RDS vs. AVD: costs, performance, and ROI explained

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Moving from RDS to AVD typically lowers compliance risk, reduces upfront CapEx costs, and increases scalability. RDS requires multiple servers, CALs, and hardware investments, while AVD is usage-based, includes licensing in Microsoft 365, and scales on demand. MSPs often see higher ROI from AVD due to reduced infrastructure management and predictable OpEx billing.

For years, Microsoft Remote Desktop Services (RDS) has been the workhorse for delivering virtual desktops. But with SPLA changes coming and RDS showing its age, the financial burden is becoming impossible to ignore. Maintaining RDS goes beyond simply keeping the lights on. It means carrying the weight of expensive servers, rigid licensing, and unpredictable compliance risks.

For MSPs, the big question is whether it makes financial sense to keep RDS running when Azure Virtual Desktop (AVD) offers a more scalable, cost-predictable alternative.

What is the full cost of RDS?

Standing up RDS requires at least five separate servers (across a minimum of three machines) just to function:

Active Directory Domain Services (ADDS) server

RDS licensing server

Remote Desktop Connection Broker

VPN or gateway server

Remote Desktop Session Hosts

Each of these roles requires its own Microsoft Server license, along with ongoing maintenance and patching. On top of that, MSPs must purchase and track RDS Client Access Licenses (CALs) for every user. Licensing compliance is a minefield! Get it wrong, and Microsoft can hit your company with tens of thousands in fines.

And don’t forget hardware. On-premises servers aren’t cheap. A single host with enough storage and redundancy to support growth can run $10,000–$30,000, and you need to over-provision just to hedge against future demand.

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What hidden costs do MSPs overlook with RDS?

Beyond licensing and hardware, RDS environments pile on costs in ways MSPs may not fully factor:

Compliance exposure: SPLA audits can sting if user counts and CALs aren’t perfectly aligned.

Support overhead: Infrastructure management, patching, and RMM configuration drain high-value engineering hours.

Scaling limits: Adding 100 users often means waiting on new licenses, ordering additional servers, spinning up new VMs, and handling new configuration steps, which can introduce delays.

RDS is a fixed CapEx model. You pay upfront and cross your fingers that your forecasts are right, even if business changes overnight.

How does Azure Virtual Desktop reduce costs?

AVD flips the model from CapEx to OpEx. Instead of over-provisioning for three, five, or seven years, you pay for what you use, when you use it.

No CALs required: User licensing is built into Microsoft 365 subscriptions.

Elastic scaling: Add or remove users in hours, not weeks.

Integrated security and management: Microsoft handles the connection broker and gateway, reducing infrastructure complexity.

RDS vs AVD: What’s the cost breakdown?

Cost category	RDS/on-premises	AVD/cloud-native
user licensing	RDS CALs (~$150 per user, 3–5 year term)	Included in Microsoft 365 (e.g., Business Premium)
Server licensing	Separate Windows Server OS licenses per host	Covered by AVD subscription
Hardware	$10k–$30k per host, refresh every 3–5 years	None—compute runs in Azure, usage-based
Connection broker/gateway	Requires separate servers + licensing	Handled by Microsoft as part of AVD
maintenance & support	MSP staff time for patching & upgrades	Centralized Microsoft updates, simplified mgmt.
Compliance risk	SPLA audits, CAL miscounts = potential fines	Subscription licensing simplifies compliance

What are the real-world cost comparisons?

Let’s put it in numbers:

RDS CAL packs typically cost around $750 for five users, depending on the licensing model and provider. Multiply that by 150 users, and you’ve locked yourself into $22,500 just in CALs, not including hardware or server licensing.

With AVD, those same users can be licensed through Microsoft 365 Business Premium at under $35 per user, per month. That covers not just the virtual desktop, but also the user's email, SharePoint access, Intune for configuration and management, and Microsoft Defender for Business.

The difference? AVD may look more expensive on a per-user, per-month basis, but its flexibility wins. If your customer hires 100 users this quarter and lets 50 go the next, you’re not stuck with sunk costs. With RDS, you are.

Is AVD more scalable than RDS?

Factor	RDS/on-premises	AVD/cloud-native
Scalability	Rigid; adding users requires hardware & CALs	Elastic; add/remove users in hours
Forecasting	Fixed multi-year CapEx model, risky forecasts	Usage-based, adjusts to actual business needs
Auto-scaling	Not available	Built in; scale in/out and up/down dynamically
Flexibility	Locked into licenses even if users leave	Pay only for active users and resources
Tech utilization	High labor for patching & support	Freed-up staff time, higher ROI per tech hour

RDS to AVD pre-migration checklist for MSPs

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What’s the long-term financial justification of moving from RDS to AVD?

Forecasting with RDS is guesswork. MSPs must estimate growth years in advance, then over-buy licenses and hardware to cover “what ifs.” But scenarios rarely play out according to plan. Business needs can shift quickly, leaving overprovisioned RDS environments behind.

AVD’s subscription model simplifies forecasting. You only pay for what’s needed today, and auto-scaling ensures that resources match demand in real time. That means no over-provisioning, no idle hardware, and no blown budgets when growth doesn’t match your projections.

What’s the ROI of switching from RDS to AVD?

Beyond hard costs, RDS environments eat up engineering resources. Patch management alone can consume hours across dozens of clients, with each environment needing custom attention.

AVD centralizes and standardizes management through Microsoft’s own update and policy frameworks. MSPs gain back technician hours—boosting their tech utilization rate (TUR)—and can reallocate senior engineers to higher-value projects instead of routine maintenance.

How does Nerdio maximize AVD cost savings?

AVD already delivers financial flexibility, but Nerdio takes optimization further across three cost buckets:

Compute: Nerdio’s industry-leading Auto-Scale feature bursts to meet demand, pre-loads machines to avoid user delays, and includes analytics to fine-tune scaling patterns.

Infrastructure: Nerdio’s Cost Estimator helps MSPs model and predict spending across networking, load balancers, and security groups.

Storage: Optimization scripts monitor FSLogix usage and right-size Azure Files so you’re not paying for unused capacity.

The result? MSPs both save money and gain confidence that costs are predictable, transparent, and controllable.

The bottom line for MSPs

AVD delivers scalability, elasticity, and financial predictability that RDS simply can’t match. It gives MSPs the ability to adjust on the fly—whether that’s scaling up for growth, scaling down in a downturn, or shifting to hybrid/remote work.

Layering Nerdio on top ensures those savings aren’t left to chance. With smarter auto-scaling, cost forecasting, and automation, MSPs can maximize ROI and make the business case for cloud-native desktops with confidence.

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Frequently asked questions about RDS vs. AVD

Is Azure Virtual Desktop cheaper than RDS?

AVD often proves more cost-effective over time when comparing it to RDS by removing the need for upfront hardware and server infrastructure, while also eliminating separate CAL licensing thanks to Microsoft 365 integration. While RDS may seem less expensive initially, AVD’s scalability, built-in licensing, and reduced management overhead deliver higher ROI and lower total cost of ownership over time.

What licenses are required for AVD vs. RDS?

For RDS (Remote Desktop Services), MSPs must purchase and track RDS Client Access Licenses (CALs) for every user, in addition to Windows Server OS licenses for each server host in the environment. This means separate licensing for ADDS, connection broker, gateway, and session hosts—all of which add cost and compliance risk.

For AVD (Azure Virtual Desktop), no separate CALs are required. User access rights are included with Microsoft 365 Business Premium, E3, or E5. Session hosts typically run Windows 11 multi-session or Enterprise, which is covered under those subscriptions. If Windows Server is used in the environment for other infrastructure components (not as a session host), it must be licensed separately via pay-as-you-go or Azure Hybrid Benefit.

Can MSPs save money by switching from RDS to AVD?

Yes, MSPs can reduce soft costs and, in some cases, hard costs by moving from RDS to AVD. AVD removes the need for RDS CALs and simplifies infrastructure by eliminating traditional on-premises server roles. Some environments may still require supporting services like Azure AD DS, but session host licensing is already included with Microsoft 365 Business Premium, E3, or E5. With Azure's usage-based billing, MSPs gain better cost control, streamline licensing, and reduce maintenance overhead.

What are the main ROI benefits of AVD?

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