Azure ARC ESU's for SQL Server 2016

For SQL Server 2016, Azure Arc lets you obtain ESUs without Software Assurance only by enabling pay-as-you-go billing for both the underlying SQL Server software and the ESU subscription; a perpetual SQL Server license without Software Assurance is not eligible by itself.^1^

SQL Server 2016

SQL Server 2016 extended support ends and ESU Year 1 starts on July 14, 2026. Coverage can continue for up to three years.^1^

With no Software Assurance, the relevant Arc option is:

1. Connect the server and SQL Server instance to Azure Arc.
2. Enable pay-as-you-go licensing for SQL Server software.
3. In Azure portal, open Azure Arc → Machines → your server → Operations → SQL Server Configuration.
4. Select Subscribe to Extended Security Updates, then select Save.

Microsoft documents these eligibility combinations:

Therefore, Arc does not turn an existing perpetual, non-SA SQL license directly into an eligible bring-your-own-license ESU entitlement. The alternative is to move that SQL installation to Azure PAYG licensing and pay the applicable SQL software and ESU usage charges.^1^

Do you have to purchase Years 1, 2 and 3 first?

You do not pre-purchase all three years when using the Arc subscription. It is billed through Azure and can be canceled when you upgrade or migrate.

However, ESU years are cumulative:

• If enrolled before July 14, 2026, SQL Server 2016 ESU billing starts on that date.
• If enrolled later, Azure applies a bill-back charge from the beginning of the current ESU year.
• Starting late does not let you pay only from the enrollment date; previous required coverage must be accounted for. Microsoft’s general rule states that starting after end of support requires purchasing the Volume Licensing offer or ESU subscription covering previous years.^1^

For example, enrolling in January 2027 triggers SQL Server 2016 back-billing for the months beginning in July 2026.^2^

Arc billing is based on the licensed topology:

• A VM is billed for its allocated virtual cores, with a four-core minimum.
• A physical installation is billed for all physical cores available to the operating system, with a four-core minimum.
• Physical-core licensing with unlimited virtualization is a separate Enterprise option.
• Eligible passive high-availability replicas are not billable.^1^

Is Azure Arc cheaper?

There is no universal cheaper option. Compare these two totals for your edition and core count:

• Traditional route: eligible SQL license/subscription plus Software Assurance, and annual ESU purchases.
• Arc without SA: hourly PAYG SQL Server software charges plus SQL Server ESU charges.

Arc is more flexible because billing is usage-based and can stop when you upgrade, migrate, or retire the instance. PAYG can be advantageous for workloads that can be stopped at night or on weekends; an always-on server may not receive that utilization benefit.^3^

Obtain a quote from your Microsoft licensing partner and compare it with the Azure estimate using the actual edition, physical/vCPU count, virtualization layout, and operating schedule. The supplied documentation does not provide enough rate information to calculate which option is cheaper for your server.

Windows Server 2016 is a separate ESU purchase

SQL Server ESUs do not cover the Windows Server 2016 operating system. Windows Server 2016 reaches end of support on January 12, 2027, with Arc ESU billing beginning January 13, 2027.

Unlike the SQL Arc PAYG alternative above, Windows Server 2016 ESUs require one of these underlying entitlements:

• Software Assurance through an eligible Volume Licensing program;
• a server subscription; or
• qualifying SPLA licensing.

A perpetual Windows Server license without Software Assurance does not satisfy the documented requirement.^4^

Consequently, budget and validate two independent items:

1. SQL Server 2016 licensing plus SQL ESUs from July 14, 2026.
2. Windows Server 2016 eligibility plus Windows ESUs from January 13, 2027.

References

1. SQL Server Extended Security Updates enabled by Azure Arc
2. SQL Server Extended Security Updates FAQ
3. SQL Server enabled by Azure Arc
4. Prepare to deliver Extended Security Updates for Windows Server (windows-server-2016)