Best ways to purchase Azure
Large amounts of money are spent every year on IT related matters, therefore, it makes sense that most companies want to be control of their IT spending. In the era of cloud and virtualization, more and more organizations are interested in moving to the (public) cloud. Although cloud platforms are generally scalable, reliable, and highly available, these shouldn’t be the only considerations driving a customer’s decision to move to the (public) cloud.
If you’re also thinking about migrating to cloud, keep in mind that there are a lot of different factors that should be taken into account, such as: the benefits and the risks. What is the cloud service model? What is the best way to purchase cloud for your business? In this article, we will provide you an overview of different types of agreements through which you are currently able to purchase Microsoft’s cloud platform: Azure, and how you can license it.
Regardless of the purchase channel, Azure can be licensed through a subscription in two ways:
- Consumption-based – Services such as virtual machines, websites, databases or storage are billed on a consumption basis (e.g. virtual machines are billed per second, storage is billed per GB, SQL Database per hour, etc.) where customers pay for the services when they are in use.
- User-based – For example Azure Active Directory Services or Azure Rights Management Services are bought as User Subscription Licenses on a per user per month basis up to the agreement anniversary.
The type of subscription (e.g. consumption-based or User SLs) is depending on the specific Azure Service you would like to subscribe for. Specific license terms are described in Microsoft’s Online Service Terms.
How to buy Azure Services
Depending on your business’s needs and payment preferences, Azure Services are available for purchase through different Microsoft channels:
Azure through a Direct Enterprise Agreement (EA)
All Azure Services and Azure Support Plans are available through a Direct Enterprise Agreement. The EA also gives you access to the Azure Marketplace, an online shop for all Azure products and services. In case you purchase Azure through a direct EA, you are required to make an upfront Monetary Commitment for each of the three years of the agreement, with a minimum order value of one “Monetary Commitment SKU” of $100 per month ($1,200/year).
A Monetary Commitment is paid upfront, and as the Azure Service is used the corresponding charge is taken-off from the Monetary Commitment throughout the year. Monetary Commitments can be used to pay for any of the consumption-based services, but not the Azure Services licensed under User Subscription Licenses (SLs), like for example the Azure Active Directory Services.
If Azure is purchased via a direct EA (directly from Microsoft not through a reseller), a Consumption Allowance is offered. The Consumption Allowance is a threshold of 50% of the Monetary Commitment on top of the initial Monetary Commitment. This threshold is build-in to allow customers to exceed their initial commitment.
If your annual usage is less than the Annual Commitment ($100,000) + Consumption Allowance ($50,000), all overage (the amount over $100,000) will be billed on the anniversary date.
If your annual usage is greater than the Annual Commitment + Consumption (e.g. greater than $150,000) then all usage exceeding the annual commitment ($100,000) will be billed each quarter.
Example: If a customer makes a commitment for $100K, the Consumption Allowance will be $50K (50% of the Monetary Commitment). If the customer then exceeds his $100K with $40K, which is less than his Consumption Allowance ($50K), then the customer will be billed for the $40K at the end of the year.
To support its customers, Microsoft sends notification of usage at the 50%, 75%, 90% and 100% of the sum of the Monetary Commitment and the Consumption Allowance.
In our example, the end user would receive usage notification from Microsoft when he will reach the following consumptions:
- 50% * ($100k+$50K) = $75K consumption
- 75% * ($100K+$50K) = $112.5K consumption
- 90% * ($100K+$50K) = $135K consumption
- 100% * ($100K+$50K) = $150K consumption
Once an Azure Services Monetary Commitments is made, you receive a single activation key which must be activated within 5 years of the purchase date. After the key is activated, a unique 12-month consumption period starts during which all Monetary Commitment must be used.
The downside of this way of purchasing Azure Services is that the unused amounts cannot be rolled over into future periods and any remaining balance at the end of the year will be lost. Moreover, you are billed for the same Monetary Commitment for the following years, unless you ask for a reduction.
Going back to the previous example: let’s say the customer made a monetary commitment of $100K per year. The customer then consumes only $50K in the first year. He will not be refunded for the remaining $50K and unless he asks Microsoft to adjust his monetary commitment for the next years, he will be billed for the initial commitment of $100K.
Azure through Server and Cloud Enrollment (SCE)
Under Server and Cloud Enrollment, Azure is either available with one of the three components – Core Infrastructure (Windows Server and System Center), Application Platform (SQL server, BizTalk server and SharePoint) or Developer Platform (Visual Studio Enterprise) with no minimums and no commitment, and payed quarterly for actual usage, or as Azure-only where Azure services are paid upfront as Monetary Commitment, the same way as under an Enterprise Agreement.
Azure through Cloud Solution Provider (CSP)
Not all Azure services are available through CSP, but Microsoft declares that it’s continuously working to align CSP with other channels. You can see an up-to-date list of Azure services that are included in the CSP here.
All Azure consumption services are billed at the end of the monthly billing period, based on the actual services used. You do not receive a usage notification, but the cloud solution provider can see your consumption via the Partner Central portal and are responsible for communicating consumption and spend to its end users.
The downside of this way of purchase is that prices for each service are taken from the monthly price list, and thus prices for the same service could be different every month.
Azure in Open and Open Value
Customers who already have an existing Open/Open Value agreement can use these agreements to buy Azure and customers who enter such an agreement can buy Azure whenever they want to.
Purchasing Azure through Open or Open Value works the same way as through Enterprise Agreement with the downside that Open and Open Value only allow for upfront payments.
When the Monetary Commitment is very low, and you are not able to contact your partner, a Direct Payment towards Microsoft is a useful emergency option to avoid service interruption. You can use your credit card to buy the required amount of Monetary Commitment and this works in the same way as Monetary Commitment purchased through the Open programs.
The above is not an exhaustive list of the ways Azure can be purchased but a list of those we consider the most popular. The best way to purchase Azure is the best way for your company depending on the type of agreement you have and preferred method of payment. For price estimation you can use the Azure Pricing Calculator made available on Microsoft’s website.
Should you require any support to determine how your on premises deployments would be best converted to Azure? Don’t hesitate to reach out to us.
Since 2015, Roxana is a Software Entitlement Specialist focused on educating clients on licensing issues with Oracle, SAP and Microsoft. In her role, she works with customers to assist them in understanding and improving their software environment by reviewing their software license agreements and provide them advice regarding legal and financial risks. With a legal background, she also helps customers identify legal weaknesses in their contracts and optimize them.