Windows Server 2025 Pay-as-you-Go - Microsoft Update Nov 2024

Hello, our friends, SAMexpert followers, and those new to our channels! Welcome.

We are here today with a Microsoft licensing update for November 2024. Fortunately, this month brought us some pretty good news, interesting news, and some confusing news as well, which we can't avoid mentioning today.

Without further ado, I'll start with the update for service providers.

Service Provider Update

Service providers can now deploy Windows Server 2025 and System Center 2025. A very important note for service providers is that nothing has changed for you regarding the licensing rules; it's all exactly the same. It all remains the same. The only thing that changed is the maximum version you may deploy.

End Client Updates

The end client side is a bit more interesting. It's not very eventful, but let's not focus on the number of events. We've had months this year when Microsoft would release a long list of uninteresting, boring updates that did not affect most end clients or providers.

This month, we finally have new versions of two major Microsoft products: Windows Server 2025 and System Center 2025.

In addition, Windows Server got a new Pay-as-you-go option with Azure Arc, which is very valuable and interesting, and we will discuss it today as well.

Windows 10 ESU terms (Extended Security Updates) are now published. If you still run Windows 10 and you want Extended Security Updates, you're concerned about security. You have that option. It's not cheap, and I'll talk about the costs later in today's live session.

We also have various updates to Microsoft Fabric, Azure Maps, and Azure for IoT operations. They are less important for most Microsoft customers unless you work with Azure Maps or need to use Azure IoT operations; then, it may be an important update.

Azure Maps

Azure Maps has quite a few updates. First of all, there are some clarified and updated terms. If you use Azure Maps in your applications, then by all means, look at that.

AI Clause: They added that customers may not use data from Azure Maps to train their AI models. So don't do that. Don't be naughty. Don't use data from Azure Maps for machine learning and artificial intelligence. It's an important update, I must say. If you do that, stop.

There's a new section regarding how you are allowed to use it in broadcast and television. This section explains how. So if you're in broadcast and television, and you use Azure Maps for weather maps, for example, for traffic maps, there's a lot of text. Go to the Azure page at Microsoft Product Terms and read about it.

Windows 10 Extended Security Updates (ESU)

Windows 10 Extended Security Updates are finally available and mentioned in Product Terms. Let's talk about them because they're very important for the majority of companies we work with.

First of all, Windows 10 ESU licenses are per device. An extended security update license is required for each device, not just running Windows 10 with ESU but also accessing virtual machines that run Windows 10 with ESU.

So, if you use Windows 10 with ESU in any way, directly on the device or indirectly via accessing a virtual machine, the client device requires an ESU license. There's an exception in Azure. Anything that's in Azure is usually cheaper than outside of Azure.

Pay attention: in the Product Terms, they only say that if you access Azure Virtual Desktop (it's a separate service; it's not Windows 365, it's Azure Virtual Desktop), Azure Virtual Desktop with ESU does not require you to license the devices that you use to access that Azure Virtual Desktop. So effectively, Windows 10 with ESU in AVD doesn't incur any extra cost for your end client devices as the only exception to the rule.

If you want to use Windows 10 with ESU in test and development, you may, but your organisation requires at least one ESU subscription. If you have at least one ESU subscription (and it's a subscription, it's an annual cost), then you may use Windows 10 with Extended Security Updates in an unlimited number in your Dev and Test environments, on your Dev and Test devices.

The last point, also, is if you've heard about Extended Security Updates before, it should not surprise you. When you want to start using Extended Security Updates, you must buy ESU licenses for the current and the previous years. So, if you decide that you need ESU, and it's 2027, you will have to pay for the ESU 2025, ESU 2026, and ESU 2027. You can't start paying mid-term. You have to pay back to the very beginning of when the ESU was released. If you start in the third year, you will have to pay for three years.

There is more information, this time not from the Product Terms, but from various sources, such as blogs. Please be careful with this because blogs are not Product Terms. I must emphasise now, and I will repeat multiple times today, that anything outside of Product Terms, especially on learn.microsoft.com, is not official. There is a lot of conflicting information on learn.microsoft.com that contradicts the actual licensing rules. Still, I selected a few interesting points here. Let's discuss them.

First, what is the price for Windows 10 Extended Security Updates?

• In the first year, the price is $61 per device per year.

• It will be $122 in the second year, so it doubles.

• In the third year, it will cost $244 per device.

And then it will stop. Microsoft will stop releasing it. That's it. Three years. Migrate to Windows 11. Migrate to Windows 12. Unless you don't care, you don't need updates and are just happy to run the old versions.

It's up to you, by the way. You're not required to buy Extended Security Updates. It's up to you. If you're concerned about IT security, you probably will. If you are concerned but you have other measures to secure environments, you probably will look at those other measures. That is your decision; you're not required to buy those updates. It's another important point.

There's one thing where blogs contradict Product Terms. In the blog, in the announcement, I think it was on the 29th of October when Microsoft said that those licensed with Windows 365 (who use Windows 365 virtual machines) get ESU at no additional cost. That's not in Product Terms. Product Terms don't mention Windows 365. I need to check the Windows 365 page, but where they talk about Windows ESU, they only mention Azure Virtual Desktops. That's it. Nothing else. Just Azure Virtual Desktops.

And there's also a mention of the discount from the base price of $61. When you use Microsoft Intune or Windows Auto Patch to manage your Windows 10 ESUs, there's a 25 per cent discount. ESU will cost you $45 per device in the first year, roughly a 25% discount, not exactly 25%.

So that's all about Windows 10 ESU.

System Center 2025 and Windows Server 2025

Now, let's talk about System Center 2025 and Windows Server 2025.

First of all, System Center 2025 licensing remains exactly the same. There are no changes. So, if you already know how it's licensed, you don't need to learn anything else. If you have upgrade rights or buy new licenses, you can deploy version 2025. All the formulas, all the rules, and everything else remain exactly the same. There are no changes; there are no updates. It's all the same.

Windows Server 2025. Again, licensing remains the same, but not really. There's one addition for Windows Server 2025, which is very exciting and very confusing at the same time. That's the pay-as-you-go option.

Windows Server, connected to Azure Arc, now has an option—it's not really pay-as-you-go licensing; it's just the pay-as-you-go billing. It doesn't require a license in the traditional way, and you can pay for it per hour, much like in Azure. This update is exciting. If somebody needs temporary elastic workloads, like with SQL Server with Azure Arc, I highly recommend looking at this option.

But not yet.

And let me explain why "not yet".

I split the lump of text with Windows Server pay-as-you-go rules from Product Terms into bullet points and spent more than a week meditating on them, trying to make sense of it because it doesn't make sense right now. If you read it as is, it doesn't make any sense.

So let me start point by point, and I'll try to explain and simplify this as much as possible, but not everything. Forewarning, not everything still makes sense.

First of all, point number one:

Customer must have a valid Windows Server Standard or Windows Server Datacenter license to use the pay-as-you-go option.

It's a pay-as-you-go option. What license? I have also spoken to over ten famous Microsoft licensing advisors worldwide. Nobody can understand what the hell Microsoft was trying to say here.

Why are we talking about a license if it's a pay-as-you-go option? The way it also says that we must have a valid Windows Server Standard license is confusing. This sentence doesn't say it must be assigned to the server. Do we just have to have it somewhere stored in, I don't know, in a drawer, in a cupboard, in the server room, lying on the server somewhere, like a printed-out license?

The second point:

For licensed servers running pay-as-you-go virtual machines, there are no restrictions on the number of pay-as-you-go virtual machines that can be deployed.

Why would there be a restriction on the number of pay-as-you-go virtual machines? Because every pay-as-you-go virtual machine requires a separate Azure connection and a separate Azure pay-as-you-go billing line item. So, obviously, why would it be limited? If you need to deploy a pay-as-you-go virtual machine, you connect it to Azure Arc, and you start getting billed. So, why this point? What does it serve? No idea.

Additional visualisation rights are not granted.

Again, try and decipher this. Our current opinion is that if you deploy a Windows Server Standard pay-as-you-go virtual machine, it doesn't let you deploy another pay-as-you-go Windows Server Standard virtual machine "for free" as you could when using regular licenses.

Reminder: When you assign a Windows Server Standard license, a set of licenses, using all the formulas, you have the right to run two virtual machines.

With pay-as-you-go, it's clear that each virtual machine, or physical machine, by the way, requires a separate license. If it was intended to be a clarification, it doesn't clarify anything the way it's formulated. Microsoft, pull your act together.

For each licensed server that is running a Pay As You Go virtual machine, a customer may run one instance in an operating system environment.

That's clear. That's just them saying, "One Pay As You Go connection, one instance."

And then they repeat the same in the next sentence, sort of:

A separate license is required for each guest.

"Guest" is not defined. What is a guest? Is it a virtual machine?

Anyway, let me try to simplify this as much as possible. The last four points effectively say, "Each virtual machine consumes a separate subscription." That's it. All of that text could have been compressed into one sentence. Each virtual machine requires one subscription. There is one Azure Arc connection and one Azure Arc line item in the bill. That's it.

But the first point is very confusing. If I assign a Windows Server Datacenter license to a physical machine – a host – I already get unlimited virtualisation. I don't need pay-as-you-go. I don't need additional licenses.

If I'm required to assign a Datacenter license, that takes that entire host out of the context of pay-as-you-go. Because I can do whatever I want on that host. Seriously.

So, general advice: wait, hold, don't use the pay-as-you-go option yet.

And don't use, please don't use, learn.microsoft.com as your source of information. And guess what is the right source? Product Terms. Whatever's written on learn.microsoft.com doesn't change the licensing rules. It does not override what's written in the Product Terms.

What they say in a related article there (on learn.microsoft.com) could still be interesting, but it confuses everything even more.

They say your device must run Windows Server 2025 Standard or Datacenter Edition. In the licensing world, when we say "device", we don't mean "virtual machine". So, if we assume that this was written by somebody who understands the meaning of the word device (which is not necessarily true because learn.microsoft.com is a community-supported resource), does it mean that we can't use VMware virtualisation with Windows Server with Azure Arc?

Product Terms don't include this limitation, but if we trust this, does it mean we cannot use VMware? It's not clarified. It's not allowed explicitly. It's not forbidden explicitly. So, the big question is: do we have to use Hyper-V? Maybe they're suggesting we have to use Hyper V.

That's why, again, stay away for now, at least until Microsoft Ignite, until they clarify the terms.

Then, learn.microsoft.com states that using the pay-as-you-go option requires that your device isn't currently licensed or activated with another license. There's a lot of confusion among people who manage licenses.

System administrators often ask us questions about "licensing" when they actually mean "activation". Licensing and activation are two completely different things. Licensing is a legal act. Activation is a technical act of activating a license on the server. They're different; don't mix them up.

So, what they probably meant, what they tried to say here, is that the server must not be activated with another license. Otherwise, this would contradict Product Terms, which discusses having a license. And again, stay away, just stay away, don't touch it yet.

And last but not least, it's not yet in the Azure Pricing Calculator. I just had a chat with Microsoft about Azure Pricing Calculator. They said they don't know the ETA when it will be there. It will be there, but right now, it's not there.

Windows Server Pay As You Go is an Azure cost. It's billed through your Azure subscription, so it should be in the calculator.

I wanted to check it in the Azure Pricing Calculator because other unofficial resources, such as blog posts and other announcements from Microsoft, suggested that the price of an Azure Arc pay-as-you-go virtual machine will not be edition-dependent. If we trust those announcements, Windows Server Datacenter and Standard virtual machines will cost exactly the same, following exactly the logic in Azure. Because in Azure, your licensing costs don't depend on the edition of the Windows Server virtual machine.

There is another reason why I really want to see the updated Azure Pricing Calculator. In Azure, when you procure Pay As You Go licenses and deploy a virtual machine without using Azure Hybrid Use Benefit, with Pay As You Go included license, two core virtual machines are only billed for two cores of license.

There's no eight-core minimum. Four-core virtual machines are only billed for four cores. There are two-core virtual machines, and it's very obvious when you look at the cost of the Windows Server included license they only charge you for two cores.

Will that be the same through the Azure Arc Pay As You Go subscription? I hope so because, effectively, what Microsoft is trying to do is they're trying to creep with Azure everywhere: from your edge computing to service provider data centres. I'm eagerly awaiting until Microsoft finally pulls their act together, clarifies the terms, and puts this in the Azure Pricing Calculator.

So, fingers crossed. We'll see. It's an exciting development. It's a good development, but the way it's delivered is meh, to say the least.

Questions and Answers

Let's have a look at the questions in the chat.

Q: Do you have any updates on the changes to Microsoft Azure Hybrid Benefits?

There are no changes to Azure Hybrid Use Benefits. So far, the rules remain the same. The only thing that we expect to maybe change after Ignite is I hope they will allow Azure Hybrid Use Benefits through channels other than EA and CSP on Azure Stack HCI.

Right now, you can only use Enterprise Agreement or CSP licenses. You can't use MPSA; you can't use OEM with the attached SA. So, hopefully, that will be harmonised. Hopefully.

I'm saying "hopefully". "Hopefully" for many partners that we talk with. But I have serious doubts it's going to change. Because that will undermine the revenue for Microsoft

I'm very excited about Windows Server 2025. I'm excited about Windows Server Pay As You Go with Azure Arc. Still, I will only recommend using it when the terms are clarified, when the pricing is transparent and when it's part of the Azure Pricing Calculator. Then, we can start strategising, thinking about how to use it and what the best options are from a cost standpoint.

I can see multiple ways of reducing licensing costs. On the other hand, will Microsoft allow all of those ways to be used? For example, can we pay for only two cores instead of eight? If so, it will reduce Microsoft's licensing revenue. Let's wait and see. Hopefully, not that long. Hopefully, there'll be some sort of clarification in the first days of December.

And I repeat my other advice: don't trust secondary sources. If they contradict Product Terms, Product Terms take precedence. For example, you can never go to court and say, "I read it on a Microsoft blog." Licensing doesn't work that way. Product Terms is the only official source of licensing information.

And on that positive note, thanks again for attending today's event, and have a great and productive rest of the week.