Note: SQL Server 2019 Licensing Guide supercedes the information in this post. (Post updated 1/09/2020)

Considering a SQL Server active/passive configuration in the Cloud?

If so, be prepared to fork out more in SQL Server licensing if

deploying to shared third party server providers like Azure and AWS.

First of all you will need software assurance to be able to assign a BYO SQL Server license to a VM running on Azure or AWS, the alternative to BYOL is to sign up to VMs with SQL built into the usage price.

But the real hip pocket pain is highlighted by the Product User Rights document in the SQL Server Fail-over section that declares :-

Fail-over server rights do not apply in the case of software moved to shared third party servers under License Mobility through Software Assurance.

Clarification was sought from Microsoft and License advisors on whether Azure was indeed considered a shared third party server provider, the consistent answer from 3 sources including Microsoft is YES, Azure is considered a shared third party server provider.

You would think that Microsoft would give itself a break and provide some competitive advantage and declare that Fail-over rights would be available on Azure IaaS. But No it decided to hit customers up for full licensing costs per SQL Server deployed.

The ramifications are that Fail-over server rights don’t apply in Azure IaaS active/passive SQL Server configurations, therefore you have to license the Active and Passive servers in an Availability Group configuration. This marries with the Azure FAQ (see below)  http://azure.microsoft.com/en-us/pricing/licensing-faq/

How do I license SQL Server within Azure Virtual Machines deployed in an active-passive configuration?

Each of the Azure Virtual Machines deployed requires licensing for SQL Server. To accomplish this, you can do the following for each virtual machine:
Obtain a SQL image from the Azure VM marketplace and pay the per-minute rate of SQL Server, or
Install or upload your own SQL Server image using the license mobility benefits under Software Assurance

On AWS you can avoid the shared third party server gotcha by deploying EC2 instances using Dedicated Tenancy and therefore the Fail-over server rights can apply and you only have to license SQL Server on the active server. The downside of Dedicated Tenancy is the $2 per hour per region cost, roughly $1440 per month plus the higher hourly rate per EC2 instance deployed.

In either case licensing SQL Server active/passive configurations on the Cloud does come at extra costs, unless you can negotiate discounts via an Enterprise Agreement or SCE agreement.