Enterprise Cloud Licensing Rules Clarified

Newly-published licensing rules clarify how organizations can reassign licenses to multitenant servers hosted by a service provider, an important option for putting Microsoft-based systems into the cloud.

Organizations that move licenses to cloud hosting providers should note important differences in the rules, because they will remain responsible for license compliance

By John Cullen, Directions on Microsoft

Use rights published in July 2011 clarify how customers can move licenses bought in volume licensing to cloud hosting providers. This “license mobility through Software Assurance” licensing option, a benefit of Microsoft’s Software Assurance (SA) program, provides one way for customers to move Microsoft server-based applications into off-premises data centers hosted by Microsoft service provider hosters, who in turn can reduce infrastructure and management costs. The new use rights reveal important differences between licensing products on-premises, and licensing them off-premises with license mobility through SA. Customers and service provider hosters will need to study these differences, because the new use rights could mean that an on-premises software architecture would require additional licenses when moved to the cloud.

Moving Licenses to Cloud Service Provider Hosters

The new use rights were published in the July 2011 Product Use Rights (PUR) document, which repeats and supplements the software license terms of products with additional rights and restrictions affecting volume licensing customers. The use rights concern movement of licenses bought in Microsoft volume licensing programs from on-premises servers to servers at service provider hosters. Longstanding Microsoft policy allows volume licensing customers to move licenses for server applications from on-premises servers to servers located at a third-party service provider hosters, as long as the servers at the hoster are dedicated to (i.e., used exclusively by) the customer owning the license. In July 2011 Microsoft added license mobility under SA, which allows customers with active SA to move many types of server licenses to a service provider hoster’s multitenant servers, which are shared with other hosting customers.

Movement of on-premises licenses to a service provider hoster’s dedicated or multitenant servers are valuable options for customers who want to outsource management of Microsoft-based systems. When customers move existing licenses to servers at a service provider hoster (the cloud), this frees the service provider hoster from having to pay Microsoft Service Provider License Agreement (SPLA) rental fees for those licenses.

Differences between On-Premises and the Cloud

Licenses moved to service provider hosters under license mobility through SA do not always grant the same rights that those licenses do on-premises. Some of the differences benefit customers and service provider hosters by simplifying compliance, but others limit the types of workloads that can be handled by the licensed systems off-premises. (See the chart “How On-premises and Cloud Virtualization Use Rights Differ” below.)

The most important differences concern the use rights for licensing multiple operating system environments (OSEs) on a server. An OSE refers to an OS instance running on either a physical or virtual server. In the vast majority of cases, a server will have multiple OSEs because it is hosting multiple virtual machines (VMs), each with its own OSE. Consequently, the license mobility through SA use rights for OSEs affect how service provider hosters may use VMs and virtualization to run software for customers.

The three major ways use rights can differ under license mobility through SA are as follows:

Fewer operating system environments (OSE) may be covered by a single license. If a license covers use of a product within multiple OSEs when applied to an on-premises server, in most cases it will cover only one OSE when applied to a multitenant server at a service provider hoster. For example, SQL Server Enterprise edition per-server and per-processor licenses with active SA subscriptions attached cover an unlimited number of OSEs on a licensed on-premises server (in most circumstances, under current rules). This difference can be significant for certain scenarios because, depending on architecture, the license(s) a customer uses to cover a set of on-premises workloads might be insufficient to cover the same workloads when reassigned to a service provider hoster.

Note that the right for SA customers to run SQL Server Enterprise in an unlimited number of OSEs on the licensed server will end when the next version of SQL Server ships,; thereafter each license will cover four OSEs.

If a single license covers more than one OSE when reassigned to a service provider hoster, the OSEs are not required to run on the same physical server. In the case of System Center Management Suite Enterprise (SMSE) and System Center Management Suite Datacenter (SMSD), four OSEs are covered by a single license, but the OSEs don’t have to run on the same physical server as is the case with on-premises licensing. This could work in the service provider hoster’s and customer’s favor by easing one aspect of license compliance.

Processor resources an OSE can access under a single license may increase. A Standard edition processor license for SQL Server, BizTalk Server, or Forefront Threat Management Gateway covers only one OSE in both on-premises and cloud scenarios. However, when the license is applied to an on-premises server, the OSE requires more than one processor license if it is configured to use more than one “virtual processor”, where Microsoft defines a virtual processor for licensing purposes as one physical processor’s worth of computational power (which is a very different definition than the industry-accepted technical definition of virtual processor). For example, an OSE configured to use three cores-worth of computational power on a server with two dual-core processors has access to 1.5 virtual processors and Microsoft requires customers to round up and have two processor licenses. When assigned to the cloud, the same processor license allows an OSE to utilize up to four virtual processors. Assuming a service provider hoster uses servers with four or fewer physical processors, it wouldn’t be technically possible for an OSE to utilize more than four virtual processors and thus any OSE running the Standard edition of these server applications would always be covered by moving one processor license from on-premises to the cloud.

Customer Still Responsible for License Compliance

According to Microsoft’s PUR document, customers who use license mobility through SA “will be responsible for third parties’ actions with regard to software deployed and managed on your behalf.” So contracting with a qualified “License Mobility through SA Partner” and submitting a “License Mobility Validation form” detailing the licenses being reassigned does not absolve customers of compliance responsibilities or risks. For starters, a customer’s existing on-premises asset management tools and processes will likely require augmentation or modification to track license compliance by a service provider. Furthermore, in the event Microsoft audits a service provider hoster, the audit could possibly also involve any customer who moved licenses to the service provider hoster.

Resources

Options and rules for reassigning server licenses with SA to the cloud are detailed in “Changes Reduce License Costs for Hosting” on page 20 of the June 2011 Update.

Microsoft’s quarterly PUR document is available via a link at http://www.microsoft.com/licensing/about-licensing/product-licensing.aspx. The July 2011 edition of the PUR details the expansion of license mobility rights for SA customers in “Appendix 1 – Software Assurance Benefits”.

Microsoft’s monthly Product List document, which details the license mobility through SA benefit (see the section “License Mobility through Software Assurance”), is available via a link at http://www.microsoft.com/licensing/about-licensing/product-licensing.aspx#tab=2.

The SPLA home page, is at http://www.microsoft.com/licensing/licensing-options/spla-program.aspx.

CHART: How On-premises and Cloud Virtualization Use Rights Differ

Details the server application licenses that have key differences between their on-premises licensing use rights and corresponding use rights when reassigned to multitenant servers hosted by a service provider.

Virtualization rights conferred by some Microsoft server application licenses can differ depending on whether the licenses are applied to on-premises servers or multitenant servers hosted by a service provider.

License mobility through Software Assurance (SA), a new SA benefit that applies to most server application licenses as of July 2011, allows customers with SA on server application licenses to reassign these licenses to multitenant servers at a third party service provider hoster. However, virtualization use rights are not necessarily the same when licenses are moved to the cloud. Among other things, the number of operating system environments (OSE) covered by a single license and the amount of processor resources an OSE can use under the context of a single license, can differ. (An OSE refers to an OS instance running on either a physical or virtual server; in the context of this discussion, OSE is usually synonymous with “virtual machine”.)

This chart lists server application licenses and key differences between their on-premises licensing use rights and corresponding licensing use rights when moved to multitenant servers hosted by a service provider hoster. Depending on the product, the results of moving a license to the cloud can vary significantly.

Note that the term “virtual processor” used in the chart has a specific meaning for purposes of licensing. A “virtual processor”, for purposes of licensing, is the equivalent of one physical processor’s worth of computational power (with a physical processor defined as a chip occupying a socket on the motherboard) which is a very different definition than the industry-accepted technical definition of virtual processor. As stated in Microsoft’s quarterly Product Use Rights (PUR) document, “Solely for licensing purposes, a virtual processor is considered to have the same number of threads and cores as each physical processor on the underlying physical hardware system”.

Products License On-premises Servers Hosted Multitenant Servers
SQL Server Processor license, Standard edition Each processor license covers one OSE; OSE requires more than one processor license if it is configured to use more than one virtual processor. Each processor license covers one OSE, but the OSE can use up to four virtual processors.
  Server license,Enterpriseedition SQL Server can be run in an unlimited number of OSEs on the licensed server, with no restrictions on the number of virtual processors used by any OSE. Each server license covers only one OSE, with no restrictions on the number of virtual processors used by the OSE.
  Processor license,Enterpriseedition If all the physical processors in the server are assigned a processor license, SQL Server can be run in an unlimited number of OSEs on the licensed server, with no restrictions on the number of virtual processors used by any OSE. Each processor license covers only one OSE, but the OSE can use up to four virtual processors.
  Processor license, Datacenter edition (Datacenter edition requires all the physical processors in the server to be assigned a processor license). SQL Server can be run in an unlimited number of OSEs on the licensed server, with no restrictions on the number of virtual processors used by any OSE. Each processor license covers only one OSE, and the OSE can use up to four virtual processors.
Dynamics CRMExchange ServerLync ServerForefront Identity Manager

Forefront Unified Access Gateway

 

External Connector (EC) Each EC covers an unlimited number of OSEs on a licensed server. Each EC license covers only one OSE per licensed server.
BizTalk ServerForefront Threat Management Gateway Processor license, Standard edition Each processor license covers one OSE; OSE requires more than one processor license if it is configured to use more than one virtual processor. Each processor license covers one OSE, but the OSE can utilize up to four virtual processors.
  Processor licenses,Enterpriseedition If all the physical processors in the server are assigned a processor license, product can be run in an unlimited number of OSEs on the licensed server, with no restrictions on the number of virtual processors used by any OSE. Each processor license covers only one OSE, and the OSE can utilize up to four virtual processors.
SystemCenterServer Management Suites Enterpriselicense (SMSE) Requires one SMSE server license per physical server. The license allows four managed OSEs on the licensed server. Allows four managed OSEs per license; however, it is not required that the OSEs run on the same physical server.
  Datacenter license (SMSD) Requires all the physical processors in the server to be assigned an SMSD processor license. The licenses allow an unlimited number of managed OSEs on the licensed server. Allows four managed OSEs per license; however, it is not required that the OSEs run on the same physical server.

About the Author:

John Cullen is a Research VP at Directions on Microsoft, an independent analyst company and ICN partner that provides detailed research about Microsoft technologies and licensing policies. Prior to joining Directions on Microsoft, John spent nine years at Microsoft and was a senior product manager for Windows Server.

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