Microsoft Makes Major Rule Change Every Customer Needs to Understand

Effective October 1, 2019, Microsoft has made a major licensing change that negatively impacts customers’ ability to utilize their on-premise Microsoft software licenses at specific outsourcing providers.  This change directly impacts customers running workloads on dedicated hardware at Alibaba, Amazon, Google and Microsoft.  This also impacts outsourcing providers using one of these four named providers to deliver part of their outsourcing service, such as VMware Cloud on AWS.

“Listed Provider” is a new term added to the October 2019 Microsoft Product Terms, which is being used to isolate specific outsourcing providers, which Microsoft is now classifying as dedicated hosted cloud services.  Microsoft has included Azure Dedicated Host in the group of Listed Providers, but they are using Azure Hybrid Use Rights to grant Azure Dedicated Host special use rights not afforded to the other Listed Providers. 

In addition to Azure Hybrid Use Rights, Microsoft has granted Azure other special use rights related to running Windows virtual desktops and Visual Studio with MSDN software for development and testing.

This change impacts five (5) major areas:

1.       Server Operating Systems

2.       Application Servers

3.       Windows Enterprise Virtual Desktops

4.       Office Applications

5.       Visual Studio with MSDN non-production software (development & testing)

Prior to 10/1/2019, customers could run Microsoft software on dedicated hardware from Alibaba, Amazon and Google, with the same licensing rules that applied when running the software on-premise.  It is important to note that Software Assurance (SA) is not required to run software on-premise, except for Windows virtual desktops.  Please note active Software Assurance (SA) coverage provides additional product use rights for most Microsoft products.

From 10/1/2019 forward, all has changed.  Microsoft is allowing all software licenses acquired prior to 10/1/2019 to have the same rights as before (except for Windows virtual desktops), but if you need additional licenses or want a new version released after 10/1/2019 the new rules apply. 

Under the new product use rights, customers will no longer be able to run new Windows Server licenses or versions released after 10/1/2019 on dedicated hardware at Listed Providers, except Microsoft has special use rights for Azure Dedicated Host via Azure Hybrid Use Rights, which gives Microsoft a very nice advantage.  Azure Hybrid Use Rights requires active Software Assurance (SA) on the software to be eligible.  Customers must pay Listed Providers directly for the Windows Server software they run on dedicated hardware.  Microsoft needs to be prepared for affected customers to drop Software Assurance (SA) on Windows Server and pay for the software directly from the Listed Provider. 

New SQL Server licenses and versions released after 10/1/2019 can still be run on Listed Providers dedicated hardware via License Mobility through Software Assurance (SA), but customers can only license at the VM level, not the physical hardware level.  This means higher cost and less flexibility for many customers.

If you are running virtual Windows Desktops on dedicated hardware from a Listed Provider other than Microsoft, you will have to acquire a Windows VDA E3/E5 user subscription for each user or find a new outsourcing provider that is not a Listed Provider and is not using a Listed Provider as part of their outsourcing service.  Requiring customers to acquire VDA E3/E5 subscriptions equites to double paying for Windows Enterprise for many customers.  Thus, if you are a Windows 10 Enterprise E3/E5 customer and acquire VDA, you are double paying for Windows Enterprise.  In our opinion, Microsoft should have granted full VDA rights to their Enterprise Agreement (EA) customers who have enrolled Windows Enterprise on their EA, but they did not.  Microsoft is offering customers renewing Software Assurance (SA) on Windows Enterprise E3/E5, between 10/1/2019 and 10/1/2020, a short extension to 10/1/2020, which is not viable long term.  

It is important to point out M365 E3/E5/F1/Business and Windows 10 Enterprise E3/E5 customers can run virtual desktops on Azure via the new Windows Virtual Desktop offering and they are not required to buy VDA, thus no double billing on Azure like the other Listed Providers.

As for Office Professional Plus, you can continue to use existing licenses the same way, but if you need additional licenses or want a new version released after 10/1/2019, you are out of luck because Office is not eligible for License Mobility through Software Assurance (SA).

Windows Client and Office have arguably been the most important software products since the company was founded, these changes could negatively affect the usage of the most important Microsoft products at the world’s largest cloud providers because of a licensing rule change. 

Many customers have taken advantage of Visual Studio with MSDN to license their development/test environments (non-production use only).  They have used these rights to license software like SQL Server and Windows Server on dedicated hardware at Amazon and Google.  Visual Studio with MSDN licenses purchased before 10/1/2019 will not be impacted if you are testing with versions of SQL Server and Windows Server released before 10/1/2019.  Once you need additional Visual Studio with MSDN licenses or wish to test with versions of software released after 10/1/2019, you will be governed by the new rules.

As for running Visual Studio with MSDN non-production software on Azure, it has been permitted via Azure Dev/Test with active Software Assurance (SA) for many years.  Microsoft has made sure there are no obstacles in the customer’s way if they want to run on Azure.

It is also worth noting when Microsoft has made changes to product use rights in the past, software on active Enterprise Agreements (EA) has not been affected until the expiration of the agreement, but on 10/1/2019 Microsoft broke this long-standing tradition with EA customers.

Customers have made large strategic investments they cannot simply walk away from and how they respond to this change may not turn out the way Microsoft expects.  In fact, this change may result in loss of revenue to Microsoft and have negative consequences on Microsoft field account teams.

It is critical all affected customers understand these changes and their options, which may include moving affected workloads off Microsoft software.  Please see the October 2019 Microsoft Product Terms regarding this significant change.

Currently Microsoft has classified four (4) outsourcing providers as Listed Providers, but Microsoft can always expand this list in the future to additional providers. 

The below matrix contains the options for using key Microsoft Software from 10/1/2019 onward.  The yellow section highlights the major impact to customers running Microsoft software on dedicated hardware at Listed Providers (excluding Azure Dedicated Host).

Listed Providers Comparison Matrix (Oct 2019).JPG

New 10.2" iPad not supported on O365 E1 or O365 F1

Last month Apple released the new classic iPad with a 10.2” diagonal display, replacing the previous 9.7” display. Microsoft must be very happy with the announcement because it will generate more consumer and business revenue for Microsoft.

On the consumer side, Microsoft has offered free basic personal editing with Office Mobile on up to a 10.1” diagonal displays on iPads. With the new 10.2” iPad, consumers will have to purchase an O365 subscription to get what they received free on the 9.7” iPad.

On the commercial side, there will be significant cost impact to businesses with iPad only users who are currently assigned an O365 E1 or O365 F1 subscription and a 9.7” iPad. When those users require a hardware refresh, there will come a time the when 9.7” iPad will no longer be available. Currently there is not an option to buy the 9.7” iPad on the Apple website, but it is available from third parties. Businesses will have to either chose the 7.9” iPad mini to continue leveraging their O365 E1 and O365 F1 subscriptions or purchase the new 10.2” iPads and move their users up to an O365 ProPlus subscription on top of their existing E1 or F1 or move them from an E1 or F1 up to a full O365 E3. Please note for smaller businesses using Office 365 Business Essentials, you will also be impacted by this.

We do not expect Microsoft to revise their O365 product use rights based on the new larger classic iPad. Business users should refer to the Microsoft O365 Service Description / Office Applications Service Description.

RPA Tools and Microsoft Office

Robotic Process Automation (RPA) is growing rapidly along with a large number of RPA tool vendors. Many of these tools automate reading and creating Microsoft Office files such as Excel workbooks and Word documents. We have heard some of these vendors require customers to install Microsoft Office on Windows Servers for the RPA agents to execute as a server-side service.

It is critical RPA tool customers understand Microsoft Office was not designed and is not supported to run unattended on a Windows Server as a server-side service. In addition to the technical and support issue of running as a server-side service on a Windows Server, there is the problem of licensing the software.

Please click here to read a Microsoft article covering this topic.

Compliant Today but Not Tomorrow

Most organizations never think about the future when deciding how to mark the “Future Affiliates” box on their EA and SCE enrollments. Let’s take a company with an EA and an SCE and they select to include all future affiliates on both their EA and SCE. This company has both SQL Server and Windows Server enrolled on their SCE.

Fast forward a year into the future and this company purchases a smaller company who does not have an EA nor any Microsoft software with active Software Assurance (SA). The new company they purchase has a large SQL Server footprint which is all physical. All the new company’s SQL Servers and Windows Servers are properly licensed before the acquisition, but once the deal is inked they are no longer compliant.

All the SQL Servers and Windows Servers now must be added to the acquiring company’s SCE. Chances are no one on the mergers and acquisition team even considered this during the acquisition due diligence process.

In addition to the SQL Servers and Windows Servers having to be re-purchased, the new company will also have to be added to the EA, which is an additional cost.

I once had a Microsoft auditor with one of the Big 4 tell me he loved getting assigned to audits where SQL Server was on an SCE!

SoftwareAdvocates is not a big fan of the SCE, but if you have one you need to fully understand it. For some customers they are fine, but only you can decide if an SCE is right for your company.

How to Count Cores for Licensing Windows Server 2019

Since the Microsoft Windows Server 2019 licensing brief contains incorrect information in the core licensing matrix by processor, we have decided to provide customers a correct document for counting cores following Microsoft’s licensing terms for Windows Server 2019.

Download “Licensing Physical Servers for Windows Server 2019 Datacenter & Standard Editions”

We pointed this out on our blog back in November of 2018, but Microsoft has failed to correct their document.

Click here to see this blog post…

Good Old Fashion Customer Revolt

On October 2, 2018 SoftwareAdvocates blogged about a major negative change impacting FROM SA Microsoft 365 E3 and E5 customers right to use perpetual copies of Office. Well it appears this did not go over well with affected customers because on May 23, 2019 Microsoft reversed course and restored the prior Office “Dual Use Right” to these customers. Nice to see customers votes still count.

Click here to read the Microsoft May 23, 2019 announcement…

Click here to read SoftwareAdvocates October 2, 2018 post…

We have confirmed the June 2019 Product Terms have been updated to reflect this change. The exact language below is from page 6 of the June 2019 Microsoft Product Terms:

“Microsoft 365: The decision to end the right to use Office Professional Plus for Microsoft 365 From SA Customers (sometimes referred to as Extended or Dual Use Rights) has been reversed. As a result, the language ending this use right effective August 1, 2019 has been removed.”

Can You Spot the Error?

As of May 26, 2019, seven months have passed since we first posted this article on November 6, 2018 and Microsoft has yet to correct their documentation error. In late April 2019, Microsoft’s market cap reached one trillion dollars and we cannot count all the glowing articles about Microsoft’s CEO’s amazing leadership, this is all great, but one would think a company as great as this could get the little details correct in their customer facing documents. We do not think it is too much to ask to provide correct documentation.

Original November 6, 2018 Post:

I recently came across a Windows Server 2019 licensing brief from Microsoft. As I was reading through it something was not adding up. Then I realized the document has an error. Below is a snippet of the error.

If you do the math for the cores required for a 3 processor server you will see it does not match Microsoft’s license requirements outlined in the document. Not to mention, how many 3 processor servers exist in the real world. It is worth noting the Windows Server 2016 and 2012 licensing briefs managed to get It correct.

Now let’s see how long it takes for this error to get corrected.

Please click here to download this document


Office 365 system requirements changes for Office client connectivity

Back in April of 2017, Microsoft published an article stating, “Effective October 13th, 2020, Office 365 will only allow Office client connectivity from subscription clients (Office 365 ProPlus) or Office perpetual clients within mainstream support to connect to Office 365 services.”. What this meant was no more connecting to O365 services from Office 2016 after 10/12/2020.

Please click here to read the April 2017 article

Then in September of 2018, Microsoft announced the following:

Office 2016 connectivity support for Office 365 services
In addition, we are modifying the Office 365 services system requirements related to service connectivity. In February, we announced that starting October 13, 2020, customers will need Office 365 ProPlus or Office 2019 clients in mainstream support to connect to Office 365 services. To give you more time to transition fully to the cloud, we are now modifying that policy and will continue to support Office 2016 connections with the Office 365 services through October 2023.”

Please click here to read the September 2018 article

I am pleased to see Microsoft listening to customers and accommodating them. However, just because we have more breathing room does not allow us to stop planning and moving forward.

Please make sure you are keeping up with Microsoft’s Lifecycle Policy - Click Here to View

Big Microsoft October 2018 Changes

It is official, Office 2019 and Windows Server 2019 are now included on the Microsoft October 2018 Product Terms and the 2016 versions have been removed.

Make sure to visit and pull all the latest Microsoft licensing documents.

There is one interesting change in the October Product Terms, Microsoft is retiring on January 1, 2019 the right for M365 E3 and E5 FROM SA customers to run Office Professional Plus.  Of course, for those customers who have active EAs, this will not be a factor until your next renewal.   I have to wonder if Microsoft fully understands the impact to their customers of this change and did they even get customer feedback before making it. Many customers depend on this right and they will have to make significant changes without it. In fact many customers would not have purchased the M365 E3 or E5 without the FROM SA right to run Office Professional Plus.

Maybe it’s time for more customers to take a look at LibreOffice, because at least they will not have rights rescinded in the future.

Awesome No Charge WMI Tool

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Download WMIX

Goverlan also offers its full featured Goverlan Reach, a powerful and full featured IT Remote management solution which runs securely on-premise.  Goverlan was kind enough last fall to provide me a walk-through of WMIX and Goverlan Reach. 

SoftwareAdvocates has no business relationship with Goverlan and receives no compensation.  This article is provided to share valuable information with our readers.