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Microsoft Unveils CSP Licensing Changes To Address EU Cloud Concerns

New licensing and hosting rules will take effect on Oct. 1, 2022, for Microsoft's Cloud Solution Provider (CSP) partners and their customers.

The new rules, which Microsoft announced this week, reflect the company's promises back in May to address certain European cloud services competition complaints. The changes aim to ease prior licensing restrictions that Microsoft had apparently imposed in 2019, affecting smaller CSP partners. The coming changes in October also will give customers some new perks.

Not covered under the changes are the so-called "Listed Providers," a name that Microsoft defines as "Alibaba, Amazon Web Services, Google" and itself.

Microsoft's CSP changes don't appear to be well-received by its large cloud services competitors. Google and Amazon are staunch critics, according to this Reuters report.

Licensing Changes Coming in October
Here are those changes, in summary, but they don't apply to the Listed Providers:

  • A new "Flexible Virtualization" benefit, which lets customers with Software Assurance coverage for on-premises software move the software to "any cloud providers infrastructure -- dedicated or shared." Software Assurance is an annuity cost, assuring product upgrades, that's paid on top of Microsoft's software licensing costs.
  • CSPs can offer "prebuilt hosted desktop and server solutions" based on the licenses customers have or that partners offer, which is said to be another Flexible Virtualization benefit.
  • The Virtual Desktop Application (VDA) add-on licensing requirement to access hosted Windows 10 or Windows 11 operating systems is getting eliminated, but just for "Microsoft 365 F3, Microsoft 365 E3 and Microsoft 365 E5 users" that "don't have a primary Windows Pro device."
  • One- and three-year subscription options "for many products including Windows Server, Remote Desktop Services (RDS) and SQL Server, through partners in the Cloud Solution Provider program, to offer price stability with long-term subscriptions."
  • Ability for Software Assurance payers to move Windows Server workloads to Azure virtual machines and apply their licensing tied to physical cores to the virtual cores in Azure virtual machines.

Microsoft clarified that these coming changes won't just apply in Europe, but are intended for "Europe and around the world," per this Microsoft blog post. The changes will make it easier for customers to use partner cloud services, and for partners to "build hosted solutions with speed and scale," the blog post indicated.

Partner Program Nuances
In an announcement for partners, Microsoft's new Chief Partner Officer Nicole Dezen said that Microsoft was making these changes "based on partner feedback."

The announcement included a few nuances. For instance, CSP partners will be able to build their own hosted desktop and server solutions using Microsoft products under a new program called "Cloud Solution Provider -- Hoster," Dezen clarified. She described this new program as undergoing a gradual and limited launch "later this year."

"At launch later this year, this program [Cloud Solution Provider -- Hoster] will be limited to CSP Direct Bill partners only, but we look forward to expanding program eligibility over time."

Partners participating in the Cloud Solution Provider -- Hoster program will need a Microsoft Customer Agreement and will be offered a "catalog of Microsoft software" that can be used. Customers transferring their licenses to these hosters will need to show licensing proofs. The Cloud Solution Provider -- Hoster program will be replacing an earlier "Qualified Multitenant Hosting (QMTH) program," Dezen indicated.

Also, the Flexible Virtualization benefit will let applicable CSPs offering hosted services under Microsoft's Services Provider Licensing Agreements (SPLA) use "more flexible hardware configurations." These SPLA licensees also get the ability to let their customers "install customer-licensed products, like SQL Server, Microsoft 365 Apps, and more, on their hosted solutions," Dezen indicated.

However, SPLA partners cannot use these SPLA licenses to host services on the datacenters of so-called Listed Providers. Microsoft is giving these partners about three years to comply with that restriction.

"Any SPLA partner impacted by this change has until September 30, 2025 to transition from a Listed Provider for SPLA outsourced hosting or to license directly from the Listed Provider outside of their SPLA," Dezen wrote.

Dezen characterized the ability of applicable CSPs to offer hosted services under longer terms (such as one-year and three-year terms) as addressing "price stability for a customer." Microsoft sometimes offers discounts for such customers, but this notion wasn't mentioned. Billing options also may get eased, too, as Dezen indicated that "we are also adding more monthly billing options in the CSP program for many of our one-year offers."

The removal of a VDA licensing requirement for hosted Windows 10 and Windows 11 OSes appears to come with a catch. While these hosted operating systems don't have to be a "qualifying operating system" (such as being at least a Pro edition), the local OS does need to be such.

"Users still must have a primary device with a Qualifying Operating System to run Windows 10/Windows 11 Enterprise locally on their PCs," Dezen explained in a footnote.

About the Author

Kurt Mackie is senior news producer for 1105 Media's Converge360 group.

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