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My customer has SQL server licenses that they have purchased through a Volume Licensing Agreement with software assurance. If they wish to exercise fail-over rights (that are one of SQL Server’s SA) to run the benefits, can I host their fail-over serve?

While software assurance provide fail-over rights for the customer’s SQL Server, the fail-over server must exist in the same environment as the active server. For example, both in DC or on-premises). Also, note that the fail-over server must be truly passive and must not be serving data to the clients.