What you need to know about Windows Azure’s pricing and licensing changes

What you need to know about Windows Azure’s pricing and licensing changes

Effective today, Microsoft is changing the way it sells and licenses Windows Azure through the Enterprise Agreement (EA) program. The changes apply to all enrollment programs, including the new Server and Cloud Enrollment (SCE), which also goes live today.

The Azure pricing update involves three major changes:

  1. Simplified pricing
  2. A new consumption allowance that eliminates overage fees
  3. A single subscription option

Below we’ll take a look at each of these changes and outline how organizations can license Windows Azure via SCE moving forward.

Simplified pricing

Under the previous Azure pricing model, an organization based its monetary commitment on pricing established by its EA Volume Licensing price level (A-D) and total monetary commitment volume. In this model, a customer’s EA price sheet reflected a flat monthly cost while the Azure Enterprise Portal tracked its monetary commitment volume discount.

However, as part of the pricing changes introduced today, a customer’s EA price sheet now reflects a single cost based on its EA price level.

Consumption allowance

Microsoft’s most significant change to Azure pricing involves the management of overage charges. Previously, when a customer exceeded the level of usage provisioned by its monetary commitment, Microsoft charged the organization for overages at a higher rate than that provided by the commitment. In this scenario, Microsoft measured consumption and charged quarterly overage fees.

Today’s changes eliminate elevated overage fees and replace them with a new concept called consumption allowance. Available for direct EA customers only, Microsoft’s consumption allowance enables organizations to plan for possible overages with the creation of a slush fund, which allows them to contribute an amount equal to 50 percent of their annual Azure monetary commitment. Should the organization’s Azure consumption exceed that provisioned for by its monetary commitment, payment is deducted from the consumption allowance.

Under the new model, Azure doesn’t charge overage fees quarterly or at a premium. Instead, payment for overuse comes directly out of the organization’s consumption allowance at the rate of monetary commitment. That said, if a customer exceeds both its monetary commitment and its consumption allowance for the year, it will incur quarterly overages.

It’s important to note that consumption allowances do not carry over from year to year, so organizations will forfeit any unused portions of their annual monetary commitment.

Single subscription option

Before today, organizations that wanted to procure Azure could choose between a 12-month or coterminous subscription term. The 12-month subscription enabled organizations to reset their annual commitment amounts at the end of each year to avoid penalties. For example, if a company consumed fewer resources than it had allotted for, it could reduce its commitment level for the next year.

In contrast, a coterminous subscription locked customers into the initial annual monetary commitment for the length of their EA. For example, if a customer signed up with an annual monetary commitment of $25,000, it paid $25,000 for each subsequent year of its agreement, regardless of actual usage. Since most organizations can’t predict their annual usage at registration, most chose the12-month monetary commitment.

Now, Microsoft is offering a single subscription term option that is coterminous with an organization’s EA terms. In conjunction with this single subscription offering, Microsoft will introduce a service reduction option, enabling customers to reduce their Azure monetary commitment on an annual basis. This option gives customers more flexibility over their annual commitment and allows them to make adjustments based on historical and anticipated future use.

How Windows Azure will be licensed under SCE

With SCE also going live today, Windows Azure will change licensing procedures, giving customers two options:

  1. Windows Azure-Only SCE. Under this option, organizations use SCE to purchase only the Windows Azure component, allowing them to define their annual monetary commitment when they sign their three-year agreement while also enabling them to raise or lower their commitment at each anniversary. Customers’ EA price level is defined by their qualifying enterprise enrollment or defaults to level A.
  2. Windows Azure with additional components. When a customer commits to any of the SCE components — core infrastructure, application platform, or developer platform — it will automatically gain access to Windows Azure. This means that customers are automatically provisioned for Windows Azure in the Enterprise Portal without having to make an initial monetary commitment. They simply pay for what they use. In addition, if a customer commits to another SCE component, it will receive an additional 5 percent off its EA pricing.

In addition to the option of licensing Azure via SCE, customers can still sign an Enrollment for Windows Azure (EWA). EWA is a standalone Enterprise Enrollment for Windows Azure only, with no option of licensing other components within the enrollment.