Summary
Key outtakes:
It's a positive initiative from Microsoft.
However, the terms remain unclear.
So far, we advise against using it in production to avoid non-compliance.
If you decide to use it, watch out for billing traps.
The uncertainty with the terms
Since November 2024, the Microsoft Licensing expert community has been discussing the bizarre terms for Windows Server Pay-As-You-Go.
They simply don't make sense. The following is a quote from Product Terms:
License Restrictions
Customer must have a valid Windows Server Standard or Windows Server Datacenter License to use the pay-as-you-go option.
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.
Additional virtualisation rights are not granted.
For each Licensed Server that is running a pay-as-you-go virtual machine, Customer may run one instance in an operating system environment.
A separate License is required for each guest.
The last 4 points simply translate into "Each virtual or physical machine requires an individual PAYG subscription". Or "one subscription covers one machine".
The problem is the first point, which does not make any sense. Why would anyone need a license if the Pay-As-You-Go option is just that, an option? When you deploy Windows Server 2025, it offers a choice between a license activation and a PAYG subscription.
We hoped Microsoft would come to senses and clarify the terms in December 2024. But they have probably been too busy playing with their shiny AI toys at Ignite. Or maybe they simply stopped caring. A few of our friends with direct links to Microsoft tried to contact the Windows Server Product Group. In their own words, "PG remains silent".
This article will be updated each time there's a change or clarification. We hope that one day, the above chapter will become unnecessary.
What is Windows Server 2025 with Azure Arc Pay-As-You-Go?
Windows Server 2025 Pay-As-You-Go is an alternative to licensing. Now, Microsoft customers are given a choice between:
Procuring and assigning a license, as it has always been.
Connecting an instance of Windows Server to Azure with Azure Arc and paying for it per hour.
The choice is given during the installation phase. If the instance is activated with a license key, there is currently no option to switch to Pay-As-You-Go later. You must make this decision upfront and stick with it.
You must already have an Azure subscription, and you must have already created at least one Resource Group.
How is Windows Server 2025 billed?
Azure Arc agent reports the machine's activity and configuration changes to Azure, which bills you per hour. However, there's a catch or two. Here is what we gathered from unofficial resources, including learn.microsoft.com (no, it's not considered official for license compliance purposes):
It is "edition-agnostic"
Note: It's not confirmed in the Product Terms.
Like in Azure, Windows Server 2025 PayG costs the same regardless of the deployed edition – Standard or Datacenter.
Windows Server CALs aren't required
Note: It's not confirmed in the Product Terms.
Like in Azure, Windows Server 2025 PayG does not require Windows Server CALs.
However, Windows Server RDS CALs and Windows Server RMS CALs are still required.
There is a 7-day trial period, free of charge
Note: It's not confirmed in the Product Terms.
Our system integration partners confirmed it. However, we have not yet gathered enough evidence ourselves.
It takes 24 hours to reflect changes in core counts
Note: It's not confirmed in the Product Terms.
If you reduce or increase the number of processor cores, the billing will only reflect it in 24 hours. It's unclear whether it is the maximum or the minimum time to react to changes.
You MUST delete and disconnect a PayG machine, or the billing won't stop
Note: It's not confirmed in the Product Terms.
Only uninstalling the agent won't stop billing. You MUST delete and disconnect a PayG machine.
After deleting, it takes up to 24 hours for the billing to stop
Note: It's not confirmed in the Product Terms.
We recommend shutting the machine down first and ensuring Azure knows it's not in use.
"Up to" is somewhat reassuring and worrying at the same time.
If a machine is disconnected for 30 days, billing won't stop until its certificate expires
Note: It's not confirmed in the Product Terms.
Do not simply disconnect a PayG-billed machine if you want it to stop being billed.
Additional knowns and unknowns
We gathered these details from the same unofficial sources:
So far, it requires a retail image. The community confirmed that MSDN images work, too.
It requires the host to run Windows Server. This has not been confirmed by anyone yet, and based on the early information from learn.microsoft.com. Thus, it's not certain if Windows Server PayG may be used with any other hypervisors than Hyper-V.
What are the minimum billed cores? In Azure, billing starts from two cores. However, in licensing, on-premises, on hosting, and via Azure Hybrid Use Benefit, Microsoft sticks with the eight-core minimum.
We will be updating this chapter as soon as there are new details.
Do not use it or risk non-compliance
The uncertainty with the Product Terms language is significant.
What is the point if PayG requires both a license and a subscription? Why pay for a license and for a subscription at the same time? Did Microsoft make a mistake in Product Terms, or was it deliberate?
Regardless of the answers to these questions, until Microsoft clarifies the language or confirms that PayG also requires a license, using it represents a significant non-compliance risk. Clients in territories highly sensitive to legal language, like Germany, should avoid deploying Windows Server 2025 with Azure Arc Pay-as-you-Go.
Proposed language — shall we petition for it?
Nobody can tell Microsoft what to do, but let's assume they'll listen.
Suppose that Microsoft's intent was indeed to offer a choice between a license and a PayG subscription. In that case, this is what we would like the clarified terms to be:
OSEs with enabled pay-as-you-go subscriptions don't require Windows Server and Windows Server CAL licenses.
Windows Server RDS CAL and Windows Server RMS CAL licences are required per the relevant licensing terms for the agreement type.
One pay-as-you-go subscription permits the use of one Windows Server OSE, physical or virtual.
No additional virtualisation rights are granted.
We would also like the following to be codified in the Product Terms:
The 7-day trial period, with clarifications on whether it is only available for the first machine per subscription or customer,
The 24-hour period to reflect changes in licensing metrics,
Other billing-related terms, conditions, and limitations.
Can it be used on hosting?
No. Not yet.
When is it best to use Windows Server 2025 Pay-as-you-Go?
As with every PayG option, the benefits are achieved when the option is correctly used and managed.
Here are a few considerations:
If you run the machine constantly, it'll probably be 20% more expensive than a regular subscription license before discounts.
It's better for:
Elastic workloads,
Temporary workloads,
Temporary requirements rising above the number of licenses you have,
Testing and evaluation may be better with Visual Studio or Azure Dev/Test subscriptions. Consider all options and costs.
Overall, giving customers more choices is a good tendency. The question remains whether the traditional licensing option will one day become obsolete.
Please share your experience
Windows Server 2025 with Azure Arc Pay-as-you-Go is a new development for everyone. We would appreciate any information and experience you can share with our readers.
Also, please feel free to ask any questions about licensing and Cloud. We are an independent consulting company that sells no licenses. That is deliberate so we can provide truly unbiased advice.