you, the impact may be significant.

Windows Server BYOL challenges

All hosting providers, not limited to those with SPLA, may now allow their end-clients to bring their licences ("Bring Your Own License") for Windows Server on multi-tenant hardware.

Virtual machines licensed with BYOL require at least eight core licenses per VM. End clients must prove that they have one of the following:

  • Windows Server volume licenses with active Software Assurance,

  • Windows Server CSP subscription licenses.

End clients also must prove that they have enough eligible Windows Server CALs:

  • Windows Server CALs with active Software Assurance or

  • Windows Server CAL subscriptions via CSP.

There's, however, an economic impact that requires consideration.

Traditionally, providers license their hosts with Windows Server or Core Infrastructure Suite Datacenter. There's a predictable cost per host's core, and all the hosted virtual machines are fully covered. The provider recovers the costs by charging end clients for their virtual machines. The more virtual machines there are on the host, the lower the cost per VM and the higher the provider's margin on the license. 

Now, as end clients are given an option to bring their licenses, it can create a "licensing mess", a mixture hard to imagine working smoothly. If a host is already licensed with Windows Server Datacenter, how can a provider discount and recover the costs of virtual machines covered with end users' licenses? 

Of course, some providers may opt for deploying an entirely new infrastructure for Windows Server BYOL, but it may not be a feasible solution for many of them. It will mean new investment, restructuring the current Cloud environments, changes to the billing systems, and much more.

End of DCP BYOL to Listed Providers

Service Provider License Agreement stipulates terms and conditions for outsourcing workloads to, in the terminology of SPLA, "Data Center Providers" (DCP). If you are a service provider with SPLA, you may use another provider's data centre to host your end-customers workloads. You may then report "DCP eligible" licenses through your SPLA agreement. 

This permission resulted in various fruitful collaborations and partnerships between providers. It also lets you offload some end-client VMs to hyperscalers like AWS, one of the so-called "Listed Providers". AWS does not offer SPLA licenses beyond: 

  • Windows Server (they must do it by the terms of the current SPUR),

  • SQL Server Core (no SALs),

  • Visual Studio SAL + RDS SAL (the recent addition).

Hyperscalers simply don't want the complexity and the headache of managing the entire SPLA price list. By working in collaboration with smaller providers, hyperscallers effectively offload the headache. It's a win-win. And it seems like Microsoft doesn't like it.

It will stop on October 01, 2025. If you host your end-client workloads on Listed Providers and report licenses through your SPLA, you may do so only until September 30, 2025.

Microsoft is pitching the change as "aligning SPLA with its original intent – to support datacentre providers". Yes, this may positively impact the ecosystem of providers invested in their own data centre capacities. But smaller providers and SaaS companies may have to reassess how they do their business. 

We'll be watching this space very closely. We are already working with some providers on mitigating the potential impact. Please drop us a message using the form below to discuss your situation. We promise a genuine conversation, not a sales pitch.