Azure VM vs Azure SQL MI

Compare SQL Server on Azure VM vs Azure SQL Managed Instance

Features

Azure SQL Managed Instance

SQL Server on Azure VM

Deployment

Created via Azure portal in a VNet; a few hours to provision fully, but minimal user config (Azure sets up SQL).

User deploys an Azure VM (with a SQL image if desired) – similar to EC2, quick to create but you manage SQL setup.

Management

Fully managed by Azure – patching, updates, backups handled by service.

Self-managed, though Azure offers a VM extension for automating SQL patching/backups.

Customization

Restricted – cannot access OS or certain features; limited to options Azure exposes (instance size, certain settings).

Maximum – complete OS and SQL control, legacy versions supported.

Use Case

Best for migrating on-prem apps to Azure with minimal changes, needing instance-level features (Agent, cross-DB) but wanting a managed service.

When full control is needed in Azure (legacy apps, custom integrations, SSRS/SSAS); a bridge between on-prem and cloud with control.

Maintenance Responsibility

Microsoft – Azure automatically patches OS and SQL engine (with almost no downtime).

You/your team – unless using Azure’s IaaS Agent to auto-patch, you handle updates.

Operational Control

Partial – you have instance-level admin in SQL, but no OS access and some server-level permissions are restricted by Azure.

Full control – you can even remote desktop to OS and change anything.

Backups

Automated: Azure performs continuous backups (point-in-time restore up to 35 days); user can initiate extra backups to storage for long-term.

User-managed (can use Azure Backup or SQL Agent jobs, or enable the SQL VM backup extension for Azure-managed backups)

Scalability

Vertical: change vCore count (online resize with brief disruption); Horizontal: limited – one primary instance, can add geo-replicas for read/DR (no multiple writable instances).

Vertical: change VM size (reboot required); Horizontal: add more VMs (e.g., Always On AG for read scale) – manual setup.

Performance

Very good for most cases: GP tier ~ “disk over network” latency (~5-10ms) and up to ~80k IOPS at max vCores, BC tier ~ “local SSD” latency (1-2ms) and up to ~320k IOPS at max size; Azure manages performance, but you might not reach extreme on-prem levels for edge cases.

High (depends on chosen VM and disks): you can use Premium SSD/Ultra Disk on Azure VMs and optimize like on-prem – performance is as good as the hardware allows, with full control.

Elasticity

No auto-scale of vCores on-the-fly; you must manually scale up/down. However, you can add/remove Managed Instances in a pool (instance pools) if using that model for multi-instance elasticity, but that’s more static allocation of multiple MIs.

No native auto-scale – you set a VM size; possible to script something with Azure Automation to scale VMs on a schedule or metric, but it’s user-implemented.

SQL Server Version

Azure handles the version – effectively it’s the latest SQL Server engine (currently equivalent to 2019/2022). You can’t choose an older engine version, but you can set database compatibility level down to 100 (SQL 2008) for legacy T-SQL compatibility.

Any version (since you control the install media). Azure marketplace images cover currently supported versions (2012+), but you could bring older versions on a custom image if absolutely needed.

SQL Feature Support

Yes, one of MI’s advantages over Azure SQL DB – you can do three-part naming queries across databases on the instance, and even cross-instance via linked servers (within some constraints of managed env).

All on-box features supported – you can install SSRS on the VM, use SSIS, enable ML Services, etc., just as on a normal server. No limitations beyond what SQL Server normally has.

Cross-Database Queries

Yes, within the SQL instance on that VM you can do cross-database joins/transactions.

Custom Software

No – you cannot RDP into the instance or install anything. CLR assemblies are allowed in SAFE mode within SQL (no external access), but you can’t install a custom extensibility framework or third-party utility on the server. Integration with other services must be done externally over network.

Yes – you can treat it like any Windows server: for example, install Splunk forwarders, custom performance collectors, or even run other apps on the same VM (if resources allow).

Network Configuration

Deployed into your VNet (requires a dedicated subnet)– it gets a private IP. You manage NSGs for that subnet. By default no public endpoint (optionally can enable one). It’s like a managed appliance sitting in your network.

Runs in Azure VNet – full control over IP address, subnet, NSGs, etc., like any VM. You can even place multiple VMs in the same subnet for cluster setups. Connect via ExpressRoute/VPN to on-prem easily.

Security

Platform-managed security: TDE on by default, backups encrypted. Azure manages OS security patches. You can use Azure AD authentication for tighter identity control. MI is deployed in your private network, adding an extra layer of isolation. It meets Azure’s compliance standards out-of-the-box (you just focus on DB-level security like user permissions).

Similar to EC2: you manage OS hardening, patches, SQL security config. Azure can encrypt disks by default, and you can use Azure Key Vault for TDE keys. Azure VM itself is an isolated environment you control. Compliance again is on how you set it up (Azure just provides infrastructure that can be compliant if you configure it so).

Authentication

SQL Auth and Azure Active Directory Auth supported. You set an AAD admin and then you can use AAD users/groups as logins. No direct Windows AD integration (would need to sync AD to AAD). This gives centralized cloud identity management for the MI.

Windows Auth and SQL Auth supported – join the VM to a domain (on-prem AD or Azure AD Domain Services) and you get integrated security. You can also use contained database users, etc., just like on-prem.

High Availability

Built-in: MI (Business Critical) has HA with automatic failover of the primary replica to a secondary if something happens (Azure handles it). General Purpose has Azure Service Fabric-based failover using remote storage. Either way, you get an SLA for HA without configuring clustering yourself.

Must be configured by user – e.g., Always On AG across VMs or a Failover Cluster with Azure Shared Disks or Azure FSx for SMB. Azure provides multi-AZ (multi-zone) VM placement for resilience, but SQL HA is your responsibility.

Disaster Recovery

Easy DR: you can configure a geo-replica MI in another region (Auto-failover Group). This will asynchronously replicate all databases. Failover can be automatic (for groups) or manual. If you choose not to have a second MI, you still have geo-redundant backups which you could restore in another region (slower recovery).

User-defined: e.g., use Azure Site Recovery to replicate the VM to another region, or set up an AG with a replica in a secondary region for DR. Azure won’t auto-handle cross-region failover for VMs – your DR plan executes it.

Pricing

Azure SQL MI pricing is per vCore, per hour, plus storage and backup costs. An 8 vCore General Purpose instance with 4TB follows an hourly compute + per-GB-month storage model. Business Critical costs 2-3× more per vCore due to faster hardware and extra replicas. SQL licensing is included.

Pay for Azure VM + storage. E.g., ~$1.5-2k/month for 8 vCPU VM with SQL Std included. Using Hybrid Benefit (BYOL) might drop that to ~$1k (just VM). Azure RIs can save ~30%. Network egress (if any) is extra.

Licensing Model

Azure SQL MI supports License-Included or Azure Hybrid Benefit, which lowers costs if you bring SQL Server licenses with Software Assurance. Reserved Capacity (1-3 years) offers discounts over pay-as-you-go.

License-Included or BYOL. Azure Hybrid Benefit lets you apply existing licenses; or pay-as-you-go includes SQL license. Per-second billing. Enterprise Agreement customers can also get dev/test pricing without SQL costs on Azure for non-prod.

Pricing Comparison of Database Configuration

8vCore + 4TB Data size + Backup,  Single Instance

An 8 vCore, 4TB General Purpose Azure SQL MI in East US costs $1,700–$2,000/month ($1,300 compute + $400 storage). Hybrid Benefit can reduce compute costs by 30-40%.

~$1,700/month for 8 vCore GP Azure MI or SQL DB (license included);
~$1,500/month for Azure VM (license included) or ~$1,000 with BYOL.
On-prem ~$1k (Std) as above.

8vCore + 4TB Data size + Backup + DR/HA

A second 8-vCore MI (Auto-Failover Group) doubles the cost to $3,500–$4,000/month. If using Business Critical, an 8 vCore, 4TB instance costs $5,000+ per month, including 3 built-in replicas (no extra VM needed for HA).

HA requires a secondary VM (8 vCore + 4TB) but incurs no extra SQL Server license cost if using Azure Hybrid Benefit.
For DR, a geo-replicated secondary adds ~$1,800/month, bringing total costs to ~$3,400/month (excluding SQL license).
Backup adds ~$120/month. Without Azure Hybrid Benefit, SQL Server licensing adds ~$2,500/month, pushing total cost to ~$5,900/month.
DR and HA both require paying for full VM resources; SQL license charges apply to all nodes unless covered by Hybrid Benefit.