Azure Arc is Replacing SPLA

Good, bad, or indifferent, Microsoft is pushing to replace SPLA. The writing is on the wall; SPLA is D.E.A.D. Then I woke up. My heart was pounding, sweat dripping from my brow, and my wife whispering to tell me everything was OK, it was just a dream. SPLA Man is still alive. But for how much longer?

Thank goodness it was just a dream. But the reality is things are changing. It’s CSP Hoster, it’s Flexible Virtualization, it’s Azure Arc, whatever the topic, change is on the horizon. What’s interesting about SPLA to me is the following:

My anonymous sources tell me it is roughly a 7 BILLION dollar business globally. I know that is how much Microsoft probably spends on toilet paper annually, but for any other company, a 7-billion-dollar business is massive.

Imagine running that 7-billion-dollar business without any overhead. There are very few licensing resources; Microsoft just discontinued its GetLicensingReady program. The only actual expense in my eyes is paying a third-party audit firm to collect revenue. Even in that scenario, there’s a massive return on investment.

Hosters still love SPLA. Why? All the other programs Microsoft introduced have nothing to do with SPLA, but everything to do with end-customers. In SPLA, hosters control the end-to-end customer experience. In CSP, one hoster mentioned, “We are just another reseller.”

Microsoft continues to raise pricing, but it has little impact on hosters. Hosters do not price solutions based on the cost of an individual license but on the overall solution. Compliance risk has always been an issue, but it is present no matter what you do. Even in Azure Arc, there’s no license verification; you simply check a box. Does your Azure admin understand the licensing impact?

I don’t know if I just provided a case for SPLA, but it doesn’t appear it is going away anytime soon. You must understand your different licensing options and use cases, know your risks before they become a problem, and, lastly, if you want to move to Azure, go for it. But I recommend understanding what is going on in your own data center before moving to someone else’s.

Let’s take a deeper look at the changes on the horizon and the shifting landscape for those of us living and breathing SPLA.

For years, SPLA has been the gold standard for service providers. “Simple” is not a word you often associate with Microsoft licensing, but relative to the emerging alternatives, SPLA was a breath of fresh air. You spin up a VM, you bill for it monthly, you make sure there’s a record in your audit log, and you move on with your life. No need to explain covert licensing logic to customers or translate a complicated licensure maze into simple English.

There is a beauty in that simplicity. The pricing is relatively transparent. The monthly reporting might be a hassle, but at least it’s a hassle you control. Compliance comes down to being organized and paying attention to the details, and you—the hoster—are in the driver’s seat.

Now, with the introduction of the CSP Hoster Program, Microsoft has started muddying those clear waters.

When Microsoft introduced the CSP Hoster Program, everyone perked up. A promise of more flexibility, increased options, and a world that increasingly revolves around the customer’s needs. That all sounds great on the surface, but dig a little deeper and hosters find themselves feeling sidelined. CSP Hosters are, as one hoster put it, “just another reseller.” There’s less room for differentiation, less “special sauce” hosters can add, just a race to the bottom driven by increasingly commoditized infrastructure and predictable Microsoft mandates.

Flexible Virtualization Licensing does offer customers what they’ve been asking for—BYOL (bring your own license) in more environments, the freedom to move workloads, and a smoother journey to the cloud. But that flexibility is a double-edged sword for hosters who have built their businesses around managing, optimizing, and selling the entirety of the experience under their roof.

And then there’s Azure Arc. What is Azure Arc? In Microsoft’s cloud-first world, Arc is the connective tissue. It lets customers extend Azure management to on-premises environments, multi-cloud, and edge. It’s how you can make your VM in a hoster’s data center look—to Microsoft, anyway—like it’s running on Azure. On paper, this seems like a win-win. In reality, for SPLA hosters, it feels less like innovation and more like an invasion. Now, licensing, updates, monitoring, and compliance are all piped through Azure, and the hoster loses the one thing SPLA always gave them: control.

When Microsoft introduced the CSP Hoster Program, everyone perked up. A promise of more flexibility, increased options, and a world that increasingly revolves around the customer’s needs. That all sounds great on the surface, but dig a little deeper and hosters find themselves feeling sidelined. CSP Hosters are, as one hoster put it, “just another reseller.” There’s less room for differentiation, less “special sauce” hosters can add, just a race to the bottom driven by increasingly commoditized infrastructure and predictable Microsoft mandates.

Flexible Virtualization Licensing does offer customers what they’ve been asking for—BYOL (bring your own license) in more environments, the freedom to move workloads, and a smoother journey to the cloud. But that flexibility is a double-edged sword for hosters who have built their businesses around managing, optimizing, and selling the entirety of the experience under their roof.

And then there’s Azure Arc. What is Azure Arc? In Microsoft’s cloud-first world, Arc is the connective tissue. It lets customers extend Azure management to on-premises environments, multi-cloud, and edge. It’s how you can make your VM in a hoster’s data center look—to Microsoft, anyway—like it’s running on Azure. On paper, this seems like a win-win. In reality, for SPLA hosters, it feels less like innovation and more like an invasion. Now, licensing, updates, monitoring, and compliance are all piped through Azure, and the hoster loses the one thing SPLA always gave them: control.

Let’s go back to that $7 billion figure. Imagine a program that pulls in that much revenue—mostly profit, by the way—without the messiness of overhead, staffing, or support. There are no armies of Microsoft reps devoted to SPLA. The GetLicensingReady materials just got sunsetted. So what’s left? A contract to a third-party audit firm and a spreadsheet for reconciliations. The margins on this program must make Microsoft’s financial wizards weep for joy.

Yet, for all that, SPLA lumbers onward, ignored in favor of glitzier, shinier, “transformational” licensing models that drive cloud adoption and quarterly Azure growth. It’s a strange dichotomy. The world is full of enterprises and SMBs who still, for one reason or another, cannot simply “move to the cloud” tomorrow. SPLA is the lifeboat for those customers, and for the hosters who support them, swapping it out isn’t as simple as throwing a switch.

Licensing compliance has always been, and will always be, a risk in the hosting business. SPLA at least made compliance something tangible—a function of good audits, disciplined record-keeping, and awareness. The risks were clear, the actions measurable.

Fast-forward to Azure Arc or new CSP-based models, and that clarity evaporates. You tick a box in Azure, sign an annual attestation, and you’re done. But does your average systems admin, or even your Azure platform engineer, understand the licensing implications of the boxes they check? Who’s responsible when (not if) there’s an audit and there’s a disconnect between what’s “in Azure” and what’s “really happening on-prem?”

This is a critical point that often goes unnoticed in the rush to cloud-centric models. In a world where click-through agreements are the norm, is anyone really checking what’s being attested to? SPLA may feel like a relic, but at least it forced everyone to pay attention. In new models, is compliance merely an afterthought?

Hosters know their value lies not in the price of a license, but in the end-to-end solution they offer. The infrastructure, support, expertise, security, and yes, the freedom from having to ever think about Microsoft licensing. Customers just want things to work. With SPLA, hosters can bundle all of this up—hardware, software, plus services—and sell a simple, reliable, compliant solution.

By contrast, CSP, Flexible Virtualization, and Azure Arc make it feel like hosters are becoming an appendage: an infrastructure provider running someone else’s software, on someone else’s terms, with compliance landing on someone else’s desk. The magic of SPLA is the ability to create differentiated offerings where hosters set the experience—not Redmond, not some portal checkbox.

So, is SPLA dead? Not yet. The pace of change is glacial for now, especially for certain verticals and regional markets where the jump to the cloud is less appealing—or even feasible. If anything, SPLA is simply aging, not dying, and its eventual end feels years off.

However, any prudent business leader should be paying close attention. Every new “cloud first” licensing announcement from Microsoft is a signal. CSP Hoster, Flexible Virtualization, Azure Arc—they hint at a future where SPLA will, eventually, be history. The key is not to be caught by surprise.

My recommendation is to audit your existing environments. Know what’s being licensed, who’s using it, and how you’re reporting it. An AI-powered SPLA licensing can help you uncover these essential insights.  Educate your technical teams. Push Microsoft for clarity about your use cases. If you have use cases or vertical markets that SPLA uniquely supports, make that case. Don’t depend on the status quo.

And if you’re thinking about jumping to Azure, do your homework. Understand not just the opportunity of moving to the cloud, but the impact on your business operations, compliance, and yes, your ability to deliver the customer experience your clients expect.

The end isn’t nigh—not yet. But change is coming.

As SPLA Man, I’m telling you: beware of complacency. Whether SPLA survives for another year or another decade is anyone’s guess, but the wheels of change are turning somewhere deep inside Microsoft. Watch for the signals, protect your business, and don’t let cloud hype distract you from what’s happening right now, under your own roof.

Remember, the only thing constant is change. Know your risks before they become your problems. And never, ever trust a checkbox in Azure to keep you compliant. If you do need technical consultancy, don’t hesitate to contact Octopus Cloud or join our SPLA community.  

Thanks for reading,

SPLA Man