Azure Arc-Enabled Data Services

Table of Contents

  1. What are Arc Data Services?
  2. Available Services
    1. Azure SQL Managed Instance
    2. PostgreSQL Hyperscale
  3. Deployment Modes
    1. Directly Connected Mode
    2. Indirectly Connected Mode (Retired)
  4. Managed Database Experience Anywhere
    1. What “Managed” Means
    2. Elastic Scale and High Availability
  5. Billing Model
    1. Pay-As-You-Go
    2. Bring Your Own License (BYOL)
  6. Migration from Traditional Databases
    1. Assessment
    2. Migration Methods
    3. Post-Migration Validation
  7. Security and Encryption
  8. Data Residency Guarantees
  9. Use Case Scenarios
    1. Scenario 1: Financial Services Database Modernization
    2. Scenario 2: Healthcare SaaS Multi-Tenant Application
    3. Scenario 3: Retail Point-of-Sale System
  10. Best Practices
  11. Cost Considerations
  12. Troubleshooting
  13. Next Steps

What are Arc Data Services?

Azure Arc-enabled Data Services bring Azure database services to any infrastructure - on-premises, edge, or any public cloud. Get a managed database experience with evergreen updates, elastic scale, and Azure-consistent management while keeping data on-premises.

Available Services:

  • Azure SQL Managed Instance: Fully compatible SQL Server with PaaS benefits
  • PostgreSQL Hyperscale: Scalable PostgreSQL with Citus extension

← Back to Azure Arc Introduction

Available Services

Azure SQL Managed Instance

What It Is:

  • SQL Server compatibility (99%+)
  • Managed instance with automatic backups
  • Built-in high availability
  • Evergreen (always up-to-date)
  • Running on your infrastructure

Key Features:

  • T-SQL compatibility
  • Linked servers
  • CLR, SQL Agent, Database Mail
  • Full-text search
  • Elastic scale (Enterprise tier)
  • Point-in-time restore

Licensing:

  • Pay-as-you-go (Azure meter)
  • Bring-your-own-license (BYOL)
  • Azure Hybrid Benefit

PostgreSQL Hyperscale

What It Is:

  • PostgreSQL with Citus extension
  • Horizontal scaling (sharding)
  • Distributed tables and queries
  • Managed service experience

Key Features:

  • Scale out reads and writes
  • Parallel query execution
  • Real-time analytics
  • Multi-tenant applications
  • High throughput ingestion

Use Cases:

  • Multi-tenant SaaS applications
  • Real-time analytics dashboards
  • Time-series data
  • High-throughput OLTP

Deployment Modes

Directly Connected Mode

Characteristics:

  • Continuous or regular connection to Azure
  • Billing and usage data uploaded to Azure
  • Azure portal management available
  • Automatic updates

Requirements:

  • Outbound HTTPS to Azure
  • Azure subscription
  • Upload to Azure every 24 hours

Benefits:

  • Simplest to manage
  • Full Azure portal experience
  • Automated billing
  • Latest features first

Indirectly Connected Mode (Retired)

⚠️ Retired Feature Indirectly Connected mode was retired in September 2025. For disconnected scenarios requiring Arc-enabled data services, use Azure Local with Disconnected Operations which provides a local control plane with Azure portal experience.

Historical Context:

This mode previously supported air-gapped environments with manual data export/import. Organizations requiring disconnected database services should now evaluate:

  • Azure Local Disconnected Operations — Local Azure portal and management
  • Traditional SQL Server/PostgreSQL — Self-managed databases on disconnected infrastructure

Managed Database Experience Anywhere

What “Managed” Means

Automated Operations:

  • Backups and restore
  • High availability and failover
  • Patch management and updates
  • Performance monitoring
  • Resource scaling

Reduced Admin Overhead:

  • No OS patching
  • No infrastructure management
  • Simplified disaster recovery
  • Built-in monitoring

Elastic Scale and High Availability

Scale Up/Down:

  • Adjust CPU and memory dynamically
  • No downtime for scaling
  • Pay only for what you use

Scale Out (Hyperscale):

  • Add read replicas
  • Shard data across nodes
  • Parallel query execution

High Availability:

  • Always-On Availability Groups (SQL MI)
  • Synchronous replication
  • Automatic failover (< 30 seconds)
  • Built-in health monitoring

Billing Model

Pay-As-You-Go

How It Works:

  • Billed based on vCore-hours consumed
  • Separate pricing for General Purpose and Business Critical tiers
  • Storage charged separately

Pricing Example (SQL MI):

  • General Purpose: ~$0.40/vCore/hour
  • Business Critical: ~$1.00/vCore/hour
  • Storage: ~$0.11/GB/month

Bring Your Own License (BYOL)

Requirements:

  • Active SQL Server license with Software Assurance
  • Azure Hybrid Benefit enrollment

Savings:

  • Up to 55% savings vs. pay-as-you-go
  • License mobility (move between environments)

Combined with Azure Hybrid Benefit:

  • Use existing on-premises licenses
  • Add free 180 days of Software Assurance
  • Further cost reduction

Migration from Traditional Databases

Assessment

Tools:

  • Azure Migrate for database assessment
  • Data Migration Assistant (DMA)
  • Azure SQL Migration extension

Assessment Output:

  • Compatibility issues
  • Feature parity analysis
  • Performance baseline
  • Sizing recommendations

Migration Methods

1. Backup and Restore:

  • For offline migrations
  • Full/diff/log backups
  • Point-in-time recovery
  • Minimal downtime: Hours

2. Log Shipping:

  • For near-zero downtime migrations
  • Continuous log replay
  • Manual cutover
  • Minimal downtime: Minutes

3. Distributed Availability Group (SQL MI):

  • Replicate from on-premises SQL Server
  • Bidirectional replication
  • Minimal downtime migration
  • Rollback capability

4. Azure Database Migration Service:

  • Online migrations
  • Minimal downtime
  • Automated process
  • Change data capture (CDC)

Post-Migration Validation

Performance:

  • Benchmark queries
  • Compare execution plans
  • Validate throughput

Functionality:

  • Test all application features
  • Validate integrations
  • Confirm backup/restore

Compliance:

  • Security controls
  • Audit logging
  • Encryption validation

Security and Encryption

Encryption at Rest:

  • Transparent Data Encryption (TDE) enabled by default
  • AES-256 encryption
  • Customer-managed keys (CMK) option

Encryption in Transit:

  • TLS 1.2+ for all connections
  • Force encryption option
  • Certificate validation

Access Control:

  • Azure AD authentication
  • SQL authentication
  • Role-based access control (RBAC)
  • Row-level security (RLS)
  • Dynamic data masking (DDM)

Auditing:

  • SQL audit to local storage or Azure
  • Threat detection
  • Vulnerability assessment
  • Compliance reporting (PCI-DSS, HIPAA, etc.)

Data Residency Guarantees

Data Stays On-Premises:

  • Database files remain on your infrastructure
  • Backups stored locally (or where you choose)
  • Query processing happens locally
  • No automatic replication to cloud

Metadata Sent to Azure (Direct Mode):

  • Billing and usage data
  • Performance metrics (aggregate)
  • Diagnostic logs (optional)
  • Configuration metadata

Compliance:

  • Meets GDPR requirements
  • HIPAA compliant
  • PCI-DSS ready
  • FedRAMP compatible

Audit Trail:

  • All data movement logged
  • Compliance reports available
  • Demonstrates data residency

Use Case Scenarios

Scenario 1: Financial Services Database Modernization

Challenge: 100+ SQL Server 2012 databases end of support, but data must stay on-premises.

Solution:

  • Deploy Arc SQL Managed Instance
  • Migrate databases using DMA
  • Implement Always-On AG for HA
  • Enable TDE and auditing

Results:

  • Modernized databases without cloud migration
  • Pay-as-you-go reduced costs by 40%
  • 99.95% availability SLA
  • Passed compliance audits
  • Reduced admin overhead by 50%

Scenario 2: Healthcare SaaS Multi-Tenant Application

Challenge: SaaS app needs to scale to 1000s of tenants with high performance.

Solution:

  • Deploy PostgreSQL Hyperscale
  • Shard by tenant ID
  • Scale to 10+ worker nodes
  • Parallel query execution

Results:

  • 10x query performance improvement
  • Seamless scaling to 5000+ tenants
  • Sub-second query response times
  • Reduced infrastructure costs (better utilization)

Scenario 3: Retail Point-of-Sale System

Challenge: Chain of 500 stores needs local database at each store with central reporting.

Solution:

  • Deploy SQL MI at each store location
  • Local transactions (no cloud dependency)
  • Nightly replication to central data warehouse
  • Azure portal for monitoring all 500 instances

Results:

  • Zero downtime from internet outages
  • Real-time POS transactions
  • Centralized reporting and analytics
  • Managed from single pane of glass

Best Practices

1. Right-Size from the Start:

  • Use assessment tools
  • Start with actual workload metrics
  • Monitor and adjust

2. Implement HA from Day 1:

  • Always-On AG for SQL MI
  • Multiple coordinator nodes for Hyperscale
  • Test failover procedures

3. Plan for Growth:

  • Size for 2-3 year growth
  • Consider scaling options
  • Budget for storage growth

4. Backup Strategy:

  • Define RPO and RTO
  • Test restores regularly
  • Implement offsite backups

5. Monitor Proactively:

  • Set up alerts
  • Review performance metrics weekly
  • Capacity planning

6. Leverage Azure Hybrid Benefit:

  • Use existing SQL licenses
  • Significant cost savings
  • License mobility

Cost Considerations

Total Cost of Ownership:

Arc Data Services:

  • Lower than Azure SQL Database for sustained workloads
  • Lower than self-managed on-premises (reduced admin)
  • Flexible with BYOL

Example Monthly Cost (SQL MI, 16 vCores):

Pay-as-you-go:

  • General Purpose: ~$4,600/month
  • Business Critical: ~$11,500/month

With Azure Hybrid Benefit:

  • General Purpose: ~$2,100/month
  • Business Critical: ~$5,200/month

Break-Even vs. Azure SQL Database:

  • Typically 6-12 months for sustained workloads
  • Faster for 24/7 production databases

Troubleshooting

Deployment Failures:

  • Verify Kubernetes resource availability
  • Check storage class configuration
  • Validate network connectivity
  • Review controller logs

Performance Issues:

  • Check resource allocation (CPU, memory)
  • Review query execution plans
  • Validate storage IOPS
  • Monitor network latency

Connectivity Problems:

  • Verify service endpoint configuration
  • Check firewall rules
  • Validate DNS resolution
  • Test from application server

Next Steps

External Resources:

Last Updated: October 2025