SQL Server Licensing in Hybrid and Multi-Cloud Environments
Hybrid and multi-cloud deployments introduce new complexities for SQL Server licensing. IT asset managers must juggle on-premises licenses with cloud-based subscription models, all while controlling costs and maintaining compliance. In a hybrid environment, some SQL Server instances run on-premises while others run in public clouds like Azure or AWS. Multi-cloud strategies leverage multiple cloud providers.
The key challenge is ensuring your SQL Server licenses are used efficiently across these environments without paying twice or violating license terms.
Below, we explore licensing models, use cases, and cost optimization tactics for SQL Server in hybrid and multi-cloud setups, with real-world examples and actionable guidance.
Read about SQL Server Licensing.
On-Premises vs. Cloud License Models
On-Premises Licensing:
Traditionally, SQL Server is licensed on-premises via perpetual licenses (per-core or Server+CAL). In this model, you pay upfront for the license and can use it indefinitely on your hardware.
Large enterprises often use per-core licensing for SQL Server (each license covers two cores, with a minimum of 4 cores per server or VM). On-premises, these licenses allow unlimited SQL Server use on that machine (no usage-based fees), but you’re responsible for compliance (tracking how many cores are deployed, etc.).
Cloud Licensing:
Licensing can be more flexible in the cloud. Public cloud platforms offer “license-included” options (called pay-as-you-go), where the hourly VM pricing includes SQL Server licensing.
For example, an Azure VM or AWS EC2 instance can be launched with a pre-licensed SQL Server. You pay for computing and an SQL license surcharge per hour, essentially renting the license as long as the VM runs.
The benefit is elastic cost (pay only for what you use, and the cloud provider ensures compliance). The downside is that license-included rates can be higher over time than reusing existing licenses.
Bringing Your Own License (BYOL): Enterprises can also bring existing SQL Server licenses to the cloud. This is common in hybrid scenarios to avoid repurchasing licenses. However, Microsoft’s rules govern where and how you can BYOL:
- Azure: Microsoft allows easy BYOL through the Azure Hybrid Benefit (if you have Software Assurance). You can apply your license to Azure VMs or Azure SQL services and pay a reduced “base compute” rate.
- Third-Party Clouds (AWS, GCP, etc.): To BYOL on other cloud providers, you typically need active Software Assurance with License Mobility rights. This allows you to deploy SQL Server on AWS or Google Cloud VMs using your licenses (the cloud provider must be an “Authorized License Mobility partner”). Without SA, your ability to BYOL to these clouds is limited – Microsoft’s policies (especially after 2019) restrict use of perpetual licenses on competitors’ clouds unless certain conditions are met (e.g., dedicating hardware or having older pre-2019 licenses).
In summary, on-prem licenses can be leveraged in the cloud to save costs, but depending on your situation, you must adhere to the correct model (license-included vs. BYOL).
Hybrid Cloud Licensing Scenarios
Hybrid deployments often involve simultaneously using SQL Server on-premises and in the cloud. For example, during a cloud migration, you might run a production database on-premises while replicating it to Azure for testing or disaster recovery.
Microsoft provides dual-use rights for such scenarios: if you have Software Assurance, you can run a SQL Server workload on-prem and in Azure concurrently for up to 180 days when migrating. This grace period ensures you don’t need to double-pay licenses during the transition.
Hybrid Use Case – Disaster Recovery in Cloud:
Consider a company running SQL Server on-premises as primary, with a secondary failover instance in Azure. With proper licensing (e.g, using Azure Hybrid Benefit and failover rights from Software Assurance), the secondary instance can be kept ready in the cloud at minimal licensing cost.
The on-prem license extends to Azure for the passive instance, meaning the company doesn’t need to buy a separate cloud license for DR. This achieves high availability across a hybrid cloud without a licensing penalty.
Multi-Cloud Use Case:
An enterprise might deploy some SQL databases on Azure and others on AWS to diversify providers. One scenario: production workloads in Azure using reserved Azure SQL VM instances (with Azure Hybrid Benefit applied) and backup or analytics workloads on AWS using spare SQL licenses.
In this multi-cloud setup, the asset manager should ensure that each license is counted only once. For instance, a 16-core SQL Server Enterprise license could be allocated to Azure or AWS at a time (unless split)—you cannot use the same license in two clouds simultaneously beyond what the license terms allow.
Planning which environment gets which licenses is crucial to avoid duplicate licensing (paying for more licenses than needed) or compliance gaps.
Read Common Compliance Pitfalls in SQL Server Licensing.
Azure Hybrid Benefit and Cloud Cost Optimization
Azure Hybrid Benefit (AHB): AHB is a program that lets you apply existing SQL Server licenses (with active SA or subscription) to Azure services. This is a top cost-saving strategy for IT asset managers in a hybrid environment.
By using AHB:
- An Azure SQL VM or Azure SQL Database can be billed at a lower rate (charging only for underlying compute and storage, not for a new SQL license).
- You effectively reuse on-prem investments in the cloud. For example, a SQL Server Standard VM on Azure might cost 50% less if you bring your license via AHB instead of paying the full license-included price.
Example: Company A has four on-prem servers with SQL Server licenses, all covered by Software Assurance. They plan to shift two servers to Azure VMs. By enabling AHB on those Azure VMs, they don’t pay Microsoft for SQL Server again in Azure—they use their existing licenses. Over a year, this can save tens of thousands of dollars in cloud bills.
The asset manager must coordinate with the cloud admin to ensure AHB is toggled on for those resources and that the on-premises deployments are adjusted (e.g., if moved entirely, the on-prem use might be retired or used only for failover).
AWS and Other Clouds: Although AHB is specific to Azure, other clouds have their mechanisms:
- AWS: You can use your licenses on AWS EC2 through BYOL images or AWS License Manager. With SA’s license mobility, AWS allows SQL to be deployed on shared instances. AWS also offers dedicated hosts or instances if you want to use licenses without SA (though that’s usually for Windows; for SQL, it’s strongly recommended to have SA). AWS also has license-included AMIs – sometimes, as an asset manager might choose license-included for short-term needs to avoid long-term commitments.
- Google Cloud: GCP’s offerings, like Cloud SQL for SQL Server, bundle the license cost into the service. If using Compute Engine VMs, similar rules as AWS apply for BYOL (license mobility with SA, or use dedicated resources).
Reserved Instances & Savings Plans:
In multi-cloud cost optimization, remember that cloud vendors offer discounts for commitments. For example, Azure Reserved VM Instances or AWS Savings Plans can lower compute costs.
While not directly related to SQL licensing, combining these with BYOL can yield big savings. For example, reserve an Azure VM for 3 years with AHB applied—you pay a reduced compute rate and zero for SQL license, resulting in a much lower total cost than on-demand pricing with license included.
Read Software Assurance Benefits for SQL Server Licensing.
License Mobility and New Multi-Cloud Benefits
License Mobility through Software Assurance:
License mobility is critical for hybrid or multi-cloud use. It allows moving a SQL Server license across servers or to cloud VMs more frequently than the default 90-day reallocation limit.
In practice, if you have a VMware cluster on-prem or are shifting workloads between Azure and AWS, licenses with SA can float to wherever the SQL instance is running.
For example, suppose an AWS VM running SQL moves to a different hos,t or you scale out to another VM. In that case, you can reassign the license without waiting 90 days (as long as SA is active and the environment is covered under the mobility rules).
Multi-Cloud Flexibility – 2022+ Updates: Microsoft introduced a Flexible Virtualization Benefit in 2022 to accommodate multi-cloud scenarios. This benefit (available if you have SA or subscription licenses) lets you bring Windows and SQL Server licenses to authorized cloud providers’ shared data centers without dedicated hardware.
It loosened the previous restrictions that forced dedicated hosts on certain big clouds. While the major “Listed Providers” (Azure, AWS, Google, Alibaba) still have some special rules, the flexibility for other clouds (like regional cloud providers or hosting services) is improved.
For IT asset managers, this means more vendor choice for placing SQL Server workloads. You could negotiate with a third-party cloud provider to host your SQL instances on multi-tenant cloud servers using your licenses, which can sometimes be cost-advantageous compared to the big providers.
SQL Server in Containers or Kubernetes:
As hybrid architectures evolve, some organizations run SQL Server in containers (on-prem or cloud Kubernetes clusters). Licensing in these cases can be treated similarly to VMs – each container or cluster node must be licensed appropriately.
If using container orchestration across environments, consider licensing the entire physical host (with Enterprise Edition + SA) to cover unlimited SQL containers, or enforce scheduling so that SQL containers only run on licensed nodes.
Managing Compliance Across Environments
One pitfall of hybrid/multi-cloud licensing is tracking usage across different platforms. Duplicate licensing can occur if teams operate in silos (e.g. cloud team purchases cloud instances with licenses included, not realizing the company already has spare licenses). To avoid this:
- Centralized License Tracking: Maintain a single software asset management (SAM) inventory for all SQL Server licenses and deployments. Include on-prem servers, VMs, and cloud instances. Update it whenever a new SQL VM is spun up in Azure/AWS.
- Use Cloud License Management Tools: Azure has built-in reporting for Hybrid Benefit usage. AWS offers AWS License Manager to track BYOL usage and ensure you don’t exceed entitlements. Use these to your advantage.
- Regular True-Ups: Cloud usage might require annual true-up counts in an Enterprise Agreement. For example, if you moved eight cores of SQL to AWS mid-year via BYOL, ensure your true-up report accounts for any net-new licenses consumed (or freed). If you plan properly, you might not need to purchase new licenses at true-up because you repurposed existing ones, but you must document that.
Compliance is critical: ensure that when a workload moves from on-prem to cloud, the license assignment is also transferred (and the previous deployment is retired or covered under migration rights). Cloud providers may require you to attest or report BYOL usage (e.g., Microsoft requires an official License Mobility Verification for moving licenses to AWS/GCP).
Recommendations for IT Asset Managers
- Establish a Hybrid Licensing Policy: Create clear internal policies for allocating SQL Server licenses across on-prem and cloud. Define when to use BYOL (e.g., always use Azure Hybrid Benefit if a license is available) versus cloud-provided licensing (for short-term or dynamic workloads).
- Maximize Existing Investments: Always evaluate if an existing on-prem SQL license can be used in the cloud project before buying through the marketplace. This includes leveraging Azure Hybrid Benefit and License Mobility through SA.
- Monitor Multi-Cloud Usage: Implement regular audits of SQL Server deployments in each environment. Use tools like Azure Arc or third-party SAM tools to gain visibility. This helps prevent paying for a license twice or leaving licenses idle.
- Leverage New Benefits: Stay updated on Microsoft’s licensing programs like the Flexible Virtualization Benefit and Azure Arc integration. These can open up opportunities to optimize costs (for example, using Azure Arc to convert a traditionally licensed SQL Server into a metered pay-as-you-go resource might save money if it’s underutilized).
- Train and Communicate: Ensure cloud architects and operations teams understand the licensing implications of where they deploy SQL Server. Miscommunication can lead to compliance gaps (e.g., running SQL in an unlicensed cloud VM). Asset managers should be part of the approval workflow for new SQL Server deployments in any environment.
- Plan for the Long Term: Consider your three-year licensing roadmap when adopting a multi-cloud strategy. Align your Enterprise Agreement or license purchases with cloud plans—if you expect to migrate many workloads to Azure, investing in Software Assurance (to use AHB) is wise. If moving to AWS/GCP, ensure those licenses have mobility rights. Proactively negotiate with Microsoft and cloud vendors for the best mix of licensing options to minimize total cost.
