As part of its evolving cloud and AI strategy, Microsoft has introduced a new wave of updates to its Product Terms for March 2025. These changes impact Azure services, Microsoft 365, data residency, security add-ons, and acceptable use policies. Here is what you need to know:

Azure Local – Greater Hardware Flexibility

In-line with their previous demo (Azure Local with low cost hardware), the Product Terms now allow any device to connect to Azure Local rather than a specified server. This removes the previous requirement for pre-validated hardware to receive customer support. The only remaining technical requirement is a secondary SSD, which enables the restricted OS to install from USB.

📌 Key takeaway: Azure Local can now support more diverse and cost-effective infrastructure at distributed locations—ideal for hybrid environments.

👉 Learn more: Introducing Azure Local, cloud infrastructure for distributed locations enabled by Azure Arc

Azure OpenAI – Temporary Data Relocation for Fine- Tuning

Within the same update as the above, Microsoft has revised its terms to temporarily relocate customer data outside of their selected ‘Geo’ when using fine-tuning features with Azure OpenAI.  While this supports custom AI model development, it introduces new compliance implications.

🚨 Risk Consideration: Customer must carefully evaluate the sensitivity of uploaded data and associated risks with temporary cross-border data movement.

👉 Further reading: Customize a model with Azure OpenAI Service – Azure OpenAI | Microsoft Learn

Microsoft 365 Copilot & Copilot Chat – Data Handling Transparency

Microsoft has clarified its approach to “Query Data” (data used in Copilot interactions via Bing):
✅ Treated as confidential
✅ Not used to train generative AI
✅ Not shared with third parties
✅ Not used to improve Bing algorithms

This affirms Microsoft’s stance on data privacy within Copilot-powered tools.

Additionally, the terms now allow cross-product data sharing, governed by each product’s specific terms.

Privacy & Security terms – Expansion of the EU Data Boundary

Copilot Chat has been added to the list of services supported within Microsoft’s EU Data Boundary, joining other tools hosted solely within EU / EFTA-based datacentres.

Microsoft has also included Dynamics 365 AI product Contact Center in the Core Online Services list, indicating deeper AI integration within Dynamics platforms.

👉 Read more: Dynamics 365 Contact Center | Microsoft Dynamics 365

Acceptable Use Policy – Crypto Mining Explicitly Banned

Microsoft has removed the ability to request approval for cryptocurrency mining with its Online Services. Customers using tools like Excel for mining activities are now clearly in violation.

The company has also reaffirmed its right to restrict or remove access if it determines a breach of its Acceptable Use Policy.

 👉 Reference: Code of Conduct for Microsoft AI Services | Microsoft Learn.

Microsoft 365 Business Premium – Access to E5 Security

Organizations with <300 users licensed with M365 Business Premium can now deploy Microsoft 365 E5 Security add-ons. This opens access to Microsoft’s most advanced security tools for small businesses.

💡 Strategic insight: This creates new bundling and negotiation opportunities for SMBs during renewals.

Microsoft Defender – Server License Loophole Closed

Microsoft has closed a gap by clarifying that user licenses cannot be used on servers to activate Defender for Endpoint, Defender for Business, or Vulnerability Management.

✳️ Impact: Organizations relying on this setup should review their licensing to ensure compliance moving forward.

Final thoughts

March’s updates highlight Microsoft’s dual focus on AI transparency and tightened compliance. From infrastructure flexibility to data governance, these updates are essential for organizations navigating Microsoft’s expanding cloud ecosystem.

How ITAA can help

Licensing and compliance need not be a burden. At ITAA, we help businesses interpret Microsoft’s evolving Product Terms and turn complexity into opportunity. Our licensing experts support clients in securing cost-effective, risk-aware agreements tailored to their needs.

📞 Contact us to explore what these changes mean for your business—and how to turn them into an advantage.

About the Author

Robert Wright, Microsoft Consultant

Robert Wright is an ex-Microsoft auditor turned Licensing Consultant. He focuses on license compliance with a strong emphasis on cost-saving strategies. With a proven track record, he excels in optimizing licensing portfolios across various industries, particularly in the public sector.