By ByteBot
Microsoft announced on January 23, 2026, that it will deprecate System Center Operations Manager (SCOM) Management Packs for SQL Server products, forcing enterprises to migrate to Azure Monitor by January 2027. The company is framing this as modernization—unified visibility, cloud-native management, better integration. However, here’s what Microsoft isn’t highlighting: migrating to Azure Monitor requires registering your on-premises servers with Azure Arc, creating a complete inventory of your SQL Server deployments that Microsoft’s licensing auditors can access during compliance reviews. This isn’t just a technical deprecation—it’s a licensing audit trap.
Azure Registration Equals Audit Visibility
To use Azure Monitor for on-premises SQL Server monitoring, organizations must register servers with Azure Arc. This creates a comprehensive inventory: server names, SQL instances, editions, core counts, deployment locations. Andrew Snodgrass, Research Vice President at Directions on Microsoft, warns about the implications: “If an audit comes along, they certainly could say, ‘You’ve got this whole list here…and you don’t have enough licenses to cover all these servers.'”
The problem runs deeper. Azure Monitor cannot distinguish between dev/test and production environments—everything looks like it needs a full license from Microsoft’s audit perspective. Consequently, organizations lose plausible deniability about forgotten dev servers, test instances running Enterprise edition (which should use the free Developer edition), or undocumented SQL deployments.
The financial stakes are enormous. SQL Server Enterprise Edition costs $15,123 per two-core license pack, with a minimum of eight cores required per server—that’s $60,000+ just to license a single production database server. Common audit findings include dev servers running Enterprise binaries with Standard licenses, test environments that weren’t properly documented in Software Asset Management tools, and instances over-provisioned on cores. A mid-sized enterprise with 200 SQL Server instances could face millions in back licensing fees if an audit discovers gaps.
Three Bad Options, One Intended Outcome
SCOM Management Packs for SQL Server Reporting Services, Power BI Report Server, and Analysis Services lose support after January 2027, as reported by The Register. Enterprises face a forced choice between three unappealing options.
Option A is migrating to Azure Monitor—Microsoft’s intended outcome. It’s fully managed, integrated with Azure, and provides the “unified visibility” Microsoft keeps emphasizing. Nevertheless, it also means audit exposure, ongoing cloud subscription costs, and loss of on-premises control.
Option B is staying on SCOM without management packs. You avoid Azure registration and keep on-premises autonomy. However, you’re left running unsupported monitoring for critical SQL Server workloads—unacceptable for most enterprises, especially those in regulated industries.
Option C is migrating to third-party tools like Datadog, New Relic, or open-source alternatives like Prometheus. This avoids Microsoft licensing exposure entirely. But it’s expensive (Datadog charges $15-$31 per host per month) and requires months of rip-and-replace migration work. Microsoft knows this is a high barrier.
Most organizations will choose Option A because it’s the path of least resistance. Microsoft designed it that way.
The Vendor Lock-In Playbook
This isn’t an isolated incident. It’s part of Microsoft’s systematic approach to forcing cloud adoption:
First, establish dependency. Enterprises rely on on-premises tools like SCOM for critical monitoring, Exchange Server for email, or Windows Server offline activation for air-gapped environments.
Second, introduce a cloud alternative. Position Azure or Microsoft 365 as the “modern” replacement with better features and easier management.
Third, deprecate the on-premises option. Remove support, announce end-of-life timelines, stop releasing updates. SCOM Managed Instance itself is being deprecated by September 30, 2026—just eight months away.
Fourth, create switching costs. Make migration to third-party alternatives expensive and technically complex. Most enterprises won’t have budget or resources for a full platform replacement.
Finally, capture customers. The majority migrate to Microsoft’s cloud by default, generating subscription revenue while simultaneously creating audit leverage through Azure Arc registration.
This pattern is playing out across Microsoft’s product line. Exchange Server is being pushed toward Microsoft 365. Windows Server offline activation is being phased out, forcing cloud connectivity. Industry resistance is building—research shows 42% of companies are now considering moving workloads back on-premises to escape vendor lock-in. Basecamp famously saved $7 million over five years by avoiding cloud dependency. But the switching costs remain high, which is exactly what Microsoft is counting on.
What Enterprises Should Actually Do
Don’t panic, but don’t be naive either. Treat this as a wake-up call about vendor dependency.
First, conduct an internal licensing audit NOW—before Azure Arc creates visibility for Microsoft. Document every SQL Server instance across production, development, test, and staging environments. Verify that editions match your licenses (no Enterprise binaries running on Standard licenses). Identify dev and test servers that should be using the free Developer edition instead of paid licenses. Fix these gaps before Microsoft’s auditors can see them.
Second, evaluate the true cost of Azure Monitor. Don’t just look at subscription fees. Factor in the licensing audit exposure risk. Calculate potential back payments if an audit discovers license gaps in your Azure Arc inventory. Compare this against the cost of migrating to third-party monitoring tools. The upfront migration expense might be cheaper than years of audit risk.
Third, consider a hybrid monitoring strategy. Use SCOM for non-SQL workloads where management packs are still supported. Use Azure Monitor ONLY for Azure-hosted SQL Server instances. Deploy third-party tools like Prometheus or Datadog for on-premises and multi-cloud SQL monitoring. The goal is to limit Azure Arc registration to only what’s absolutely necessary, reducing your audit exposure.
Fourth, if you’re negotiating an Enterprise Agreement with Microsoft, push for licensing audit protections. Request clear documentation about what Azure Arc data can be accessed by auditors and what’s protected. Ask for a “safe harbor” clause that prevents audit findings based solely on Azure Monitor telemetry. Microsoft won’t offer this proactively, but it’s worth negotiating.
Long-term, reduce dependency on single-vendor monitoring. Invest in open-source or vendor-neutral tools where feasible. Recognize vendor lock-in risks in future architecture decisions, especially when evaluating cloud-first strategies.
The Real Cost of Forced Cloud Migration
Microsoft will defend this as modernization—better features, easier management, superior hybrid cloud support. And maybe Azure Monitor is technically better than SCOM in some ways (that’s debatable, given SCOM’s stronger customization capabilities). But technical superiority doesn’t justify the hidden licensing audit risk. It doesn’t justify forced migration with limited viable alternatives. True modernization would preserve on-premises options for customers who need them.
The hidden cost here isn’t the Azure Monitor subscription. It’s the licensing exposure when Microsoft gains complete visibility into your SQL Server infrastructure. Organizations that have relied on gaps in their Software Asset Management data—forgotten test servers, undocumented dev instances—will lose that plausible deniability. Everything becomes visible. Everything becomes auditable.
This is classic vendor lock-in disguised as innovation. Microsoft created the dependency through SCOM’s dominance in enterprise monitoring, then pulled the rug out with a deprecation announcement that forces migration on their timeline. The licensing audit visibility is a feature, not a bug—it’s leverage in future Enterprise Agreement negotiations and a revenue opportunity through audit remediation.
Enterprises need to recognize the pattern and plan accordingly. The cloud migration wave isn’t just about technology—it’s about control, leverage, and who holds the keys to your infrastructure data.
