Cloud licensing costs arise in one of two ways: either the licence for Windows Server, SQL Server, Red Hat Enterprise Linux or SUSE is included in the hourly price of the instance or image, or a company brings licences it already holds, bring your own licence (BYOL), and pays the provider only for the infrastructure. The route changes the price of the same machine, and the software vendor's licence terms, not the cloud provider alone, decide which route is open.
How it works
Licence included
On AWS, Windows AMIs on Amazon EC2 and Amazon RDS for SQL Server under License Included carry the Microsoft licence. For newer instance types RDS for SQL Server shows the licence separately (unbundled): the instance per hour, the licence per vCPU per hour, with Optimize CPU lowering the licensed vCPUs. On Azure, pay-as-you-go Windows VMs and Azure SQL Database in the vCore model include the licence, the database as a component beside base compute. Google Cloud charges premium images on top of the machine type: Windows Server per visible vCPU, SQL Server per core with a minimum of 4 cores per instance, RHEL per core since 2024-07-01, SLES by machine type, each with a one-minute minimum and per-second billing after that. Spot VMs do not reduce image charges.
Licences brought along
Azure Hybrid Benefit covers Windows Server and SQL Server core licences with active Software Assurance or qualifying subscription licences, as well as RHEL and SLES subscriptions. A Windows VM then costs the base rate, which equals the Linux rate. Each VM needs at least 8 core licences, and a processor licence counts as 16. Standard edition licences run either on-premises or in Azure, with a one-time overlap of up to 180 days for migration; Datacenter edition allows simultaneous use for VMs without a time limit.
On AWS, License Mobility, a Software Assurance benefit, brings eligible products such as SQL Server, SharePoint Server or Exchange Server to EC2 with default tenancy and, as Bring Your Own Media, to RDS for SQL Server. According to AWS, the Microsoft Product Terms make Windows Server ineligible for License Mobility; for Windows Server licences brought along AWS names only EC2 Dedicated Hosts, where the licence was bought before 2019-10-01 (or added as a true-up under an Enterprise Enrollment effective before then) and the version was available before that date. AWS License Manager tracks licence consumption.
Google states that only the Compute Engine infrastructure is charged when licences are brought along. According to Google, SQL Server and SharePoint Server are typically possible through License Mobility, Windows Server typically not; it may qualify through Outsourcing Software Management Rights if version and purchase predate 2019-10-01 and the VMs run on sole-tenant nodes. Images based on a premium image cannot be used for BYOL.
The 2019-10-01 cut-off
Microsoft changed its outsourcing terms on 2019-10-01: on-premises licences without Software Assurance and mobility rights may no longer run on dedicated hosted cloud services of the Listed Providers, namely Microsoft, Alibaba, Amazon (including VMware Cloud on AWS) and Google. Microsoft states that licences bought earlier keep their rights for the versions of that time and that the change does not apply to other providers. Whether a particular licence qualifies is decided by the vendor's product terms and the company's own agreement; that is a question for licensing advisers and legal counsel, not for cost analysis.
| Provider | Licence included | Own licence | Hardware condition | On the bill |
|---|---|---|---|---|
| AWS | Windows AMIs on EC2, RDS for SQL Server | License Mobility; per AWS: Windows Server only if bought before 2019-10-01 | Dedicated Hosts without mobility | in the instance rate, on RDS unbundled as a separate component |
| Azure | pay-as-you-go VMs and vCore databases | Azure Hybrid Benefit | none for VMs | base rate equal to Linux |
| Google Cloud | premium images | License Mobility, Outsourcing Software Management Rights | sole-tenant nodes without mobility | image on top of the machine type |
What it means for your cost
On AWS the licence share usually sits invisibly inside the instance rate; only a comparison with the Linux rate of the same type reveals it. It shows separately on RDS for SQL Server with unbundled pricing and on Google, where the premium image sits beside the machine type. On Azure, VMs running with Hybrid Benefit are identified in billing data by the Additional Info field with "ImageType":"WindowsServerBYOL", and billing follows with a delay of several hours. Machine pricing is covered in Virtual machines and instance families, database licences in Managed databases.
Where licences brought along require dedicated hardware, the bill shifts: an EC2 Dedicated Host costs per second while it is allocated, whether instances run on it or not, and Google names sole-tenant nodes explicitly as an additional cost. The licence choice is thus a savings opportunity whose result depends on how well the hosts are used. Dedicated Hosts have their own reservations and Savings Plans, similar to Reserved Instances, and Azure Hybrid Benefit can be combined with reservations; the starting point is on-demand pricing.
Contract terms with private pricing are covered in Enterprise agreements and private pricing, software bought through a marketplace in Marketplace purchases on the cloud invoice.
Where it goes wrong
- Hybrid Benefit without licence cover. Symptom: Windows VMs run at the Linux rate, but an inventory shows more cores than licences. Cause: the benefit is switched on per VM, the company has to reconcile it with its licences, and Microsoft reserves the right to audit.
- Software Assurance lapsed. Symptom: VMs keep running at the Linux rate after Software Assurance ends. Cause: Hybrid Benefit applies only during the Software Assurance or subscription term; afterwards, according to Microsoft, the company has to renew, switch the benefit off or remove the workloads.
- A half-empty Dedicated Host. Symptom: high host hours with few instances. Cause: the host costs money while it is allocated, regardless of how full it is.
- Spot does not make Windows cheaper. Symptom: on Google Spot VMs the charges for Windows or SQL Server images stay the same. Cause: Spot prices apply to the machine type, not to premium images.
- Small SQL Server instances. Symptom: an instance with 2 vCPUs carries licence charges for 4. Cause: Google bills SQL Server for at least 4 cores per instance and AWS for at least 4 vCPUs.
Example
List prices in USD, read on 2026-10-16: Google Compute Engine, the same in all regions, USD 0.046 per visible vCPU-hour for Windows Server images and USD 0.12 per core-hour for SQL Server Standard; AWS, the same in all regions according to the pricing page, USD 0.046 per vCPU-hour for Windows Server AMIs on Dedicated Hosts, and USD 8.096 per hour for an m6i Dedicated Host in Europe (Frankfurt).
Sources
Read on 2026-10-16. Microsoft licensing on AWS, AWS Windows FAQs, What is AWS License Manager?, Amazon EC2 Dedicated Hosts pricing, Amazon RDS for SQL Server pricing, Azure Hybrid Benefit for Windows Server, Azure Hybrid Benefit for Azure SQL Database and SQL Managed Instance, Azure Hybrid Benefit, Updated Microsoft licensing terms for dedicated hosted cloud services, Microsoft licences on Google Cloud, Bringing your own licenses to Compute Engine, Compute Engine disk and image pricing.