Exchange, SQL and Windows Server Licensing 101
Microsoft are changing some of their licensing rules (which might already seem quite complex) - here’s the essentials you should know.
Published on 6th January 2026
As Microsoft phase out older versions of some of their big server products, IT leaders are facing new decisions about how to stay compliant and cost-efficient. Understanding the current licensing landscape for Windows Server, SQL Server and Exchange Server can help organisations avoid costly mistakes and even uncover opportunities to save money and streamline management.
Exchange Server Moves to Subscription Edition
In October 2025, Microsoft officially deprecated older Exchange Server versions, including 2016 and 2019, and introduced Exchange Server Subscription Edition. While the software itself hasn’t changed dramatically, the licensing rules have.
Organisations running Exchange on-premises must now purchase licenses through Microsoft Volume Licensing — and, critically, Software Assurance is now required. Exchange Server SE customers must maintain active SA for both the per-server license and their client access licenses (CALs), whether user or device-based, to remain compliant.
What Software Assurance Really Covers
Software Assurance delivers tangible benefits beyond compliance. It’s essentially a subscription that renews every three years and typically costs about a third of the license’s original price. The payoff, however, can be significant:
- Version protection lets customers upgrade to future releases (for example, Windows Server 2025) without repurchasing licenses.
- License mobility allows virtual machines to move across hosts in clustered environments.
- Bring Your Own License privileges enable organisations to carry existing licenses into cloud environments such as Microsoft Azure or Amazon Web Services.
- Cold backup rights allow a standby disaster recovery server to run without a separate license if the primary server fails.
In short, software assurance adds flexibility and long-term savings potential to nearly every Microsoft licensing scenario.
Beware of This Common Microsoft Licensing Mistake
Client access licenses, or CALs, are always backward-compatible — for instance, a 2022 CAL can access a 2019 server — but not forward-compatible unless covered by active software assurance. Organisations that skip SA risk needing to repurchase CALs for newer servers.
This can really bite small businesses that assume that they’re compliant with their Microsoft licensing just because a piece of software they used “worked.” After all, if they didn’t have the right to use the software, wouldn’t Microsoft prevent them from doing so?
The answer is that sometimes you will be stopped from using unlicensed software, and sometimes you won’t be. Using software without a proper license could get discovered in one of Microsoft’s regular audits, at which point you’d be hit with an unexpected bill. Remember, just because a feature activates or runs successfully doesn’t mean it’s properly licensed.
Windows Server and SQL Licensing Updates
While the basics of Windows and SQL licensing remain familiar, there are key updates IT leaders should know. Microsoft now allows organisations to license virtual machines directly, instead of licensing the physical host, as long as SA is active.
This can be a cost-saver for environments running only a few Windows VMs on a large host. The minimum purchase requirement is eight core licenses per VM and 16 per environment.
SQL Server follows similar rules. Starting with SQL Server 2022, SA is required when licensing per virtual core. Without it, customers lose mobility and upgrade rights.
Extended Support and Downgrade Rights
SA also plays a crucial role when older systems reach end of support. Windows Server 2012, for example, will enter its final year of Extended Security Updates in October 2026. To qualify for ESUs, organisations must have active SA or purchase new Windows Server 2025 licenses with SA, then use downgrade rights to continue running 2012.
Those who let SA lapse face a steeper cost to regain compliance, as they’ll need to repurchase licenses entirely. Maintaining SA from the start is far more cost-effective and avoids unnecessary disruption.
Finally, Microsoft’s new commerce experience now governs most Microsoft 365 and cloud-based products, replacing the old Cloud Solution Provider model.
For traditional server licensing, organisations can still buy through Open Value or Microsoft Products and Services Agreement volume licensing programs. Open Value requires SA for all purchases; MPSA doesn’t, though Microsoft has stopped adding new products to it.
Microsoft licensing can be complex, even for seasoned IT professionals. Licensing experts can assist with transitions from older Exchange Server versions to the new Subscription Edition, guide customers through SA renewals, and optimise licensing across Windows and SQL environments.
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Ahmad Juliyanto via Vecteezy