Azure FinOps Essentials

Hi there, and welcome to this week’s edition of Azure FinOps Essentials.

This time, we are looking at a cost factor that is often overlooked in cloud discussions: software licensing. When moving workloads to Azure, many teams focus on compute and storage optimization, while ignoring the licenses that run on top. The result is that organizations may end up paying twice, once through existing agreements and again on the cloud bill.

In this edition, I will explain how Azure handles licensing, what Software Assurance and Hybrid Benefit mean in practice, and why paying attention to licensing can unlock hidden savings. More importantly, I will highlight why FinOps practitioners should not treat licensing as a technical afterthought but as an integral part of driving business value in the cloud.

Let’s dive in.

Cheers, Michiel

The Hidden Cost of Cloud: Licensing

When we talk about cloud costs, most people think about compute, storage, or network traffic. Yet licensing is one of the most overlooked factors in Azure.

Take SQL Server or Windows Server as examples. By default, Azure charges you through a pay-as-you-go model that includes the license cost in the hourly rate. If you already own licenses with Software Assurance and do not enable Azure Hybrid Benefit, you are effectively paying twice for the same product.

This is more common than you might expect. Teams migrate quickly, scale up workloads, and focus on performance, but they forget to check the licensing details. The result is thousands of euros wasted each month.

Licensing is tricky because it requires alignment between procurement, finance, and engineering. It is not automatically optimized by Azure. You need to configure it, monitor it, and make sure benefits are applied where they should be.

This is why licensing deserves more attention in FinOps. Getting it right can mean the difference between waste and efficiency.

How Azure Hybrid Benefit Works and How Much You Can Save

Azure Hybrid Benefit (AHB) lets you bring your own Windows Server or SQL Server licenses to Azure if you have active Software Assurance (SA). This means you only pay for the underlying compute infrastructure instead of paying again for the Microsoft license.

What is Software Assurance?

Software Assurance is Microsoft’s licensing program that gives you more than just the right to use a license. It provides benefits like upgrade rights, support, training, and most importantly for FinOps, license mobility. This license mobility allows you to reuse your existing Windows Server or SQL Server licenses in Azure instead of buying new ones. More details can be found here: Microsoft Software Assurance overview.

Windows Server Savings Example

According to Microsoft, Azure Hybrid Benefit for Windows Server can save you up to 40 percent on virtual machines, and even more when combined with Reserved Instances. (Microsoft AHB overview)

Example:

A D8_v3 Windows Server VM costs around $548/month at pay-as-you-go rates. If you apply Azure Hybrid Benefit, the license portion is removed and you only pay for compute. This brings the cost closer to a Linux VM, about $280/month, which is nearly a 50 percent saving.

SQL Server Works Even Better

Azure Hybrid Benefit also applies to SQL workloads:

• SQL Server on Azure Virtual Machines

• Azure SQL Database (vCore-based, provisioned tiers)

• Azure SQL Managed Instance

Microsoft states that customers can save up to 55 percent on SQL workloads with Azure Hybrid Benefit (source). Enterprise Edition customers can also exchange 1 on-premises core license for up to 4 vCores in the cloud, making the discount even more attractive.

Managing Licenses at Scale

For larger organizations, you can centrally manage Hybrid Benefit at subscription or billing scope. This makes it easier to assign licenses where needed, track utilization, and avoid over or under use. Documentation on how to manage this at scale can be found here: Tutorial: Apply Azure Hybrid Benefit for SQL.

Why Licenses Matter in Cloud FinOps

Nothing in IT comes for free. The hardware has a cost, the platform services have a cost, and the software licenses that run on top of those resources also have a cost. In traditional on-premises setups, software licenses were often purchased as part of a larger enterprise agreement and then “forgotten” because they were already paid for upfront. In the cloud, this cost becomes much more visible, since it is directly tied to your monthly invoice.

The benefit of the cloud is its flexibility and scalability, but that also introduces new ways of paying for licenses. If you are not aware of what you already own, you may end up paying twice. This is especially common with lift-and-shift migrations where organizations move workloads into Azure without adjusting their licensing strategy. In such cases, Azure Hybrid Benefit can help you reuse existing licenses and unlock substantial savings.

From a FinOps perspective, the key point is awareness. Just as you would optimize compute or storage usage, you also need to optimize your licensing. Reviewing what you already paid for through Software Assurance, and aligning that with your Azure deployment, can ensure you maximize value from your cloud spend.

Cloud FinOps is not only about technical optimization. It is also about bringing financial accountability and making sure that business decisions reflect the full picture, including the software that powers your workloads.

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Want more FinOps news? Then have a look at FinOps Weekly by Victor Garcia