Azure Virtual Desktop vs. Windows 365: Licensing and Cost Strategies

Azure Virtual Desktop (AVD) Licensing vs. Windows 365: What CIOs and CTOs Need to Know

Azure Virtual Desktop (AVD) and Windows 365 offer two different models for cloud-hosted Windows desktops. This brief explains how their licensing and cost structures differ and what these differences mean for enterprise IT strategy.

Key point: AVD leverages existing Microsoft 365 (M365) licenses for user access rights, while charging separately for Azure infrastructure. 

In contrast, Windows 365 offers a fixed per-user subscription that bundles licensing and cloud infrastructure into a single price. CIOs and CTOs must weigh flexibility versus simplicity and variable costs versus predictable budgeting when choosing between AVD and Windows 365.

Read Licensing Virtual Desktops and Windows 365 for CIOs.

AVD and Windows 365 – Two Approaches to Cloud Desktops

Azure Virtual Desktop (AVD) is a cloud-based virtual desktop infrastructure (VDI) service in Azure, providing full control over the environment. IT can deploy scalable virtual machines in Azure and deliver either pooled multi-user desktops or personal single-user desktops to employees.

AVD is highly flexible – organizations can choose VM sizes, use custom images, and control networks and security. This flexibility, however, comes with greater administrative complexity and a need for Azure expertise.

In exchange, AVD offers granular control and potential cost optimizations (e.g., powering VMs off during off-hours).

Windows 365 (Cloud PC) is a Desktop-as-a-Service (DaaS) offering that provides persistent, cloud-hosted Windows 10/11 desktops on a fixed-price, per-user-per-month basis. Each Cloud PC is dedicated to a single user. Microsoft manages most of the infrastructure behind the scenes, simplifying deployment and management.

Windows 365 desktops are integrated with Microsoft Endpoint Manager (Intune) and behave like physical PCs from the end-user perspective. This service emphasizes ease of use and predictable costs at the expense of some flexibility (for example, limited VM size options and no multi-session capability).

IT admins don’t need deep Azure knowledge to use Windows 365, but they must accept a one-size-fits-all cloud model where costs are incurred for each user regardless of actual usage.

In summary, AVD is more akin to a customizable Azure service (you pay for what you use in Azure and manage it yourself), while Windows 365 is more like a SaaS subscription for cloud PCs (you pay per user, and Microsoft manages the infrastructure).

Read Windows 365 Cloud PC Strategy for CIOs: Sizing, Licensing, and Cost Planning.

Licensing Entitlements and Requirements

Azure Virtual Desktop Licensing (Internal Users): For enterprise (internal) use, AVD requires that each user has a qualifying Windows license that provides AVD access rights. The good news is many organizations already own these licenses as part of their Microsoft 365 subscriptions.

Eligible licenses include: Microsoft 365 E3/E5/A3/A5, Microsoft 365 F3, Microsoft 365 Business Premium, Windows 10/11 Enterprise E3/E5 (including VDA licenses), and comparable education versions.

If a user has any of these, they can access an AVD Windows 10/11 session at no additional license cost. In other words, AVD user access rights are a benefit included in popular Microsoft 365 (M365) enterprise plans.

There is no separate “AVD license” to buy for internal users – you Bring Your Own License (BYOL) by your M365 or Windows Enterprise subscriptions.

Example: A company with M365 E5 for all employees automatically has AVD access rights for those users.

There’s no extra licensing fee to enable AVD desktops for them. (If a user did not have a qualifying M365 or Windows Enterprise license, the organization would need to assign a standalone Windows VDA per-user license or similar to meet the requirement.)

Additionally, if using Windows Server-based session hosts on AVD (which is less common for internal scenarios), traditional RDS CALs with Software Assurance would be required; however, most enterprises opt for the client OS to avoid this complexity.

Windows 365 Licensing: Windows 365 is licensed on a per-user, Cloud-Based PC subscription basis. You purchase a Windows 365 license for each user who requires a Cloud PC, selecting an appropriate size (CPU, RAM, and storage) to meet their performance needs.

This license includes the rights to the Windows OS and the underlying Azure infrastructure for that Cloud PC. In essence, you’re paying Microsoft a flat monthly fee to host a dedicated VM for a user.

Enterprises can choose between Windows 365 Enterprise (which integrates with Azure network and Intune, requiring an organization’s Entra ID/AD environment) and Windows 365 Business (a simpler option for smaller organizations or those without domain requirements).

Both editions are priced by VM configuration. For example, a Cloud PC with two vCPUs, 8 GB of RAM, and 128 GB of storage costs around $40–$45 per user per month (list price, depending on edition and any applicable discounts). A smaller 2vCPU/4GB model costs around $31 per user per month. These prices include the Windows license (Enterprise edition OS) and the computing, storage, and network costs.

One important nuance: If your users already have Windows licenses (e.g., Windows 10 Pro or M365 E3/E5), you may be eligible for a discount on Windows 365 via the Windows Hybrid Benefit. This benefit reduces the Cloud PC subscription cost (typically by approximately $4 per user per month) by recognizing your existing Windows license investment.

In practice, enterprises with Microsoft 365 E3/E5 can use Windows 365 Enterprise without needing separate OS licensing, but they still pay the full Cloud PC subscription fee. (Intune is required for Windows 365 Enterprise Cloud PCs – an Intune license is included in EMS or M365 E5; if you only have M365 E3, you still have Intune as part of EMS E3, so that’s covered. Windows 365 Business does not require Intune.)

Summary of Entitlements: In short, AVD leverages your existing Microsoft 365 or Windows Enterprise subscriptions for user access rights, whereas Windows 365 requires the purchase of an additional subscription license per user.

Most mid-to-large enterprises already meeting their users’ productivity needs with M365 E3/E5 will find they have AVD entitlements by default, which can make AVD attractive from a licensing standpoint (no new per-user license fees). Windows 365, on the other hand, introduces a new per-user cost but bundles everything into that price for simplicity.

Cost Model: Consumption vs. Fixed Subscription

From a cost perspective, Azure Virtual Desktop and Windows 365 have fundamentally different models:

• Azure Virtual Desktop (Consumption-Based): With AVD, aside from user licensing (covered by Bring Your License, BYOL, as above), you pay for the Azure infrastructure resources that your virtual desktops consume. This includes Azure VM compute hours, VM storage, and any associated networking costs (e.g., outbound bandwidth or VPN gateway if used). The pricing is pay-as-you-go – you’re billed for VM compute by the second or minute, and for storage every month, just like any other Azure resource. If you shut down VMs outside of working hours or scale down the number of running instances when not needed, you save money. You can also purchase Azure Reserved Instances or use Savings Plans to get discounts up to ~72% on VM costs in exchange for one- or three-year commitments. The key point is that AVD costs scale with usage. AVD enables strategies such as multi-session hosts (multiple users on a single VM) and autoscaling (dynamically turning VMs on or off or resizing them based on demand) to optimize costs. If no users are connected, you could theoretically power down everything and incur minimal expense that day. However, cost variability means budgeting requires estimating usage patterns – costs can spike if you forget to shut down VMs or if usage suddenly increases.
• Windows 365 (Fixed Subscription): With Windows 365, you pay a fixed monthly fee per user for their Cloud PC, and this cost remains the same regardless of how much or how little the user utilizes the Cloud PC. All Azure computing, storage, and network services are bundled into a single per-user license. This makes budgeting straightforward – e.g., 100 Cloud PC licenses at $40 each will cost $4,000 per month, every month. There’s no concept of shutting down to save money – even if a user doesn’t use their Cloud PC for a week, the license cost for that month is already incurred. The upside is cost predictability and simplicity. You won’t get surprise cloud bills from a VM left running, but you also won’t save money for users who only occasionally use their virtual desktop. Microsoft manages the underlying resources in their cloud, so you cannot apply reserved instance pricing or custom scaling – you’re essentially paying Microsoft to handle all that. The fixed fee also includes some level of overhead for Microsoft’s management of the service.

Pricing Comparison Table: Below is a simplified comparison of how costs are incurred in AVD vs Windows 365:

In practice, the total cost of AVD vs Windows 365 will depend on your usage patterns and how well you manage an AVD environment:

• If every user needs a dedicated VM running 24/7, Windows 365 can sometimes be slightly cheaper than an equivalently sized AVD VM due to Microsoft’s economies of scale. (One analysis found Windows 365 about 11% cheaper on average than a comparable AVD VM running constantly over a 3-year reserved term.)
• If users only need their desktops during an 8–10 hour workday and you deallocate AVD resources after hours, AVD can be a more cost-efficient solution. For example, running personal AVD VMs only about 50 hours a week (instead of 168 hours) might make AVD roughly 5–10% cheaper than Windows 365 for similar specifications. The savings increase if you have a large number of part-time or infrequent users.
• More significantly, if you use pooled AVD host pools (where multiple users share larger VMs via Windows 10/11 multi-session), the cost per user can drop substantially. In a scenario with many users on shared servers, AVD’s cost per user can be 50% or more lower than providing each user with a Cloud PC. With autoscaling (powering down unused VMs during off hours), organizations have reported even greater savings (over fifty percent savings vs. Windows 365 in some cases).
• Real-world example: One enterprise with ~1300 users used AVD with autoscaling and only kept 50–60 VMs (multi-session) running for 500-700 concurrent users at peak. Their Azure bill came to approximately $15,000 per month, which equated to roughly $12 per user per month when spread across all 1,300 users who used the system at least occasionally. In contrast, providing 1,300 Windows 365 Cloud PCs at even $31 each would cost approximately $40,000 per month. This illustrates how AVD can yield significant cost advantages at scale if concurrency and utilization can be optimized. (Conversely, if each of those 1300 users truly needed a dedicated always-on desktop, the cost equation would be different.)

The bottom line on cost: Windows 365 offers simplicity and price certainty, whereas AVD offers flexibility and potential cost savings with careful management. CIOs and CTOs should analyze their user profiles and workload patterns to optimize their IT infrastructure.

If you have steady, uniform desktop usage and limited IT capacity to manage VDI, Windows 365’s fixed model might be worth the premium. If you experience spikes and valleys in usage, have part-time users, or struggle to manage cloud resources efficiently, AVD can be significantly cheaper over time.

Flexibility, Scalability, and Management Considerations

Beyond pure cost, there are strategic factors related to flexibility and management that differentiate AVD and Windows 365:

• Customization and Control (AVD): AVD provides you with full control over your Azure environment. You can choose any available Azure VM SKU for your session hosts (CPU, memory, or GPU), install custom applications, and even run specialized workloads (e.g., high-performance GPU workstations, which AVD supports via specialized VM instances). You also control the OS images (you can use Microsoft’s images or your custom images), and you manage how and when updates are applied. Networking is configurable – for Windows 365 Enterprise Cloud PCs, you can place them in your Azure virtual network; however, with AVD, every aspect of network topology (subnets, NSGs, and hybrid connectivity) is under your control. This means AVD can be tailored to complex enterprise requirements, integrated with on-premises networks, and locked down in detail. The trade-off is that your IT team needs to handle that complexity (though third-party management tools and Microsoft’s automation tools can help).
• “Simpler” Desktop-as-a-Service (Windows 365): Windows 365 is designed to be as simple as provisioning a license. Especially in the Business edition, Microsoft handles nearly everything – you just assign a user a Cloud PC, and they connect via the internet (Microsoft manages networking and infrastructure). In the Enterprise edition, you have some control to integrate Cloud PCs with your Azure AD, on-prem Active Directory (via hybrid join), and put Cloud PCs on your Azure virtual network for policy control. However, you still cannot change the core VM specs beyond selecting from Microsoft’s predefined sizes. There’s no multi-session: each Cloud PC is dedicated to a single user and a single VM. Scaling means buying more licenses. Windows 365 does not support features such as custom VM sizes or direct installation of VM extensions. You manage the OS through Intune policies and configurations, similar to physical PCs. This suits organizations that want a “cloud PC” experience with minimal Azure complexity – for instance, a business with no existing Azure footprint can still easily use Windows 365. However, if you require extensive customizations or integration, you may find it limiting.
• Administration and Skills: Running AVD effectively involves managing a workload in Azure. Your team will need skills in Azure resource management (or use a partner or tool like Nerdio Manager). You’ll manage virtual machines, handle Azure cost monitoring, set up scaling scripts or use Azure Automation, and troubleshoot issues at many layers (VM, OS, network, user profiles, etc.). With Windows 365, administration is primarily focused on user and device management, utilizing the Microsoft Endpoint Manager admin center to deploy apps or policies to Cloud PCs, along with some Azure AD setup. Microsoft ensures that the Cloud PC service is up and running and that the VMs are available. For CIOs/CTOs, this difference means considering the operational investment: Do you have (or want) an engineering team fine-tuning a cloud VDI environment (if so, AVD gives them the tools to do so), or would you prefer to offload as much as possible to Microsoft (in which case Windows 365 is attractive)?
• Scalability: Both services are cloud-based and can scale to thousands of users, but the mechanisms differ. AVD scales by provisioning more VMs or expanding host pools, and you can automate this scaling in response to load (e.g., auto-provision extra session hosts when many users log in). Windows 365 scales by adding more user licenses, with Microsoft ensuring enough capacity on their side. If you needed to rapidly provide 500 more users with desktops tomorrow, with AVD, you’d deploy VMs (scripts or Azure AutoScale can do this relatively quickly if capacity is available in Azure), and with Windows 365 you’d assign 500 licenses and Microsoft handles the VM instantiation (Cloud PCs typically are ready within an hour of license assignment). Windows 365 may have certain limits per tenant, but it’s generally designed to be turnkey scalable – as long as you can purchase the licenses, you can scale out.
• Multi-Session vs. Single Session: AVD’s ability to use Windows 10/11 Enterprise multi-session is a unique advantage for certain scenarios. Multi-session allows multiple user sessions on one Azure VM concurrently (only available in Azure, not on-prem). This is great for shared virtual desktops or app virtualization scenarios – it can lower the cost per user and simplify image management if users have identical app needs. Windows 365 explicitly does not allow multi-session – each Cloud PC is one user at a time. So, if you have use cases like a team of shift workers who never all need to be online at once, AVD could let 2-3 of them share a VM (or, better yet, use the new Windows 365 Frontline license, discussed below). For software development, testing, or training labs where you may have many users occasionally but not simultaneously, AVD’s pooling shines. CIOs should consider whether multi-session solutions align with their workforce’s usage patterns (e.g., call centers, education labs, etc.). If yes, AVD may be far more efficient. If every user truly needs their persistent desktop environment, Windows 365’s single-session model might suffice.
• Hybrid and Offline Use: Both solutions assume users have internet connectivity to access their cloud desktops. However, suppose a user needs to work offline or the organization values having a local copy of the desktop. In that case, neither service directly provides that (offline use isn’t possible with a cloud-hosted VM). However, Windows 365 has an upcoming feature called “Windows 365 Offline” (in development by Microsoft) that aims to enable a Cloud PC to sync with a local device for offline work. AVD has no equivalent – it’s pure cloud. This may or may not factor into decisions depending on your workforce needs.
• External or Contractor Use: If you need to provide a desktop environment to external users (such as contractors or customers), licensing becomes more complex. AVD has an option for external users via a special per-user monthly fee (Azure AD External Identities or the AVD external user access pricing model). Windows 365, on the other hand, would require each external user to have a license just like an employee (which might not be ideal if they are short-term). In some cases, AVD’s model may be more cost-effective for seasonal or external users, as you only pay when they connect in a given month. CIOs dealing with B2B scenarios might prefer AVD for its licensing flexibility with external users (where you pay Azure rather than needing every external to have an M365 license).

In summary, AVD offers maximum flexibility and integration at the cost of complexity. In contrast, Windows 365 offers simplicity and turnkey management at the cost of some flexibility and potentially higher cost per user.

Your choice may depend on whether you view virtual desktops as a strategic, highly customized part of your architecture (favoring AVD) or as a commodity service you simply want to remove from your plate (favoring Windows 365).

Real-World Pricing and Contract Examples

To make these differences concrete, consider a scenario of 100 users who need a standard virtual desktop for full-time work:

• Windows 365 scenario: 100 Cloud PC licenses, each with 2 vCPU/8 GB/128 GB specs at ~$41 per month (assuming enterprise edition with Windows Hybrid Benefit). Total = $4,100 per month. This cost is fixed. Over a year, ~$49,200. In a three-year Enterprise Agreement, you’d likely lock this in, possibly with a volume discount if negotiated, but the order of magnitude remains the same. The contract would simply be for 100 Windows 365 licenses (which you could adjust annually or via a CSP program every month).
• AVD scenario (personal desktops): 100 Azure VMs of similar size (say Azure D2s_v4 instances) running Windows 10 Enterprise multi-session (even if one user each, we use multi-session OS for licensing). If run 24/7, let’s assume each VM costs approximately $40 per month in Azure after discounts (roughly matching the cost of Windows 365). That would also be approximately $4,000 per month. However, with AVD, you can power machines off on weekends and nights. Assuming these knowledge workers use desktops for ~55 hours a week and VMs are deallocated for the rest of the time, the effective Azure compute cost might drop to around 30–40% of full-time. That could bring the bill down to perhaps $1,600 – $2,000 per month for computing when averaged (plus storage costs, say $5 per VM = $500). Total, maybe around $2,500 per month. That is a significant saving (40% or more) compared to Windows 365’s fixed $4,100. The catch: someone has to implement that scaling schedule or use auto-scale tools. Additionally, if at any point all 100 VMs needed to run simultaneously for an extended period (e.g., during a crunch period), the Azure bill would increase accordingly.
• AVD scenario (pooled multi-session): Instead of 100 separate VMs, you could serve 100 users with, say, 10 VMs (each hosting 10 users concurrently) if their usage patterns allow. Perhaps you deploy 10 VMs with eight vCPUs and 32 GB of RAM, each capable of handling 10 users. The cost might be roughly the same as the personal VM scenario in raw compute (since eight vCPUs for 10 users vs two vCPUs per user is similar in total vCPU count). Still, you might achieve even better efficiency if only 70 users are active at a given time, potentially requiring only 7 VMs to be powered on. Organizations have reported that by optimizing user density and idle time, costs per user can be well under $20 per user per month on AVD, which is less than half of those on Windows 365. In exchange, users in a pooled scenario don’t get a dedicated machine; their session could be assigned to any host, and you need profile management (e.g., FSLogix) to roam their settings. It introduces more IT management complexity (and potential user experience differences) compared to each user having a personal Cloud PC.

From a contract negotiation perspective, note a few points:

• Windows 365 licenses can be purchased via your Enterprise Agreement or CSP partner. They count as subscription licenses (like any Microsoft SaaS offering). Microsoft typically offers price breaks at higher volume licensing levels (e.g., level A vs level D pricing in EA), so negotiating the per-user price for a large number of Cloud PCs is possible. However, since Windows 365 is relatively new and a bundled service, discounts may not be as steep as for more established products. Always inquire about promotional offers (Microsoft sometimes has promos for trying Windows 365 or pilot discounts).
• Azure Virtual Desktop’s costs are part of your Azure consumption. In an EA, you might have an Azure monetary commitment (e.g., you commit to spend $X on Azure over 3 years in exchange for a discount). Using AVD will draw down that Azure commit. If you have already committed to spending, AVD might effectively “ride for free” until you exceed it, whereas Windows 365 would be an additional budget line item. For some CIOs, this is a key factor: leveraging already-budgeted Azure spend can be preferable to increasing per-user licensing costs.
• If negotiating an EA and you plan to use AVD heavily, consider asking for Azure credits or discounts specifically targeted for AVD usage, or leverage Microsoft’s Azure consumption incentive programs. Additionally, consider evaluating Azure Reserved Instances or Savings Plans for VMs, which can help lock in lower rates for your expected AVD host machines.
• Microsoft 365 E3/E5 licenses (which many enterprises have) give you the rights to AVD. There’s no direct cost credit if you opt for Windows 365 instead, so you’d essentially be paying twice for the Windows OS entitlement (once via M365 and once via the Cloud PC license). This is an argument some IT leaders use to favor trying AVD first: “We already paid for Windows Enterprise via M365, so AVD usage rights are included – why pay again for Cloud PCs?” Unless the operational savings of Windows 365 (or strategic need for simplicity) outweigh that duplicated cost, AVD can appear more financially prudent.

Recommendations

For CIOs and CTOs evaluating Azure Virtual Desktop vs. Windows 365, here are key recommendations:

• Leverage Existing Licenses: Identify what Microsoft 365 or Windows licenses your users already have. If you’re already investing in M365 E3/E5, take advantage of the included AVD entitlements before purchasing additional Windows 365 licenses. Use what you’ve paid for.
• Assess Usage Patterns: Analyze your workforce’s usage hours and concurrency. If employees work mostly during business hours or you have many part-time users, AVD’s pay-as-you-go model with auto-scaling can yield big savings. For steady 24/7 needs or one-to-one usage, Windows 365’s fixed cost may be acceptable for the simplicity it brings.
• Start with a Pilot: Run a pilot for both AVD and Windows 365. Compare not just the cost, but also the user experience and management overhead. A pilot can reveal if your IT team can handle AVD’s complexity or if Windows 365 truly eases the load. Use the pilot data to make an informed decision or even choose a hybrid approach.
• Consider a Hybrid Approach: These services are not mutually exclusive. You can use AVD for certain scenarios (e.g., pooled desktops for seasonal staff or developers who require custom VMs) and Windows 365 for others (e.g., persistent desktops for executives or a small branch office with no IT staff). Mix and match to optimize both cost and convenience.
• Optimize Azure Costs: If you opt for AVD, invest in cost management. Utilize Azure Auto-Scale or scripts to shut down idle VMs, and consider Reserved Instance pricing for baseline capacity. Monitor Azure spending closely and right-size VM instances based on usage metrics to optimize resource utilization. Microsoft provides Azure Cost Management tools – use them to avoid any surprise bills.
• Negotiate Wisely: If opting for Windows 365 at scale, engage Microsoft or your licensing partner to negotiate pricing. Large enterprises may get incentives or discounted rates for significant Cloud PC adoption, especially if you’re a strategic customer. Similarly, ensure your Enterprise Agreement’s Azure commit aligns with any planned AVD usage to maximize any discount benefits.
• Keep Licensing Compliance in Check: Ensure every user accessing AVD has the proper license assigned (M365 or VDA). Similarly, don’t assign Windows 365 licenses to users without also having the necessary base licenses (e.g., Intune for Enterprise). While Microsoft handles a lot in the cloud, you are still responsible for compliance with license terms.
• Plan for Management and Support: If your IT team lacks Azure VDI expertise, factor in the costs of training or managed services for AVD. There are third-party tools (e.g., Nerdio, Citrix on AVD) that can simplify AVD management; consider these as part of your solution cost. For Windows 365, ensure your team is ready to manage Cloud PCs via Intune/Endpoint Manager, which may require modern device management skills.
• Security and Governance: Both AVD and Windows 365 integrate with Azure AD/Entra ID for identity and Conditional Access. Ensure you extend your security policies to these environments. With AVD, you also need to secure the Azure resources (such as network security groups) accordingly. With Windows 365, pay attention to data residency and backup limitations (Cloud PCs have limited backup snapshots today). Incorporate these services into your governance framework.
• Monitor and Re-evaluate: The DaaS landscape is evolving. Microsoft continually adds features (e.g., Windows 365 Offline, AVD new capabilities) and adjusts pricing. Regularly review your virtual desktop strategy. It’s possible to shift from one model to another if the business case changes (for example, if Microsoft lowers prices or if your Azure costs exceed expectations). Maintain flexibility in contracts where possible to pivot as needed.

FAQ

Q1: What licenses are required for Azure Virtual Desktop (AVD)?
A1: For internal users, each AVD user needs a license that includes Windows 10/11 Enterprise rights. Common examples are Microsoft 365 E3 or E5, Microsoft 365 Business Premium, or Windows Enterprise E3/E5 licenses. Most organizations with enterprise Microsoft 365 subscriptions already cover this. If you don’t have those, you can buy a standalone Windows VDA per-user license to entitle a user to AVD. (For external users, AVD offers a separate per-user monthly fee option instead of requiring them to have a Microsoft license.)

Q2: Do I have to pay for Azure infrastructure separately with AVD?
A2: Yes. With AVD, after you have the user license entitlements, you will pay for the Azure resources (VM compute, storage, networking) consumed by your virtual desktop environment. This is separate from your Microsoft 365 licensing cost. Think of it as paying the “cloud bill” for the servers that host your virtual desktops. In Windows 365, by contrast, that infrastructure cost is bundled into the per-user license fee – you don’t see a separate Azure bill for it.

Q3: How do Windows 365 subscription costs compare to AVD costs?
A3: Windows 365 is a fixed cost per user (for example, ~$31 to $50 per user per month, depending on the Cloud PC size). AVD costs can vary widely: you could spend more than that per user if you leave large VMs running 24/7 or far less if you efficiently share resources and shut down idle time. For steady workloads with one user per machine, Windows 365 may be in the same ballpark or even slightly cheaper (since Microsoft can optimize the backend). But for bursty or flexible workloads, AVD can be optimized to cost significantly less. In short, Windows 365 offers predictable costs, while AVD may potentially result in lower costs if managed effectively (but could also be unpredictable).

Q4: Can we use both AVD and Windows 365 in our organization?
A4: Absolutely. Many enterprises adopt a hybrid approach. For instance, you might assign persistent Windows 365 Cloud PCs to a set of users who require dedicated, always-on desktops, or where you lack Azure admin capacity, while using AVD for another group where you want to maximize server sharing or support a specialized app via multi-session hosts. Both services can coexist and are accessed similarly by users (through a Remote Desktop client or the web). It’s about mapping the right solution to each use case and possibly optimizing licenses (ensuring you’re not double-paying when it’s not needed).

Q5: What is Windows Hybrid Benefit for Windows 365?
A5: The Windows Hybrid Benefit is a discount program for Windows 365 that offers a lower price on Cloud PC licenses to users who already have a valid Windows 10/11 license (typically meaning they have Windows Pro on their work device or a qualifying Microsoft 365 subscription). It recognizes your existing investment in Windows. For example, if you have a Microsoft 365 E3 license for a user (which includes Windows 10 Enterprise upgrade rights), you can receive a discount of a few dollars off the Windows 365 monthly price for that user. You just indicate that you want to apply Hybrid Benefit when assigning the Cloud PC license.

Q6: What are Windows 365 Frontline licenses?
A6: Windows 365 Frontline is a specialized licensing option for scenarios such as shift workers. It allows multiple users to share Cloud PCs, assuming they won’t be using them simultaneously. For example, with a 3:1 ratio Frontline license, you can assign three users to one Cloud PC, with any one of them able to use it at a given time (and brief overlap allowed during shift changes). It’s more cost-effective than providing each user with a full license. This is useful if you have staff in different shifts or time zones who don’t need concurrent access. It’s Microsoft’s way of lowering the cost for certain workforce scenarios on Windows 365.

Q7: Is one solution more secure than the other?
A7: Both AVD and Windows 365 are built on Azure and inherit a lot of the same security capabilities (network isolation, encryption, identity control via Entra ID/Azure AD). AVD gives you more responsibility in implementing security – you manage the network controls and NSGs and perhaps integrate them with your security tools. Windows 365’s managed approach means Microsoft handles things like backend isolation, but you still control endpoint security via Intune policies (just as you would for a physical device). One could argue that Windows 365 reduces the chances of misconfiguring Azure resources (thus possibly reducing the risk of an open port or mismanaged network). In contrast, AVD provides you with full control to meet strict internal security requirements (e.g., all traffic remaining within your VNets, custom monitoring agents, etc.). With proper configuration, both can be very secure. Ultimately, it comes down to your security team’s preferences: AVD enables deeper integration into your existing security monitoring and network, while Windows 365 offers a securely managed black box (especially in the Business edition).

Q8: What about performance differences between AVD and Windows 365?
A8: Performance can be comparable since both ultimately run on Azure VMs, but there are a few nuances. AVD allows you to select VM series (including GPU-enabled ones for graphics-intensive work) and adjust settings; you can also scale out if one VM becomes overloaded (for pooled scenarios). Windows 365 ties you to preset sizes – if a user maxes out a 2vCPU/8GB Cloud PC, you may need to upgrade them to a larger size (license) next month. Windows 365 Cloud PCs are also single-user, so there’s no contention from others on that VM, which can make performance more consistent for that user. AVD multi-session involves resource sharing, which requires sizing and load management (although it’s efficient, a heavily loaded multi-session host could impact users if not managed properly). In short, both can deliver good performance if sized properly. If you have very high-end needs (such as engineers requiring 16 vCPUs, 64GB RAM machines, or GPU acceleration), AVD offers more options in Azure than Windows 365 currently does. Cloud PCs top out at certain sizes, whereas Azure has virtually any size if you’re willing to pay.

Q9: How are updates and software handled in each service?
A9: In AVD, you typically maintain master images or use Azure image gallery for your session hosts. You decide when to patch Windows or update applications (though you can use services like Windows Update for Business and MEM/Intune or SCCM if you like). With pooled AVD hosts, you might use an image-based rollout (swap to a new image to update all hosts). It’s somewhat similar to managing a server farm. In Windows 365, each Cloud PC is like a standalone machine managed by Intune. You use Microsoft Endpoint Manager policies to push updates or software, or even allow users local admin rights if appropriate (they can then install software, just like on a normal PC, although typically you’d manage it). Microsoft manages the underlying service but not the OS patching – that is still your responsibility via normal Windows Update (unless you use Autopatch service). So, neither solution frees you from updating Windows and apps, but Windows 365’s model might align better if you already use Intune for your laptops. AVD gives more flexibility if you prefer traditional imaging or other management tools.

Q10: Which is the better option for our organization – AVD or Windows 365?
A10: There is no one-size-fits-all answer. For a quick rule of thumb:

• Choose AVD if you want maximum flexibility, have variable or high-volume usage that requires cost optimization, and have (or plan to develop) strong Azure competence in-house (or with a partner). AVD is ideal for larger enterprises that require control and customization, or for anyone seeking to minimize the cost per user for large-scale deployments.
• Choose Windows 365 if simplicity and speed of deployment are top priorities and you’re willing to pay a premium for a turnkey solution. It’s ideal for scenarios such as a straightforward desktop replacement, especially if you lack Azure administrators or want to extend a desktop to an outsourcing partner with minimal setup. It’s also a good fit for small to mid-sized organizations that find AVD too complex.
  In many cases, a combination may be the best approach. The “better” option depends on your specific goals: cost savings vs. convenience, flexibility vs. standardization, and how these services align with your existing Microsoft ecosystem. Evaluate both in a pilot and factor in both hard costs and soft costs (administration effort, support, training) before deciding.

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