Why AVD and Windows 365 Management Pricing Is Destroying MSP Margins

May 21, 2026

A look at the hidden portfolio math behind per-tenant minimums and MAU billing and a different model for MSPs managing Azure Virtual Desktop and Windows 365 at scale.

Managing 10 AVD/Windows 365 Clients Isn’t 10× One Client. The Pricing Compounds

If you run an MSP practice with AVD or Windows 365 offerings, you already know the realities of managing it: every new client is its own tenant, its own identity boundary, runbooks, and quirks.

But what often gets overlooked as a significant cost of doing business is the way your management tooling costs compound across your portfolio, and how the dominant pricing models in the AVD and W365 management space tax it in ways you don’t realize until you’re already locked in.

This isn’t about any one vendor, it’s about a structural problem with how AVD and W365 management tools are priced. In this post, we’ll talk through some of the challenges with these models and how Hydra by Login VSI was built to specifically fix it.

How MAU Licensing and Per-Tenant Minimums Actually Work

Most AVD management platforms price one of two ways, and many combine them:

1. Per Monthly Active User (MAU): you pay a per-user fee for every user who logged in during the billing month, even if they only connect once.
2. Per-tenant minimum: regardless of user count, every managed tenant has a minimum (or floor). Below a certain user-count, you pay the floor instead of per-MAU.

Per-tenant minimums look reasonable in isolation; the problem is when you stack them across your customer list. Every tenant you manage carries that floor, whether the client is 40 users or 400. A fixed cost per client scales with how many clients you have, not how much each client is worth.

Because your revenue curve doesn’t work that way, your management cost shouldn’t either.

How Per-Tenant Minimums Compound: A Portfolio Example

Let’s look at an example. Imagine an MSP managing several clients’ AVD & W365 deployments. Let’s use a hypothetical floor of $500/tenant minimum. Here’s what the math looks like:

The column on the right shows the total cost per client. Like a typical MSP, most clients are SMB. You can see that eight of your ten clients are paying the floor ($500) regardless of whether they have 15 users or 80.

Client A has the same cost of goods sold as Client H, even though Client H is more than 5x the size! That means that per month, your business pays a premium of $1,510 to manage clients under the pricing floor. That’s $18,120/year in potential savings if you find another way.

Why Contractors and Seasonal Users Penalize MSPs Under MAU Pricing

Now layer the second problem on top: MAU is active users, which means anyone who logged in during the billing window counts the same as a daily heavy user.

For a single enterprise, this is annoying but manageable. They have a roughly stable workforce, occasional contractor surges, and predictable seasonal patterns.

For an MSP managing ten clients, you’re aggregating ten independent MAU patterns:

• One client runs a Q1 audit and brings in 15 external auditors for two weeks. They each log in once. That’s 15 MAU now added on.
• Another client has seasonal retail staff that ramps in October. 40 users, half of whom only log in twice.
• A third has a long tail of “occasional access” executives, board members, and reviewers who collectively might touch the environment four times a quarter.

Each of those users is a full MAU charge on each tenant they touch. Across a portfolio, the contractor and occasional-user tax compound quickly, and it’s a population that you as an MSP can’t control or forecast. Your clients will still have seasonal bursts, and there will always be intermittent executive use-cases.

The management vendor’s pricing model rewards them when your clients grow in users, add contractors, or have a busy quarter. However, your pricing to clients is typically a fixed monthly managed services fee, so every growth in a client’s user base is a margin compression event for you.

You’re being penalized for the exact thing your clients pay you to enable. In our opinion, that’s backwards from how it should be.

How Peak Concurrent User Pricing Works for MSP Portfolios

The model that actually matches how you as an MSP delivers value is a single shared peak concurrent user model, priced once at the MSP level, with no per-tenant fee.

What this means in practice:

• One pool of peak concurrent capacity sized to your aggregate need across all clients, not multiplied by tenant count.
• No per-tenant minimum. Onboarding a small client with growth potential doesn’t add a floor charge; it just consumes a slice of your existing pool when active.
• No MAU tax on contractors or occasional users. Concurrent capacity reflects what’s actually running at peak, not the long tail of who logged in once this month.
• Predictable per-tenant economics for you. You can confidently price small clients without doing acrobatics to clear a vendor’s floor, with burst-protection included.

This is the model Hydra is built on. There’s no per-tenant fee and no MAU billing: pricing is solely based on peak concurrent users, with full image lifecycle management, real-time session visibility, autoscaling, and built-in multi-tenancy included.

That means one pool of peak concurrent capacity sized to your aggregate need across all clients, with strict tenant isolation and enterprise-grade RBAC built in. Clients never share data or visibility; only the pricing model is pooled.

The math difference for the portfolio above is significant. The MSP is no longer having to pay for ten floors; they pay for the actual aggregate capacity they consume… and only once.

That’s the structural change. Everything else (onboarding speed, automation surface, multi-tenant operations, etc.) follows from a pricing model that was actually designed with the MSP delivery pattern in mind, not retrofitted onto an enterprise-direct model.

How to Calculate Your Actual Portfolio Costs:

If you want to see what your own portfolio looks like under the two models, the math is straightforward. For each client:

1. List total user count vs. rough concurrent peak.
2. Multiply users × your current per-MAU rate.
3. Compare to your vendor’s per-tenant floor (take whichever is higher). That’s what you’re paying today.
4. Sum across the portfolio.
5. Then run the same totals against a single-pool, no-per-tenant-floor model sized to your aggregate concurrent peak.

The difference is the hidden premium you’re paying. For most MSPs in the small-to-mid client range, it’s between 15% and 40% of the management line item (almost entirely concentrated in clients under 150 users).

The Right Pricing Model for MSPs

The consideration shouldn’t be whether a pricing model is reasonable for one customer, it’s whether the pricing model scales appropriately when you scale the count of customers, not just the size of each one.

A pricing model that’s MSP-aligned has three properties:

1. No per-tenant floor. Every tenant you add should add marginal cost proportional to the value, not a fixed entry fee.
2. Capacity-based, not headcount-based. Your operational reality is concurrent load across a portfolio, not a sum of MAUs across disjoint user populations.
3. Onboarding speed isn’t taxed. If you can stand up a new client in an afternoon, the tool should let you do it without triggering a new minimum charge that nukes the margin on that engagement for the first year.

If your current AVD management tool fails any of those three tests, you’re paying a portfolio tax and you’re competing against MSPs who aren’t.

The good news: this is a structural problem with a structural fix. It’s not about negotiating a better rate on the existing model. It’s about choosing a model that was built for how you actually run your business.

Stop Paying the Portfolio Tax: Start a Free Trial Today

Ready to see what your portfolio looks like under peak concurrent pricing instead? Start a free 30-day trial of Hydra with full functionality, no onboarding fees, and no rebuilds required.

Learn more about Hydra or start your free trial here.