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Azure Hybrid Benefit Explained

Maximize your existing licenses to save up to 85% on Azure compute costs

What is Azure Hybrid Benefit?

Azure Hybrid Benefit (AHB) lets you use your existing on-premises Windows Server and SQL Server licenses with Software Assurance to save money on Azure virtual machines and database services. Instead of paying for both the license and the Azure compute, you only pay for the compute.

Windows Server

40%

Savings on Windows VMs

SQL Server

55%

Savings on SQL Database

Combined + RI

85%

Hybrid Benefit + Reserved

Eligible Products

Windows Server Hybrid Benefit

  • Eligible Licenses: Windows Server Standard or Datacenter with active Software Assurance
  • Azure Services: Windows VMs, Azure VMware Solution, Azure Stack HCI
  • Exchange Ratio:
    • Standard: 2 licenses = up to 8 vCPUs or 2 VMs with 8 vCPUs each
    • Datacenter: 1 license = unlimited VMs on dedicated host

SQL Server Hybrid Benefit

  • Eligible Licenses: SQL Server Enterprise or Standard with active Software Assurance
  • Azure Services: Azure SQL Database, SQL Managed Instance, SQL Server on VMs
  • Exchange Ratio:
    • Enterprise: 1 core = 4 Azure vCores (Business Critical)
    • Standard: 1 core = 1 Azure vCore (General Purpose)

How It Works

Scenario Without AHB With AHB
Windows Server VM Compute + Windows license Compute only (use your license)
SQL Server on VM Compute + Windows + SQL license Compute only (use both licenses)
Azure SQL Database Full DTU/vCore pricing Reduced pricing (license included)

Real Cost Examples

Example 1: D4s v3 Windows VM (4 vCPUs, 16GB RAM)

  • Pay-as-you-go: ~$280/month
  • With Hybrid Benefit: ~$168/month
  • Savings: $112/month (40%)

Example 2: SQL Managed Instance (8 vCores, Business Critical)

  • Pay-as-you-go: ~$3,200/month
  • With Hybrid Benefit: ~$1,440/month
  • Savings: $1,760/month (55%)

Example 3: Combined Savings (SQL on Windows VM)

  • Pay-as-you-go: ~$1,500/month
  • With AHB (both): ~$700/month
  • Plus 3-year Reserved: ~$230/month
  • Total Savings: Up to 85%

Stacking Benefits

Azure Hybrid Benefit can be combined with Reserved Instances for maximum savings:

Benefit Combination Typical Savings
Hybrid Benefit only 40-55%
Reserved Instance only (1 year) ~40%
Reserved Instance only (3 year) ~60%
Hybrid Benefit + 1-year RI ~65%
Hybrid Benefit + 3-year RI Up to 85%
Maximum Savings Formula: Start with on-premises licenses (AHB) → Add 3-year Reserved Instances → Result: Up to 85% off pay-as-you-go pricing.

How to Apply Azure Hybrid Benefit

For New VMs

  1. In Azure Portal, create a new VM
  2. Under "Licensing," select "Would you like to use an existing Windows Server license?"
  3. Check the confirmation box
  4. Complete VM creation

For Existing VMs

  1. Navigate to your VM in Azure Portal
  2. Go to Configuration
  3. Find "Azure Hybrid Benefit" section
  4. Select "Already have a Windows Server license"
  5. Save changes

For Azure SQL

  1. During database creation, look for "Want to use SQL Hybrid Benefit?"
  2. Or modify existing database under Compute + Storage settings

License Tracking and Compliance

Important: You are responsible for ensuring you have enough qualifying licenses. Microsoft may audit your Azure Hybrid Benefit usage. Track your entitlements carefully.

Best Practices

  • Inventory Your Licenses: Know exactly how many Windows Server and SQL Server licenses you own
  • Track Software Assurance: Hybrid Benefit requires active SA
  • Use Azure Cost Management: Monitor AHB usage across subscriptions
  • Document Assignments: Keep records of which Azure resources use which licenses
  • Consider Centralized Management: Use Azure Policy to enforce AHB where applicable

Extended Security Updates (ESU)

Azure Hybrid Benefit also provides value for end-of-support products:

  • Windows Server 2012/R2: Free Extended Security Updates in Azure
  • SQL Server 2012: Free ESUs when running in Azure VMs
  • On-Premises ESU: Would cost 75% of license per year
  • In Azure: ESUs included at no extra cost
Migration Incentive: Running end-of-support software in Azure gives you free security updates that would otherwise cost thousands on-premises.

Azure Hybrid Benefit for Linux

Linux VMs also benefit from hybrid options:

  • Red Hat: Bring your own RHEL subscriptions to Azure
  • SUSE: Use existing SUSE Linux Enterprise subscriptions
  • Savings: Avoid paying for OS licensing in Azure

Common Questions

Can I use AHB if I'm moving entirely to Azure?

Yes. As long as you have valid licenses with Software Assurance, you can apply them to Azure even if you're decommissioning on-premises servers. SA must remain active.

What happens when Software Assurance expires?

You lose eligibility for Azure Hybrid Benefit. VMs will continue to run, but you'll start paying the full license cost. Plan for SA renewals or Reserved Instances.

Can I use the same license on-premises and in Azure?

Dual-use rights allow temporary concurrent use during migration (up to 180 days). For permanent dual use, you need separate licenses.

Additional Resources

Disclaimer: Pricing and licensing information provided on this page is for general guidance only and may not reflect the most current Microsoft pricing or licensing terms. Microsoft frequently updates its licensing models, pricing, and feature inclusions. We are not responsible for any inaccuracies or outdated information. Always verify current pricing and licensing requirements directly with Microsoft's official licensing resources or your Microsoft partner before making purchasing decisions.

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