CIO Playbook: Microsoft Licensing for Remote Work and VDI

CIO Playbook: Navigating Microsoft Licensing for Remote Work and VDI

Executive Summary:
In an era of hybrid work, CIOs must ensure that remote desktop solutions are not only technically sound but also compliant and cost-effective.

This playbook provides a strategic overview of Microsoft licensing for Virtual Desktop Infrastructure (VDI) and remote access. It covers on-premises VDI (e.g., Citrix, VMware) and cloud-based desktops (Azure Virtual Desktop and Windows 365 Cloud PC), clarifying how Windows licensing (Windows 10/11 Enterprise, Virtual Desktop Access) and Microsoft 365 entitlements apply.

Key use cases, including BYOD, contractors, and frontline workers, are addressed with practical licensing strategies.

The guidance strikes a balance between global enterprise needs and mid-market considerations, providing side-by-side comparisons and actionable recommendations to help senior IT leaders make informed decisions.

Introduction: Remote Work and VDI Licensing Challenges

Remote work has accelerated the adoption of virtual desktops and cloud PCs, enabling employees to access a corporate Windows desktop from anywhere on any device.

However, with this flexibility comes complex Microsoft licensing rules. CIOs and IT executives face questions such as: What licenses are needed to legally run Windows in a data center or the cloud for remote users? How do Microsoft 365 subscriptions factor into VDI rights? What is the difference between Azure Virtual Desktop and Windows 365 Cloud PC from a licensing perspective?

This playbook, written in the voice of a Microsoft licensing expert and enterprise advisor, demystifies these issues. It provides a strategic overview with practical details, ensuring you understand the compliance requirements and cost implications of various remote desktop solutions.

Use this guide to navigate Microsoft’s VDI licensing landscape and formulate a licensing strategy that supports your organization’s remote workforce securely and efficiently.

VDI Licensing Fundamentals

Before diving into specific solutions, it’s essential to understand the foundational Microsoft licensing concepts for virtual desktops. Microsoft traditionally licenses Windows for VDI on a per-access-device or per-user basis.

The primary licensing vehicles are Windows Software Assurance (SA), Virtual Desktop Access (VDA), and Windows Enterprise subscriptions via Microsoft 365. These determine who is licensed to access a remote Windows OS and from which devices.

Virtual Desktop Access (VDA) Explained

Virtual Desktop Access (VDA) is a Microsoft licensing option that allows a device or user to access a Windows client operating system running in a virtual desktop infrastructure (VDI). Historically, VDA was introduced to license thin clients and other endpoints that don’t have a qualifying Windows OS with Software Assurance:

• Windows SA Benefit: If Windows Software Assurance covers a PC, it includes access to virtual Windows desktops at no extra cost. In other words, devices with active Windows SA (or a Windows Enterprise subscription) have built-in “virtual desktop access rights”​. This was Microsoft’s way to let customers with volume licensing run Windows in VDI without additional fees on those licensed PCs.
• When VDA is Needed: For devices not covered by Windows SA, such as thin clients, non-Windows endpoints, or personally owned or contractor PCs, you must purchase a Windows VDA license to legally allow those devices to access a Windows virtual desktop. VDA ensures every endpoint is licensed, even if it’s a Mac, Linux device, iPad, or an older PC without proper Windows licensing. VDA is most commonly provided as a per-device annual subscription, approximately USD 100 per device per year (retail).
• Who Specifically Needs VDA: Any user on a device that does not have a qualifying Windows Pro/Enterprise OS with active SA or does not have a per-user Windows 10/11 Enterprise license. Examples:
  • Employees connecting from personal devices that only have a Home edition OS (no SA), or from an unsupported device (e.g., a personal MacBook).
  • Contractors or partners using their hardware to access your VDI.
  • Shared kiosks or thin terminals in offices that run a lightweight OS or firmware.
  • Older corporate PCs that are out of compliance (e.g., Windows Pro without SA) are used to access a virtual desktop.
• Per-Device vs. Per-User VDA: Traditional VDA is device-based, meaning one license is required per accessing device. Microsoft now also offers per-user licensing through subscriptions (discussed below), which can cover VDI rights across multiple devices for a single user. The key is that every accessing endpoint or user must be covered by some form of Windows virtualization license (SA, VDA, or qualifying subscription). There is no “free” use of Windows in a VM for unlicensed endpoints – ignoring this is a common compliance risk.
• What VDA Covers: VDA (or SA) grants rights to use the Windows client OS in a virtual machine. It does not cover other software, such as Microsoft Office or RDS CALs for Remote Desktop Services – these must be licensed separately, if applicable. VDA is solely about the Windows OS itself.

Example: A hospital deploys thin-client terminals for nurses to access a Windows 10 virtual desktop infrastructure (VDI) session. Since thin clients have no Windows OS with Software Assurance (SA), each device requires a VDA license to be compliant.

Alternatively, suppose each nurse is assigned a Microsoft 365 E3 license (which includes Windows Enterprise per user). In that case, the M365 user license can replace the need for per-device VDA, allowing the nurse to log in from any device without separate VDA licensing.

Windows 10/11 Enterprise Per-User Licensing via Microsoft 365

Microsoft’s shift to per-user licensing with Microsoft 365 has greatly simplified VDI licensing for many organizations. Microsoft 365 E3/E5 (as well as A3/A5 for education and F3 for frontline) bundles Windows Enterprise, Office 365, and EMS into a user-based subscription.

From a Windows licensing perspective, a Microsoft 365 E3/E5 user license includes Windows 10/11 Enterprise with virtualization use rights equivalent to SA:

• VDA Rights Included: A user with Microsoft 365 E3 or E5 is licensed for Windows Enterprise on up to five devices and, crucially, has VDI access rights on any device they use. In essence, the Windows 10/11 Enterprise per-user license that comes with M365 fulfills the VDA requirement for that user. You don’t need to buy separate VDA licenses for that user’s devices, even if they use personal or non-Windows endpoints, because the user subscription covers them. This is a cost-saver: for example, instead of buying $100 per year per device VDA for a user’s home PC and iPad, a single M365 E3 user license covers both.
• Qualifying OS Requirement: The per-user Windows license in M365 is an upgrade entitlement. Normally, it assumes the user’s primary work device has a base Windows Pro license. (For instance, Microsoft 365 E3 allows that device to be upgraded to Enterprise and enables additional rights.) However, for accessing cloud or datacenter VDI, the user license is sufficient on its own. In practical terms, as long as each user has M365 E3 or E5, they can use any device to connect to a Windows 10 or 11 virtual machine. The per-user licensing waives the old requirement that each device have SA or VDA. Note: Microsoft 365 F3 (frontline) also includes Windows Enterprise. Still, with some limitations – the shared device used must have at least Windows Pro and certain hardware constraints (e.g., F3 doesn’t support usage on devices over 10.9” screen unless the device is licensed). In general, E3/E5 licenses are more flexible for VDI scenarios than F3.
• How Per-User Licensing Enables Remote Access: With Windows Enterprise per-user, an employee can legally access a Windows virtual machine from any of their devices (corporate or personal). This is ideal for BYOD programs. For example, an engineer with an M365 E5 license can use a personal Mac to log in to a Windows 11 virtual desktop—no separate VDA is needed, since her user subscription already grants the right to access a Windows VM from non-Windows hardware.
• Multiple Concurrent VMs: Windows Enterprise per-user licensing also allows the licensed user to run multiple VMs. Historically, a device with SA could run up to four concurrent Windows VMs. Under per-user licensing, a single user can similarly run several virtual desktops (for testing, multi-session needs, etc.) as long as it’s for that user’s primary use. This covers most VDI use cases (e.g. a developer spinning up a few Windows test VMs under their one user license).

Key Takeaway: Upgrading your users to Microsoft 365 E3 or E5 can eliminate the need for separate VDI OS licensing costs. The M365 license not only equips users with Office and EMS security tools, it also unlocks Windows virtualization rights.

This simplifies compliance: your Windows VDI usage is covered by the same licenses your employees use for their everyday productivity suite. CIOs should consider this when evaluating the ROI of M365 vs. piecemeal licensing.

On-Premises VDI (Citrix, VMware) – Licensing Considerations

Traditional on-premises VDI solutions, such as Citrix Virtual Apps and Desktops or VMware Horizon, allow IT to host Windows client OS instances in the data center, which users can log in to.

From a Microsoft licensing standpoint, the primary concern is licensing the Windows desktop OS that users will be remoting into, and any required Remote Desktop Services licenses if using Microsoft’s RDS components. The virtualization platform (such as Citrix or VMware) may have its own licenses, but these are separate from Microsoft’s licensing rules for Windows.

Windows OS Licensing for On-Prem VDI:

• If each virtual desktop VM is running Windows 10 or 11 Enterprise, every endpoint or user needs to be covered by SA or VDA (as discussed in fundamentals). In practice:
  • Organizations with Microsoft 365 E3/E5: Each user’s M365 license covers their rights to use a Windows 10/11 VDI. This is the simplest scenario – no extra OS license needed. Example: A company with 500 employees all on M365 E3 can deploy a Citrix VDI farm with Windows 10 Enterprise VMs. All 500 users can connect from any device (office PC, home laptop, tablet), and the Windows OS is licensed via their M365 user subscriptions. No separate VDA subscription or Windows OS license is required for the VDI hosts or endpoints.
  • Organizations without M365 (or with mixed licensing): If some users or endpoints lack a Windows E3/E5 license, you must license their access via another route:
    • Software Assurance on Windows Pro PCs – If the user is connecting from a corporate PC with Windows Pro and active Software Assurance (SA), that device’s SA covers the VDI access. Many enterprises maintain SA on their desktop OS through volume licensing. Ensure SA is up to date on any device used for VDI. If it has lapsed, that device now requires a VDA license.
    • Windows VDA per device – For thin clients, Linux devices, or any device without a qualifying OS, purchase a Windows VDA subscription for each. E.g., 50 call center terminals (thin clients) x ~$100/year = $5,000/year for licensing their Windows VDI access.
    • Windows VDA per user or standalone Windows Enterprise – You could opt to license a user with a standalone Windows 10 Enterprise subscription (available via CSP or volume licensing without the full M365 bundle). This essentially functions like M365 E3 without Office. Each such subscription would cover that user’s multiple devices for VDI, similar to M365. This approach might be used for external contractors (license them as a “user” instead of every device they bring).
• Remote Desktop Services (RDS) CALs: On-premises VDI can be implemented in two flavors:
  1. Personal VM VDI – each user gets their own Windows client VM, with no multiple user sessions per VM. In this case, you are not using Windows Server Remote Desktop Session Host for multiple users, so an RDS User CAL is generally not required for the OS. Users connect directly to their Windows 10 or 11 instance using a VDI broker (such as Citrix or VMware). Microsoft’s stance is that RDS CALs are needed when using RDS role services or multi-user sessions on Windows Server. If your VDI solution bypasses RDS roles (e.g., Citrix VDI with Windows 10 VMs), you don’t need RDS CALs for those connections. (However, if Citrix or VMware employs RDS components like the Connection Broker or Gateway, RDS CAL requirements can emerge. Many Citrix deployments still require RDS CALs because the Citrix VDA agent uses Remote Desktop Protocol (RDP) under the hood on Windows Server. Always verify with Microsoft or your vendor.)
  2. Session-Based VDI (RDSH) – Some environments use Windows Server with Remote Desktop Session Host to provide a “desktop experience” to multiple users, similar to traditional Terminal Services. In that case, each user needs an RDS CAL (with an active SA if used over the internet) to connect to the Windows Server, and the server operating system must be licensed normally. This approach is sometimes used to avoid the cost of Windows 10 VDA by using Windows Server, as it is licensed with regular server licensing and CALs. Example: An MSP might host Windows Server 2019 with a desktop theme for multiple clients who require RDS CALs, instead of providing each with a Windows 10 virtual machine. This is a workaround that some use to reduce VDI licensing costs. Still, it offers a different user experience and is typically used only for specific use cases or legacy reasons.

Compliance Tip: If you’re using Citrix or VMware VDI, don’t assume the platform license covers Windows. You still need to ensure each client device/user is licensed for Windows OS access​. This is a commonly overlooked area that auditors watch for. It doesn’t matter if it’s Citrix, VMware, or any third-party solution—if the workload is a Windows client OS, Microsoft’s licensing rules apply the same​.

On-Prem Example Scenario:
A mid-sized law firm has 100 staff, each with a basic Windows 10 Pro laptop (no Software Assurance). They want to use VMware Horizon to provide secure virtual desktops that staff can log into from anywhere. To license this legally, the firm has options:

• Option 1: Acquire Microsoft 365 E3 for each user. This immediately gives all 100 users Windows 10 Enterprise with VDI rights. They can use their own laptops or home PCs to connect, and the Windows virtual machines (VMs) in the data center are covered. No separate OS licensing needed per VM or device. They also gain Office 365 and EMS features, adding value beyond just VDI rights.
• Option 2: If M365 is too costly, purchase 100 Windows VDA subscriptions— one for each employee’s device that will be used. This allows Windows 10 Pro laptops (without SA) and home devices to connect to Windows 10 virtual desktops. At roughly $100 per device per year, this would cost around $10,000 annually just for VDA, and it provides no additional benefits beyond VDI access. (The firm might find M365 E3, which costs more per user but includes VDI plus many other capabilities, to be a better investment in the long run.)
• Option 3: Ensure all laptops are upgraded to Windows 10 Enterprise with Software Assurance through a Volume Licensing agreement. The SA cost per device might be similar to VDA. SA would then cover VDI usage. This is effectively the device-based approach rather than the user-based.

In all cases, the firm must also license any Microsoft Office used in the virtual desktops, likely via Office 365 E3 licenses that come with M365 or standalone licenses. They would also need RDS CALs if their VMware Horizon environment uses any RDS role or if they ever decide to publish apps via RDS. Since each user gets a full VM, no RDS CAL is required for that scenario.

Azure Virtual Desktop (AVD) – Cloud VDI Licensing

Azure Virtual Desktop (AVD) (formerly Windows Virtual Desktop) is Microsoft’s cloud-based VDI platform running on Azure. It allows you to deploy virtual Windows desktops and apps in Azure and have users connect over the internet.

Licensing AVD involves two pieces: user access rights and Azure infrastructure costs.

User Licensing for AVD

One major advantage of AVD is that Microsoft does not charge a separate per-user license fee for AVD itself (for internal users). Instead, it requires that each user have an appropriate Windows license, just like on-premises virtual desktop infrastructure (VDI).

In other words, AVD is essentially free to use if your users are already licensed for Windows Enterprise – you only pay for Azure consumption. Microsoft confirms that most organizations likely already have the necessary licenses for AVD through their existing Microsoft 365 or Windows subscriptions.

The eligible licenses for AVD user access include:

• Microsoft 365 subscriptions – Microsoft 365 E3, E5, F3, and A3/A5 for Education all qualify. Additionally, Microsoft 365 Business Premium is an option for small to medium-sized businesses (SMBs). These cover the Windows 10/11 Enterprise license needed per user.
• Standalone Windows 10/11 Enterprise (E3/E5) or Windows VDA per user licenses. If an organization doesn’t use M365, it can license users with just Windows Enterprise E3 or E5, or Windows VDA licenses to meet the requirement.
• Windows Education (A3/A5) and Windows 10 Enterprise are included in these academic plans, as well as for virtual desktop infrastructure (VDI) scenarios.
• Azure AD External Identities / External Users: By default, only users in your organization (with one of the above licenses) can access AVD. However, Microsoft introduced a new option for external users, such as customers or non-employees, with a per-user monthly fee, instead of requiring them to have a Windows license. This AVD external user access pricing is $10 per user per month for full desktop access or $5 for app-only access. This is useful, for example, if you’re an ISV providing a cloud app via AVD to clients or if you have short-term third-party users for whom buying full M365 licenses isn’t practical. For most internal workforce scenarios, this won’t apply, as you’ll cover users via M365 or existing licenses.

In summary, if your employees have Microsoft 365 E3 or E5, or Windows Enterprise, they can use Azure Virtual Desktop at no additional licensing cost. Ensure every user is assigned one of the qualifying licenses. If not, plan to acquire the necessary licenses or consider the pay-as-you-go model for external users in Azure Virtual Desktop (AVD).

Azure Infrastructure Costs for AVD

While user access rights are covered by existing licenses, running AVD in Azure incurs infrastructure costs that must be understood:

• Compute and Storage: You pay for the Azure virtual machines that host your desktops, their operating system disks, and any other required infrastructure (such as networking and bandwidth). AVD gives you flexibility to choose VM sizes and only pay for what you use. For example, you might have a pool of virtual machines (VMs) that automatically scale down at night to save money. If a VM runs 8 hours a day, you pay for those 8 hours of Azure compute​. This consumption-based model can be very cost-effective for fluctuating or part-time usage, as you’re not paying 24/7 (unlike a physical PC or a Cloud PC that is allocated per user).
• Multi-session Windows 10/11: Azure is the only environment where Microsoft offers a special Windows 10/11 Enterprise multi-session OS. This allows multiple user sessions on a single Azure VM, similar to RDS on a server, but with a client OS experience. Using multi-session can greatly reduce the number of VMs needed, thus lowering costs, if users have lighter workloads. Importantly, there is no additional license charge for multi-session beyond the same user license requirement. It’s simply an option in AVD that lets you optimize Azure spend by having, for example, 4–10 users share a single VM during their sessions. Each user still needs their M365 E3 or E5 license as usual.
• Azure Windows Server option: AVD also supports using Windows Server (2016, 2019, 2022, etc.) as the host OS for session-based desktops or RemoteApps. In this case, you would need to license Windows Server in Azure. Typically, you can either pay pay-as-you-go for server licensing as part of the VM (which is included in the per-hour VM rate for Windows VMs), or use Azure Hybrid Benefit to apply your existing Windows Server licenses with SA to cover the VM OS. If you use Windows Server as a desktop host, you must also manage RDS CALs for users, just as with a traditional RDS deployment. However, this approach is less common now that Windows 10 multi-session is available; most AVD deployments stick to the client OS so they can avoid RDS CAL complexity.
• Other Azure services: Don’t forget ancillary costs – for example, Azure Files or Azure NetApp Files for user profile storage (if using FSLogix to roam profiles), network costs if users connect from various regions, and Azure Active Directory services. These are not licensing fees but Azure usage charges. They need to be estimated in your Total Cost of Ownership (TCO) for AVD.

Licensing Recap for AVD:
To use Azure Virtual Desktop, ensure each user has an appropriate Windows license (usually via M365) and factor in Azure consumption costs. There is no separate “AVD license” for internal users – Microsoft lets you use your existing entitlements. The only extra licensing situation is if you choose to serve external users via the new per-user fee model. Essentially, AVD shifts the cost from licensing to cloud infrastructure: you trade capital expenses for operating expenses in Azure. This often simplifies licensing management (fewer moving parts to track) and can reduce waste, since you pay only for what you use.

Example: A global firm with 1,000 employees all on Microsoft 365 E5 wants to provide Azure-based remote desktops. They confirm that M365 E5 covers all user licensing for Azure Virtual Desktop (AVD). They design an AVD host pool where VMs run during business hours, scaled to active usage. The primary cost will be the Azure VM compute hours.

They use Windows 10 multi-session to host 2-3 users per vCPU, keeping Azure costs efficient. As a result, they avoid any new per-user licensing costs entirely – they only pay for Azure infrastructure. Compared to an on-premises VDI, they have no VDA subscriptions to manage and no physical hardware to buy; they leverage their existing M365 investment and Azure’s flexibility.

Windows 365 Cloud PC – Licensing and How It Compares to AVD

Windows 365 Cloud PC is Microsoft’s newest offering (launched in 2021) for cloud-based desktops. It provides a personalized Cloud PC for each user via a simple subscription model. Unlike AVD, which is more of a toolkit, Windows 365 is offered as a fully managed SaaS (Software as a Service) service.

Let’s break down how licensing works for Windows 365 and how it differs from AVD:

Windows 365 Licensing Model

• Per-User Subscription: Windows 365 is licensed per user, per Cloud PC. You purchase a license SKU for each user, which corresponds to a specific Cloud PC configuration (e.g., two vCPUs, 8 GB RAM, 256 GB storage). That license includes the right for that user to have a Cloud PC of that spec, running Windows 10 or 11. The cost is a fixed monthly fee (for example, approximately $31 per user per month for a 2vCPU/8GB machine, as of early offerings; higher specs cost more). This fee covers the VM, storage, and Microsoft’s management – it’s truly a SaaS solution. There are no separate Azure charges for compute; Microsoft manages the backend in its cloud. The user can log in at any time and have a machine available 24/7.
• No Additional OS License Needed: The Windows 365 subscription covers the Windows OS license for Cloud PCs. You don’t need Software Assurance or a VDA – it’s already included. This is a key difference from AVD: with AVD, you bring your license; with Windows 365, you effectively rent the license as part of the service.
• Windows 365 Editions – Enterprise vs. Business: There are two editions:
  • Windows 365 Enterprise is designed for organizations that have Azure AD and Microsoft Endpoint Manager (Intune) in place and likely have existing Microsoft 365 licenses. Enterprise requires that the user also be licensed for Windows 10/11 Enterprise, Intune, and Azure AD Premium 1 (often via an M365 E3/E5 or Business Premium bundle). In practice, this means that Windows 365 Enterprise is ideal for customers who already have M365 E3 or E5 – it integrates seamlessly with their environment (Cloud PCs can be managed in Intune, for example, or are hybrid AD-joined, etc.). You must assign a Windows 365 license in addition to those base entitlements. The requirement ensures the user has the necessary management and identity licensing. Most companies meet it through their M365 subscriptions (e.g., M365 E3 includes Windows, Intune, and AAD P1).
  • Windows 365 Business is targeted at smaller organizations or simpler deployments. It has no licensing prerequisites – you can assign a Windows 365 Business license to any user, even if they don’t have an M365 E3 or E5 license. This edition is capped at 300 users, aimed at small to medium-sized businesses (SMBs). It manages the Cloud PC in a basic Azure AD-only environment (without an on-premises domain join). It’s essentially plug-and-play: just purchase the license and the user gets their Cloud PC. Because it doesn’t require full Intune or AD integration, even a company without an enterprise IT infrastructure can use it.
• Windows Hybrid Benefit (WHB): Microsoft offers a discount on Windows 365 if you already have a Windows license for the user’s primary device. This is called Windows Hybrid Benefit and is available for at least Windows 365 Business subscriptions. For example, if a user has a Windows 10 Pro license on their laptop and accesses the Cloud PC from that device at least once during the subscription term, they receive a roughly 16% lower price on the Cloud PC license. In practical terms, many enterprises with volume licensing or OEM Pro on their PCs will qualify. The discounted SKU is slightly cheaper (Microsoft’s example shows a $4 difference on a roughly $54 subscription). Note: To use the hybrid benefit, the user’s device must be running Windows 10 or 11 Pro, and they must log in to the Cloud PC at least once a month. If those conditions aren’t met, you should be paying the regular price (this is an audit point – Microsoft can check compliance with Hybrid Benefit usage).
• Frontline Worker Licensing: In 2023, Microsoft introduced Windows 365 Frontline licenses, which are specialized licenses for scenarios such as shift workers. Each Frontline license allows you to assign three Cloud PCs (to three users), but only one of those Cloud PCs can be used at any given time (non-concurrently). The idea is to serve three part-time users with one license, assuming they use it in different shifts, such as morning, afternoon, and night. This can dramatically lower costs for organizations with many part-time or task workers. Essentially, it’s a concurrent use model: three named users share one license, each using it in turn. Windows 365 Frontline still requires the base Windows, AAD, and Intune licenses (similar to Enterprise) and is managed through Intune. It’s a cost-effective option for frontline scenarios, ensuring you don’t pay full price for users who don’t need a PC 24/7.

Comparing Windows 365 and Azure Virtual Desktop

While both Azure Virtual Desktop (AVD) and Windows 365 provide remote Windows desktops, their approaches and licensing models differ significantly. Below is a high-level comparison:

Management & Flexibility:

• AVD (Platform as a Service): You control the Azure environment – you decide on VM sizes, when they run, scaling, images, and so forth. This flexibility allows you to optimize costs (such as shutting down VMs or using smaller sizes for light users) and customize the environment deeply, including group policies, custom networking, and integration with on-premises systems. However, it also means you need Azure and VDI expertise to manage it. It’s great for larger enterprises with cloud architects or when you need custom solutions, such as integrating with Citrix or using specialized images. From a licensing view, AVD lets you use existing licenses and just pay for Azure usage. It can be cheaper for variable workloads or when you already have sunk costs in M365 licenses. The complexity is higher – think of AVD as a toolkit that your IT team assembles and operates in Azure.
• Windows 365 (Software as a Service): Microsoft manages nearly everything. Each user gets a dedicated Cloud PC that is always on (unless you manually deprovision it). The simplicity is a major selling point – no need to manage Azure scaling or maintain host VMs. Admins simply assign Cloud PCs to users and can manage them using Intune, just like physical PCs. This is ideal for organizations with limited IT cloud expertise or those who want a predictable, hands-off service. Licensing is straightforward, charging a monthly fee per user. Still, flexibility is limited (e.g., you pay for 24/7 availability regardless of whether the user uses it, and customization of the OS image or integrations is more constrained than with AVD). Windows 365 may be more cost-effective for steady, always-on usage, such as for full-time employees who need a personal Cloud PC available at all times. In contrast, it can be less efficient for sporadic use cases because you’re paying a fixed price.

Cost Model:

• AVD: Consumption-based. You pay for what you use in Azure. If a VM is off, you pay little (just storage). If you have 100 users but only 50 are active at night, you can scale down to 50 virtual machines (VMs) at night. This elasticity can save money. Also, you leverage existing Windows licenses (M365, etc.), so you’re not doubling up on OS licensing costs. However, if you don’t manage power states or scaling, AVD can become costly (e.g., leaving 100 VMs on 24/7 can cost more than Windows 365). There’s also a small complexity in tracking Azure costs and optimizing reserved instances for steady usage (e.g., paying upfront for a year to receive a discount if you know a VM will run continuously).
• Windows 365: Fixed per-user pricing. You know exactly what each Cloud PC costs per month. This predictability is useful for budgeting—no surprise cloud bills. Microsoft essentially charges a premium for the convenience and includes the infrastructure in the price of the subscription. If a user only uses their Cloud PC for 2 hours a day, the cost is the same as if they used it for 12 hours. On average, Microsoft has indicated that Windows 365 can be slightly more expensive than a well-optimized AVD deployment, but it’s within a 10-15% range in many cases. That premium is often acceptable for the simplicity gained.

Licensing & Prerequisites:

• AVD: Requires each user to have a Windows 10/11 Enterprise or equivalent license, typically through M365. No cost for the AVD service itself beyond Azure usage. If you have many M365-licensed users, AVD capitalizes on those existing investments. If you have users without such licenses (e.g., external), you must either license them or pay the external user fee.
• Windows 365: The Cloud PC license includes the OS. For the Business edition, you can have zero other Microsoft licenses and just buy a Cloud PC – this is useful for contractors or specific scenarios. For the Enterprise edition, Microsoft assumes you have at least Intune, AAD P1, and Windows already (so essentially, an M365 subscription). In effect, Enterprise is layered on top of Microsoft 365, whereas Business is a standalone product. If you’re already an M365 E3 or E5 customer, adding Windows 365 might seem straightforward (just an additional cost for the VM). If you’re not, Windows 365 Business provides a one-stop solution, but with limited integration.

Feature Differences: Aside from licensing:

• AVD supports multi-session (multiple users on one VM), while Windows 365 is strictly one user per VM.
• AVD can integrate with on-premises AD, custom networks, and even third-party virtualization stacks, such as Citrix Cloud and VMware Horizon Cloud on Azure. Windows 365 has more fixed integration points (Intune, AADJ, etc., no third-party VDI brokers).
• Windows 365 offers an “offline” mode, currently in development (not yet generally available as of 2025), where a Cloud PC can sync with a device for offline use. AVD doesn’t have that.
• Windows 365 Frontline (shared licenses) is a unique offering for Windows 365; AVD would handle that scenario by using multi-session or scheduling with its consumption model.

The table below summarizes licensing models across the key options:

Note: In any scenario where Microsoft 365 or Windows Enterprise is used, that license typically also covers Office 365 apps for that user. If you use a VDI without assigning M365, ensure that you have a licensed version of Office (e.g., Office 365 ProPlus or volume Licensing) for users to use Office apps on the virtual desktop. An office in VDI is usually licensed per user via Office 365 nowadays, which simplifies application licensing as well.

Remote Access Use Cases and Licensing Strategies

Different remote access scenarios require tailored licensing approaches. Below, we address common use cases—BYOD programs, contractors and part-time staff, and frontline workers on shared devices—and how to stay compliant cost-effectively in each.

1. BYOD (Bring Your Own Device)

When employees use personal devices (home PC, personal laptop, tablet) to access corporate virtual desktops, licensing must cover those non-corporate devices:

• Leverage Per-User Licensing: The best strategy for BYOD is to assign each BYOD user a Microsoft 365 E3 or E5 license (or a Windows Enterprise per-user license). Since personal devices, by definition, won’t have corporate Windows SA, per-user licensing is the simplest way to grant VDI rights. As noted, M365 covers the user across any of their devices. This avoids the need to individually license each personal device with VDA, which would be impractical and intrusive for true BYOD. For example, if an employee wants to use their own MacBook to remote into a Windows 11 desktop, an M365 E3 license ensures that usage is legal and seamless.
• Enrollment & Security: BYOD devices may not be domain-joined, but you can still enforce compliance by requiring VDI access to go through conditional access (device compliance, MFA, etc.). The user license handles the licensing aspect. Ensure the BYOD policy limits access to only authorized users (who have the proper license assigned). Do not allow unlicensed users to access VDI from personal devices—every user session on a Windows VDI must be attributed to a licensed user. Azure Virtual Desktop integrates with Azure AD, so you can restrict who can launch desktops. In on-prem VDI, your connection broker should authenticate via AD accounts that are licensed.
• Cost Consideration: Most organizations with BYOD needs find that they already own M365 or can justify the cost with the included productivity tools. Suppose someone truly only needs VDI access, without anything else. In that case, a cheaper alternative is a standalone Windows 10 VDA per-user license (approximately the same cost as an M365 E3 minus the Office/EMS). But in practice, if you’re going to pay around $100 per user per year for VDA, upgrading to full M365 may provide significantly greater value.
• Compliance Tip: Beware of scenarios where a personal device is used to directly control an office PC via Remote Desktop (not a virtual desktop). If the office PC is licensed, that’s fine. However, if a personal device directly runs Office apps via RDP on the office PC, you could violate Office licensing. It’s usually cleaner to use actual VDI or Windows 365 for BYOD, with proper user licensing, rather than using ad-hoc RDP to physical machines, which can trigger hidden licensing requirements for RDS, Office, etc.

BYOD Example: A consultancy supports Bring Your Own Device (BYOD) for its 50 consultants. Each consultant is given a Microsoft 365 Business Premium license, which is more affordable than E3 and includes Windows 10/11 Enterprise, Office apps, and Intune. Consultants use their own devices, which may be Windows Pro or macOS.

With Business Premium (which is eligible for AVD), they can connect to the firm’s Azure Virtual Desktop with full access. Their device does not require any software beyond the Remote Desktop client and does not need a separate license. The company saves money by not buying laptops for everyone, yet stays compliant by licensing each user. If a consultant leaves, IT simply reassigns the M365 license to another incoming user (after a 30-day license reallocation cooling period to comply with license reassignment rules).

2. Contractors and Part-Time Workers

Contractors, temporary staff, or part-timers often need access to corporate apps for a limited time. They might not receive a corporate laptop or standard license.

Here is how to handle their Windows licensing:

• Short-Term Microsoft 365 Assignments: If the number of contractors is small or their tenure is only a few months, the simplest approach is often to assign them a Microsoft 365 license during their engagement and then revoke it. Microsoft 365 E3/E5 can be bought as monthly subscriptions (in CSP programs), which you can turn off when not needed. This gives the contractor the same rights as an employee, including VDI usage rights. You can also manage their access via Intune if they bring their device. For a part-time internal employee, you’d likely already have them in your license count.
• Windows 365 for Contractors: Windows 365 Business could be a very attractive option for contractors. Because it has no prerequisites, you could purchase a Cloud PC license just for the contractor. This gives them a ready-to-use, secure cloud workstation with Windows 10 or 11 that you fully control. They can connect to it from their PC or even just a browser. Importantly, the Windows 365 license covers the operating system (OS), so you don’t need to worry about which OS the contractor’s device is running. For example, you hire a contractor for 3 months – you provision a Windows 365 2vCPU/8GB machine for them. They use it for the project, and then you release the license when done (or reassign it to another contractor, observing a 30-day gap if required to ensure a safe license reassignment). This way, you didn’t have to give them a physical machine or a full M365 license; you just gave them a self-contained Cloud PC.
• Azure AD External User with AVD: If you have a large number of external users (contractors who are not in your tenant), and you want to use AVD, consider using the Azure Virtual Desktop external user billing. Instead of creating them as full guest users with licenses, you can treat them as external users and pay $10 each per month for their AVD access. However, keep in mind that this still requires you to set up AVD infrastructure for them in Azure and manage it. If the contractor count is high and fluid, this model may simplify licensing (no need to repeatedly assign and remove M365). But for a handful of contractors, it’s probably easier to just give them a temporary M365 account or a Windows 365 Cloud PC license.
• Compliance Consideration: Contractors should not use production VDI environments with unlicensed accounts. Each contractor either needs to be given a licensed account in your AD (such as a temporary staff AD account with the appropriate license) or counted as external under the AVD external license model. If contractors use their personal Microsoft accounts or logins that are not licensed, this creates a compliance gap. Always onboard them into an identity that you manage for the duration of their access.
• Cost Optimization: For part-time employees (e.g., who work only 2 days a week), you might consider Windows 365 Frontline licenses. Suppose you have 3 part-time employees sharing two rotating positions. With one Frontline license, you could give each a Cloud PC but only two will ever be active (since typically one is off-shift). However, Frontline requires an Enterprise setup and might be overkill unless you have a larger pool of such users. Alternatively, if part-timers already have a company PC when on-site, and just need home access occasionally, you could simply rely on their device’s SA or provide a minimal license only when needed.

Contractor Example: A design firm brings on 10 freelance graphic artists for a 3-month project. Instead of issuing laptops, IT provides each freelancer with a Windows 365 Business Cloud PC that has the necessary software preloaded. The freelancers connect via their web browser from home. The firm pays a fixed monthly fee per Cloud PC. Since it’s just 3 months, this is highly cost-effective, and the freelancers never had local copies of any data (enhancing security).

After 3 months, IT deletes the Cloud PCs and stops the subscriptions. The cost was predictable, and the licensing was straightforward with Windows 365 covering everything. Had they tried to do this with on-premises VDI, they would have needed to set up accounts, possibly buy VDA licenses or M365 for each, and have the infrastructure capacity ready, which would be far less agile.

3. Frontline and Shift Workers on Shared Devices

Frontline workers, such as retail employees, factory floor operators, and healthcare clinicians, often use shared PCs or terminals during their shifts. Licensing these scenarios can be tricky because you don’t want to pay for a full license per user if they only use the system briefly, especially if the devices are shared.

• Shared Device Licensing (Per Device): If you have shared Windows 10 or 11 PCs that workers log into with their credentials, consider licensing those devices with Windows Enterprise (through SA or a per-device agreement). Device-based licensing can cover multiple users on one device. For example, a retail store uses a point-of-sale PC that is shared by five employees working in shifts. Instead of 5 separate user licenses, that PC could be covered by a Windows Enterprise upgrade + SA or just count under your volume agreement. If it’s an OEM Pro license, adding SA will grant VDI rights on that device for any user. Alternatively, if the device is a thin client or doesn’t have Windows, purchase one Windows VDA device license for it. Then, any number of employees can use that terminal to access a VDI during their shift. Device licensing is more economical when the device-to-user ratio is low (e.g., sharing one device among five people means paying for one user license instead of five).
• Frontline User Licensing: Microsoft 365 F3 is tailored for frontline workers. It includes Windows 10/11 Enterprise, but only as an online service, and for use on a single, fixed device (assuming a shared device model). As noted earlier, M365 F3 users are entitled to access VDI, but only if the device they use has a Windows Pro or Enterprise base license. This means that if you deploy, say, Azure Virtual Desktop for your frontline workers, you should ensure that the kiosks or tablets they use are at least Windows Pro-licensed. If they are, an F3 user can log into AVD just like an E3 user. If the device is not Windows (such as a Linux thin client), then the F3 user’s rights alone may not be sufficient – you would need a device VDA in that case. Keep this nuance in mind: F3 is cheaper per user, but it assumes some device licensing costs.
• Windows 365 Frontline: As discussed, Windows 365 Frontline is practically made for this scenario. With one license, you can equip up to 3 users (non-concurrent) with personal Cloud PCs at a fraction of the cost. For example, a hospital has 30 nurses across 3 shifts (10 per shift). Instead of 30 separate Cloud PC licenses, they could buy 10 Frontline licenses. Each license provides 3 Cloud PCs for three nurses on different shifts. When shift changes, the off-duty nurse’s Cloud PC is disconnected, and the oncoming nurse can launch their own Cloud PC. The service ensures that only 10 are active at once, using 10 licenses. All nurses still receive their desktops (with their apps and settings), but the hospital pays roughly one-third the cost compared to licensing them all at once. This model requires some management, ensuring that users log off and don’t overlap, although the system will handle enforcement. It’s a big cost saver for scenarios like call centers and manufacturing lines, where not everyone is working at the same time. Note: Each of those nurses would still need the base license required (likely the hospital has an M365 F3/E3 for them that covers Intune and AAD).
• Shared Windows Server/RDSH for Task Workers: Another approach if Cloud PCs are overkill is to use a Remote Desktop Server with CALs in shared mode, especially if tasks are limited, such as data entry into a single app. This is more old-school, but worth mentioning: license the server with Windows Server and RDS CALs for each user. (In a large organization, RDS CALs for a group of shift workers might be less expensive than full Windows licenses.) Then, all task workers log in to a single multi-session server desktop or app. This can be cost-effective but offers less personalization. Many are moving away from this and towards cloud solutions, but if you already have Windows Server licenses, it’s an option.

Frontline Example: A large retail chain has 1,000 store kiosks (shared PCs) used by 5,000 total employees (shifts). Historically, they just had those PCs on Windows 10 Pro, and employees shared logins—compliance was a gray area. To modernize, they consider Azure Virtual Desktop or Windows 365:

• Option 1: Deploy AVD with multi-session Windows 10. License each of the 5,000 employees with M365 F3 (cheaper than E3). Ensure each kiosk has a Windows Pro license (they do). Now, any employee can log into AVD from any store PC. The cost is mainly Azure and F3 licenses, which also improve their Office 365 access. This also enhances security (no shared OS login, each gets their session).
• Option 2: Use Windows 365 Frontline. Purchase ~1,700 Frontline licenses to cover 5,000 users (3 users per license). Give each employee their Cloud PC, accessible from store devices or home. This is a larger licensing cost (Frontline licenses), but simpler for the user (each has a full persistent desktop). The retailer compares costs: F3 + Azure vs. Frontline Cloud PC subscriptions. They find that if employees only use the system during work hours, AVD’s utilization-based model with multi-session might be cheaper. However, Windows 365 could give better performance isolation and simplicity. They might even mix both: corporate staff get Windows 365, store staff use AVD multi-session – demonstrating how a hybrid approach can optimize for different needs.

Cost-Effective Licensing Strategies

Optimizing Windows licensing for remote work can save significant budget and avoid compliance gaps. Here are strategies and best practices to consider:

• Inventory and Leverage Existing Licenses: Start by assessing what Microsoft licenses you already own. Many enterprises discover they already have Windows VDI rights via Microsoft 365 or Software Assurance and aren’t fully utilizing them. If you’ve invested in M365 E3/E5, capitalize on those entitlements – they should be the cornerstone of your VDI licensing strategy. Avoid paying again for VDA if it is not necessary. Conversely, if you haven’t moved to per-user licensing and are paying for multiple device VDA subscriptions, analyze whether a shift to M365 E3 could deliver more value (often, Office, EMS, and Windows for roughly the combined price).
• Use Azure Hybrid Benefit: For any cloud deployment (AVD or even Windows 365, where applicable), use the Azure Hybrid Benefit. For example, apply your existing Windows Server licenses with Software Assurance (SA) to Azure to cover session host VMs and reduce Azure VM costs by up to 40% or more. For Windows 365, ensure you apply Windows Hybrid Benefit if you qualify​. These require some administrative steps (marking in the Azure Portal that you have ownership of licenses), but the savings are substantial.
• Choose AVD vs. Windows 365 Based on Usage Patterns: If your workforce works standard hours and you have the IT capability, AVD with scaling scripts can be a very cost-effective option (e.g., shutting down VMs after 7 pm and on weekends to save money, or using smaller pools for part-time employees). Suppose your workforce is global 24/7, or you prefer a simpler approach. In that case, Windows 365’s fixed costs might be competitive when you consider the IT management cost savings, as there is no need for a dedicated team to manage host pools. Model your costs for both: Microsoft provides pricing calculators for AVD, considering factors such as VM uptime and reserved instances, as well as straightforward per-user pricing for W365. Sometimes, a mix is optimal: critical users who need guaranteed performance use Windows 365, while a larger pool of users with varied usage use AVD pooled desktops.
• Frontline Workers: Minimize Licensing Overlap: For users who share devices or have limited usage, avoid “double licensing.” Either license the user or the device, but not both. For example, don’t pay for an M365 F3 for a user and a VDA for the shared device they use – one of them is sufficient. If the device has VDA, the user can use it without F3 (for Windows purposes; you may still license them for email and Office, though). Or if the user has F3 and the device has a base Windows license, you don’t need VDA. Be clear in your licensing design about who or what is the primary metric (user-based vs. device-based) for each scenario, and stick to that to avoid extra costs.
• Implement Controls to Prevent Unlicensed Access: From a compliance standpoint, configure your VDI solutions so that only properly licensed users can sign in. For instance, in Azure Virtual Desktop, use Azure AD groups for assignment that include only users with the right licenses. In Citrix/VMware, maintain an Active Directory security group for “VDI Users” and ensure licenses are assigned accordingly. This prevents well-meaning but unlicensed individuals, such as a contractor whose M365 license has expired, from accessing the system and potentially putting you out of compliance. Regularly reconcile AD user lists against licensing reports.
• Education and Documentation: Make sure your software asset management and IT teams understand Microsoft’s VDI licensing rules. Microsoft’s product terms and licensing briefs for VDI should be internal required reading for those managing the environment. Sometimes, misconceptions (e.g., “we have OEM Windows, so we’re fine for VDI”) can lead to costly true-ups. Gartner-style recommendation: Designate a licensing champion or use a licensing partner to review your remote access strategy on an annual basis. Given how licensing evolves (e.g., new offerings like Windows 365 Frontline), staying up to date can uncover new savings or risks.
• Monitor External and Third-Party Access: If you provide virtual app or desktop access to external parties (such as consultants or customers), decide early whether you will cover them with internal licenses or treat them as external users. Microsoft now has clearer options for external users (such as the AVD external user fee), which may be cheaper than assigning an internal license to a temporary account. Always keep external users in a separate group so you can track and report on them for compliance purposes.
• Avoid Common Pitfalls: Two common compliance issues are:
  (a) Relying on OEM Windows Pro licenses for VDI rights – they do not cover VDI. Only SA or subscription licenses do. If you haven’t added SA or given the user a subscription, an OEM license on a laptop doesn’t let that laptop access a Windows VM legally.
  (b) Using Windows 10 multi-session outside of Azure – it’s not permitted. That special OS can only be used in Azure. Don’t attempt to run multiple user sessions on Windows 10 in an on-premises VM host. If you need multi-user on-premises, use Windows Server with RDS.
  (c) Not adhering to license reassignment rules – e.g., rapidly reassigning one Windows 365 license to many users in a week is not allowed (generally, a license cannot be reassigned more frequently than every 90 days, except for certain exceptions like permanent employee turnover). Plan for each user to have a license while they are active; don’t “rotate” one license among users to save money, as this violates the terms.

By following these strategies, CIOs can make the most of their Microsoft investments for remote work. Often, the cheapest solution is the one that uses what you already pay for – for example, enabling AVD with your existing M365 licenses. In contrast, the simplest solution might be worth the extra cost, for example, paying a bit more for Windows 365 to reduce management overhead. This balance between cost and simplicity is a core consideration in any licensing decision.

CIO Recommendations and Action Plan

In conclusion, here are actionable recommendations for CIOs to ensure a compliant and efficient licensing approach for remote desktops. We distinguish advice for large global enterprises and mid-sized organizations where appropriate:

For Global Enterprises:

• Develop a Unified VDI Licensing Policy: Establish a clear policy that covers all forms of remote Windows access, including on-premises VDI, Azure VDI, Cloud PC, RDS, and more. Given your scale, inconsistency can creep in. A unified policy helps avoid siloed decisions that lead to non-compliance. For example, mandate that any implementation of VDI must be reviewed by a licensing specialist and align with the corporate Microsoft agreement terms.
• Maximize your Enterprise Agreement with Microsoft to secure favorable terms. You likely already license Windows Enterprise organization-wide (via M365 E3, E5, or Windows E5 Add-ons). Ensure your EA true-ups account for VDI usage. If you plan a major shift to Azure Virtual Desktop, talk to Microsoft – sometimes Azure consumption commitments can be negotiated, or promo credits might be available for first adopters. Use your size to your advantage to get cost predictability.
• Hybrid Approach – Tiered Solution: Large enterprises often adopt a tiered VDI strategy:
  • Tier 1: Persistent Cloud PCs (Windows 365 or personal AVD VMs) for executives or developers who need admin rights/custom software.Tier 2: Pooled AVD (multi-session) for general office workers, to maximize density and minimize Azure costs.Tier 3: Traditional desktops or laptops for those who still need local computing (with SA for occasional VDI use).
  Ensure licensing is accounted for in each tier (e.g., execs likely have E5 already; pooled users all have at least E3; device-based licensing for any specialized kiosk, etc.). This layered approach can optimize both cost and performance. As CIO, push your architects to match license types to usage patterns (don’t give every user the most expensive solution if it’s not needed).
• Invest in Automation and Monitoring: At enterprise scale, consider tools to track VDI usage vs. licenses. For instance, use Azure Cost Management to monitor AVD user metrics or Citrix usage logs, and compare them with your licensed user counts. Any discrepancy, such as more users logging in than you have licenses for, should be flagged. This proactive stance can save you from audits. Also, automate power management in AVD to save costs – enterprise cloud teams can script schedules or use Azure AutoScale for host pools; those savings accumulate significantly at scale.
• Audit Contractors and Partners: In a large firm, it’s easy to lose track of external users given temporary accounts. Do periodic audits to ensure each external user accessing your systems is accounted for in licensing. If many contractors are found, consider moving them to an “external AVD” model or give them their own Windows 365 Business Cloud PCs that are deleted after use. This prevents license creep where you might otherwise assign expensive E5 licenses to short-term accounts and forget to remove them.
• Engage with Microsoft or a Licensing Partner: Don’t hesitate to contact Microsoft’s licensing desk or a SAM partner to validate your approach. The rules do change (e.g., the Authorized Outsourcer program changed in 2022, affecting hosting rights). As a global enterprise, you have access to Microsoft account teams—use them to get clarity on writing about any ambiguous scenario, such as using Windows 11 multi-session with certain Azure Stack deployments. This gives you defensibility and the latest info.

For Midsize Organizations:

• Simplify with Microsoft 365 Business or Enterprise: If you’re not already on Microsoft 365, consider it strongly. Midsize companies (say 100-1000 users) benefit from simplifying IT licensing. Microsoft 365 Business Premium is capped at 300 users, but if you fit, it’s a fantastic bundle that includes Windows 11 Enterprise upgrade, Office, Intune, etc., and crucially, VDI rights. If you have over 300 users, an E3/E5 licensing via CSP or EA license will cover you. The point is that a single per-user license can cover your Windows, Office, and mobility needs, making VDI licensing one less headache (because it’s already covered).
• Use Cloud Services to Avoid Data Center Complexity: Mid-sized IT teams may not have the capacity to manage complex VDI infrastructures. Lean towards Windows 365 or a straightforward AVD deployment (possibly through a managed service provider or using management tools like Nerdio Manager). While Windows 365 might cost a bit more than AVD, consider the value of the time saved and reduced admin overhead. It might allow your small IT team to focus on other priorities. Many mid-market firms choose Windows 365 Business because it requires minimal setup—just assign and go.
• Shared Device Optimization: If you have only a handful of shared devices or remote kiosks, you might simply cover them with device-based licensing. For instance, if you have 10 shared PCs in a warehouse for 50 workers, buying 10 Windows VDA licenses (or ensuring that those 10 have SA via a Volume Licensing Open Value agreement) is a clean solution. You don’t necessarily need to license all 50 users individually if they don’t have other IT provisioning. This can be cheaper and easier to track (those 10 devices are known assets).
• Avoid Over-licensing F3 Users: If you use Frontline (F) licenses to save costs for specific workers, ensure you’re adhering to their constraints (e.g., the device must have Pro). Don’t buy F3 thinking it’s just a cheaper E3—for VDI specifically, F3 is fine, but you might inadvertently find an F3 user using a personal device that’s not licensed, leading to a gap. In mid-size companies, sometimes a few power users or managers might also be on F3, which is not intended. Standardize who gets what license to avoid confusion.
• Watch Your Azure Costs: Unlike huge enterprises, a surprise Azure bill can upset a mid-size company’s IT budget. If you go the AVD route, start small and monitor your costs daily or weekly. Use Azure budgets and alerts. One misconfigured auto-scale or forgotten running VM can burn through your savings. If Azure seems too volatile cost-wise, again, Windows 365’s fixed price might be preferable despite a slightly higher nominal cost, because you’ll avoid variability and the need for Azure expertise.
• Consider CSP Licensing for Flexibility: If you are below enterprise agreement thresholds, consider procuring licenses via Cloud Solution Provider (CSP). CSP allows month-to-month adjustments. For instance, you can easily ramp up or down Microsoft 365 or Windows 365 licenses as your staffing changes with minimal fuss. This flexibility aligns well with the dynamic nature of remote work staffing (e.g., a sudden project that requires 20 extra contractors for 2 months – you can add 20 Windows 365 licenses for 2 months and then drop them). Work with a Microsoft partner who can offer CSP licensing and potentially value-added services, such as managing an AVD environment for you.

General Recommendations (All Organizations):

• Keep Documentation: Document your licensing assumptions and decisions. If you decide “we will use M365 E3 for all employees, which covers VDI”, write that down along with references to Microsoft’s licensing terms that support it. This is useful if questions arise later, such as during an audit or when a new team member questions the setup. It also helps ensure continuity when personnel change in IT procurement or licensing roles.
• Stay informed about licensing changes: Microsoft licensing for VDI has evolved, with examples including the introduction of per-user AVD external licensing and new Windows 365 offerings. Assign someone to monitor Microsoft announcements or licensing blogs. Even once a year, do a review: are there new ways to optimize? For instance, if Microsoft were to introduce a new SMB-focused VDI license, you’d want to know. Gartner and licensing advisory firms often publish updates. Consider a subscription or regularly check resources for enterprise licensing.
• Pilot and Iterate: When adopting a new approach, such as moving from on-premises VDI to Azure or introducing Cloud PCs, run a pilot and evaluate not just technical performance but also the licensing impact. In the pilot, verify that all users are properly licensed and that you can provide evidence of this (e.g., a report of M365 licenses assigned to pilot users, a list of their endpoint types). This will flush out any overlooked scenarios (such as an intern trying to log in who isn’t licensed, etc.). Solve those in the pilot before scaling.

By following this playbook, CIOs can confidently support remote and hybrid work models without falling into licensing traps. The goal is to enable flexibility for employees—work from anywhere, on any device—while maintaining compliance and controlling costs.

Microsoft’s licensing has a reputation for complexity. Still, with the expert insights and strategies outlined above, you can turn licensing into an advantage: leveraging existing entitlements, taking advantage of new cloud offerings, and ultimately providing a seamless and legal remote desktop experience for your workforce.

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