Azure RDS Licensing: What ITAM Professionals Need to Know

1. Azure RDS Licensing Basics

Azure allows you to run Windows Server virtual machines, but it does not include RDS licences by default. If users connect to a Windows Server on Azure for a graphical desktop or applications (via RDS/Remote Desktop Protocol), each user or device must be licensed for RDS — just as they would on-premises. For a deeper dive into RDS CAL fundamentals, see RDS Licensing: CALs, Cloud Alternatives, and Enterprise Strategy.

Key Point	What It Means	ITAM Impact
RDS CAL Required	Every user or device accessing RDS on Azure needs an RDS Client Access Licence or equivalent. Windows Server CALs are exempt on Azure, but RDS CALs are not.	Running RDS on an Azure VM still obligates you to have proper RDS CALs for those users.
User CAL vs Device CAL	Microsoft offers per-User and per-Device RDS CALs. However, only User CALs can be used in Azure. Device CALs cannot be assigned to cloud environments.	Convert any Device CAL reliance to per-User before migrating to Azure.
No Bundled RDS	There is no pay-as-you-go RDS CAL in Azure. Microsoft doesn't sell RDS CALs as part of Azure subscriptions.	Licences must be acquired separately through volume licensing or SPLA/CSP programs.
Software Assurance Mandatory	To use your own RDS CALs in Azure, those CALs must have active SA. SA enables "licence mobility" to the cloud.	Lapsed SA = CALs lose cloud rights. Budget SA renewal as non-negotiable for Azure usage.

Treat Azure RDS VMs exactly like on-premises RDS servers for licensing purposes. The only thing Azure includes automatically is the Windows Server OS licence itself. Every aspect of RDS client access must be separately licensed and tracked. This is one of the most common compliance gaps in cloud migrations.

2. Licensing Models and Options

Enterprises have several options for licensing RDS on Azure. The choice of model affects cost structure and compliance posture. For context on SPLA licensing specifics, see SPLA Licensing Complete Guide.

Licence Option	Use in Azure	How to Obtain	Cost Model
RDS User CAL (with SA)	✅ Yes	Volume Licensing (Enterprise Agreement)	One-time ~$200/user + annual SA (~25% = ~$50/yr)
RDS Device CAL	❌ No	Volume Licensing (on-prem only)	N/A — Device CALs cannot be used for Azure VMs
RDS User Subscription (SL)	✅ Yes	CSP or Volume Subscription	Per-user monthly/annual fee (operational expense)
RDS SAL (via SPLA)	✅ Through Sept 2025*	Service Provider Licence Agreement	Monthly per-user fee (~$8–15/user/month via provider)

*Microsoft has announced that SPLA RDS SALs on Azure are available only through September 30, 2025. Future cloud service provider licensing for RDS may change after that date.

Explanation of Options

RDS User CAL with Software Assurance: Purchase perpetual RDS User CALs and maintain active SA to use them on Azure. The SA benefit (licence mobility) allows a licensed user to access RDS on Azure VMs. Pay upfront for the CAL (~$200) plus annual SA fee (~25%). This is ideal for long-term internal use with a stable workforce, as it has lower total cost per user over 2–3+ years.

RDS User Subscription Licence (SL): Available via CSP or volume licensing as a per-user, per-month fee. Provides the same rights as a CAL with SA, but on a pay-as-you-go basis. Convenient for operational expense models or flexibility without long-term SA commitment.

RDS SAL via SPLA: Monthly licence through service providers. Useful when an organisation doesn't have its own volume licences or when external users need access. However, SALs are time-limited in Azure — available only until September 2025. Enterprises using this option should plan a transition to CALs or another solution.

The SPLA RDS SAL deadline is approaching. After September 30, 2025, Microsoft is disallowing SPLA partners from using their own SPLA licences on major cloud providers (Azure, AWS, GCP). If you rely on service provider licensing for Azure RDS, plan your transition now — either to owned CALs with SA, CSP subscriptions, or Azure Virtual Desktop. For full detail on these changes, see SPLA Licensing Guide.

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3. Azure RDS vs Azure Virtual Desktop (AVD)

Many enterprises are now considering Azure Virtual Desktop (AVD) as an alternative to traditional RDS. AVD delivers virtual Windows 10/11 desktops from Azure — with fundamentally different licensing requirements. For a detailed comparison, see AVD vs Windows 365: Licensing and Cost Strategies.

Feature	Traditional RDS on Azure	Azure Virtual Desktop (AVD)
RDS CAL Required?	✅ Yes — every user needs an RDS CAL/SL	❌ No — RDS CALs not needed
User Licensing	Separate RDS User CALs (with SA) or subscriptions	M365 E3/E5 or Windows Enterprise E3/E5 (often already owned)
Operating System	Windows Server (multi-session via RDS roles)	Windows 10/11 Enterprise multi-session (client OS)
Infrastructure Cost	Azure VM cost + RDS licence cost	Azure VM cost only (if M365 licences already held)
Incremental Licence Cost	~$200/user CAL + ~$50/yr SA	Often $0 additional (covered by existing M365)
Management	Traditional RDS deployment — licence server, CAL tracking	Cloud-managed — no RDS licence server needed
Best For	Server-only applications, lift-and-shift of existing RDS, legacy systems	Desktop apps, internal user remote access, new deployments

AVD Cost Comparison — 500 Users

A global firm with 500 users, all on Microsoft 365 E5, evaluates two options:

Option A: Traditional RDS on Azure — 500 RDS User CALs (~$200 each) + SA (~$50/yr each) = $100,000 upfront + $25,000/year. Plus Azure VM costs.

Option B: Azure Virtual Desktop — No additional licence cost (M365 E5 covers AVD). Only Azure VM costs.

Result: AVD saves $100,000 upfront + $25,000/year in RDS licence costs. Over 3 years, that's $175,000 in licensing savings alone — before any VM optimisation.

Consider AVD as a modern alternative to hosting RDS on Azure, especially if you already licence users with M365 E3/E5. It reduces licensing complexity and shifts focus to optimising Azure resources instead. For deeper planning guidance, see Licensing Virtual Desktops and Windows 365 for CIOs.

Evaluating Azure RDS vs AVD for Your Organisation?

The licensing model choice between traditional RDS and Azure Virtual Desktop has six-figure cost implications for enterprise deployments. Our independent advisory helps ITAM teams model total cost of ownership, validate licence positions, and negotiate optimal EA terms with Microsoft.

Microsoft Optimisation Services → Book a Consultation

4. Cost Drivers and Optimisation Strategies

Cost Factor	Detail	Optimisation Tip
Upfront vs Ongoing	CAL (~$200) + SA (~$50/yr) = ~$350 over 3 years. SPLA SAL (~$10/user/month) = ~$360 over 3 years.	Break-even is ~2–3 years. Long-term users → buy CALs. Temporary/fluctuating → subscription.
SA is Mandatory	Only CALs with active SA can be used in Azure. SA adds 25% annually.	Never let SA lapse on Azure-destined CALs. Budget SA renewals as non-negotiable.
Unused Licences	Over-provisioned CALs or SALs = wasted spend. Paying for 100 users when only 80 connect.	Regular usage audits. Reclaim CALs from departed employees. Adjust SPLA counts downward.
Azure Hybrid Benefit	Windows Server licences with SA can reduce Azure VM costs (not RDS CALs, but the underlying VM).	Always apply Azure Hybrid Benefit to reduce infrastructure costs alongside RDS licensing.
Existing Investments	On-prem RDS User CALs can be brought to Azure by adding SA.	Leverage existing CALs. Adding SA to existing inventory is cheaper than buying new licences.
CSP for Burst Capacity	CSP subscriptions can be added/removed monthly for variable demand.	Hybrid approach: owned CALs for steady-state + CSP subscriptions for overflow.

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5. Compliance and Common Pitfalls

Pitfall	Risk	Mitigation
Assuming Azure Covers RDS	Azure VM pricing includes Windows Server OS — but not RDS. Companies deploying RDS without acquiring CALs are non-compliant.	Explicitly account for RDS licensing in every Azure deployment plan. It's never automatically included.
Using Device CALs in Azure	RDS Device CALs cannot be used in cloud environments. Applying them creates a compliance gap.	Convert Device CAL reliance to per-User when migrating to Azure. Device CALs are on-prem only.
Missing Licence Mobility Form	Microsoft requires a Licence Verification form within 10 days of deploying RDS with CALs on Azure. Plus a 90-day assignment minimum.	Submit the form on time. Plan deployments to minimise frequency of licence transfers between on-prem and cloud.
External User Access	Contractors, partners, and clients also need licensing. Standard internal CALs don't cover external users.	Use External Connector licences or RDS SALs for external users. Treat external access as a separate licence line item.
Poor Record-Keeping	Not knowing how many CALs you have or who they're assigned to. Audit exposure.	Track actual usage via Azure logs and RDS licence server reports. Reconcile with procurement records quarterly.
SPLA Policy Changes (2025)	SPLA RDS SALs on Azure retiring after September 2025. Continuing on a deprecated model = non-compliance.	Transition to owned CALs, CSP subscriptions, or AVD before the deadline. Review Microsoft Product Terms regularly.

Ignorance is not a defence in Microsoft licensing. Microsoft audits can impose back-dated charges at list price (often 125% of cost) plus additional fees. A single Azure deployment with 200 unlicensed RDS users could result in a $40,000+ compliance finding. Proactive management is far cheaper than reactive remediation.

6. Licence Planning and Enterprise Agreements

Managing Azure RDS licensing at scale requires strategic planning and EA negotiation. For broader context on Microsoft enterprise licensing, see Overview of Windows Server Licensing Models.

💡 Enterprise Agreement Strategies

1. Factor RDS into EA Negotiations — Include RDS User CALs (with SA) in your EA renewal. Enterprise customers can often secure better pricing as part of a bundled agreement. Communicate your Azure RDS plans to negotiate licence mobility rights upfront.

2. Hybrid CSP + EA Approach — Own CALs for steady-state users (base in EA) and leverage CSP subscriptions for burst capacity and transient users. Add or remove CSP monthly without overcommitting.

3. Plan SPLA Transition — If you rely on SPLA SALs, plan to bring licensing in-house via CALs or shift to AVD before September 2025. Engage Microsoft account reps early for options.

4. Budget SA Renewals — SA must be renewed every year (or at EA renewal cycles). Skipping SA to save money backfires if those users still need Azure access. Include SA costs in forecasts as non-negotiable.

5. Monitor Utilisation — Track RDS usage trends. If usage is growing 20%/year, proactively include additional licences in your next agreement. If dropping (moving to AVD), reduce the RDS component at true-up.

6. Get Written Confirmation — Ask Microsoft for clarifying terms in writing for Azure RDS usage, especially for complex scenarios (partner access, third-party hosting). An addendum explicitly stating your rights prevents misunderstandings.

🤝 Renewing your Microsoft Enterprise Agreement?

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7. Recommendations and Checklist

💡 10 Expert Recommendations

1. Maintain Software Assurance — Always keep RDS User CALs under active SA for Azure use. This ensures cloud usage rights and avoids compliance gaps.

2. Assess AVD Viability — Evaluate Azure Virtual Desktop. If users are eligible via existing M365 licences, AVD eliminates separate RDS CAL costs entirely. See CIO Playbook: Microsoft Licensing for Remote Work and VDI.

3. Choose the Right Model Per User Profile — Perpetual CALs for long-term users. Subscription licences for temporary or fluctuating users. Hybrid approach optimises cost and flexibility.

4. Monitor and Reconcile Usage — Implement monthly or quarterly audits of Azure RDS usage vs licences owned. Revoke access for unlicensed users. Reclaim CALs from departing employees.

5. Don't Overbuy — Avoid purchasing excess CALs "just in case." Leverage CSP subscriptions for demand spikes instead of creating shelfware.

6. Include RDS in Cloud Governance — Add RDS licensing checks to your cloud deployment checklist. Every new Azure VM with RDS must have user access licensing accounted for.

7. Stay Informed on Changes — Designate someone to track Microsoft Product Terms updates. Early awareness of changes (like the 2025 SPLA update) allows smoother transitions.

8. Leverage Licence Management Tools — Use Microsoft's tools or third-party SAM tools to track RDS CAL assignments and Azure usage. Automation reduces human error.

9. Plan for External Access Separately — If external users need RDS access, treat their licensing as a separate line item. Don't assume internal CALs cover non-employees.

10. Engage Experts — An annual licensing review can prevent costly mistakes and surface optimisation opportunities in your EA negotiations.

Checklist: 5 Actions to Take

Inventory your RDS entitlements. Compile all RDS CALs, subscriptions, and eligible M365 licences. Note counts and SA status.
Map Azure usage. Identify all Azure VMs with RDS enabled. Document users connecting and whether they're internal or external.
Align licences to usage. Assign appropriate licences from your inventory to each deployment. Plug gaps immediately with additional purchases or subscriptions.
Submit compliance forms. File the Licence Mobility Verification form with Microsoft. Observe the 90-day assignment minimum before reassigning.
Optimise and plan. If CALs are unused, reduce at next renewal. If AVD could replace some RDS, schedule a pilot. Budget for SPLA transition. Review quarterly.

Microsoft Audit Concerns?

Microsoft audits can impose back-dated charges at 125% of list price for unlicensed RDS usage. Our independent audit defence advisory helps enterprises validate licence positions, close compliance gaps, and negotiate favourable remediation outcomes before or during a Microsoft audit.

Microsoft Audit Defence Service → Microsoft Contract Negotiation

8. Frequently Asked Questions

Yes. Any user accessing a Remote Desktop session hosted on a Windows Server in Azure requires an RDS CAL (with active SA) or an equivalent subscription licence. Azure VM pricing includes the Windows Server licence, but not the RDS user licences — those must be obtained separately.

You can bring your own RDS CALs to Azure if those CALs have active Software Assurance. SA grants "extended rights" to use the CAL in a cloud environment. You'll need to submit a Licence Mobility verification form to Microsoft. Note that RDS CALs without SA, or Device CALs, cannot be used for Azure sessions.

An RDS CAL is a perpetual licence you buy (usually per user) with SA for cloud use — it's a capital expense. An RDS SAL is a subscription (rented) licence through a Service Provider Licence Agreement — it's an operational expense. Both cover a user's rights to use RDS, but CALs are one-time purchases with ongoing SA, while SALs are pay-as-you-go. Keep in mind SPLA SALs on Azure are expected to change after September 2025. See SPLA Licensing Guide for details.

No. Azure Virtual Desktop (AVD) runs on Windows 10/11 multi-session — classified as a "desktop OS" environment. RDS CALs are not needed. Instead, each user needs an eligible Windows licence, typically covered by M365 E3/E5. If your users already have these subscriptions, there's often no incremental licence cost for AVD. See AVD vs Windows 365 Licensing for a detailed comparison.

External (non-employee) users aren't covered by your regular RDS User CALs. Two main approaches: (1) Obtain an External Connector licence for Windows Server/RDS — a single licence covering all external users per server. (2) Have external users covered by RDS SALs via a provider, or assign them RDS User SL subscriptions. Either way, explicitly licence each external user as a separate line item.

Compliance audit failures can result in financial penalties and forced purchases. Microsoft audits impose back-dated charges (often at 125% of list price) plus additional fees. For example, 200 unlicensed users at ~$200/CAL could result in a $50,000+ finding. Beyond financial risk, there's reputational risk within the organisation. Proper management upfront is always cheaper than reactive remediation.

Fredrik Filipsson

Co-Founder @ Redress Compliance

20+ years in enterprise software licensing. Former IBM, SAP, and Oracle. 11 years as an independent consultant advising hundreds of Fortune 500 companies on Oracle, Microsoft, SAP, IBM, Salesforce, and ServiceNow licensing, contract negotiations, and cost optimisation.

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