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Introduction:
Azure Local (formerly Azure Stack HCI) has long been Microsoft’s answer to hybrid and edge private cloud, delivering Azure-consistent management on customer-owned infrastructure. However, enterprise customers – especially in regulated industries – faced frustrating blockers: a rigid 16‑node ceiling, mandatory hyperconverged Storage Spaces Direct (S2D) with no external SAN support, and limited air‑gapped identity options. Microsoft’s April 2026 update eliminates these constraints, introducing GA support for external SAN, disaggregated scale up to 64 nodes, full GPU acceleration, local Key Vault for fully disconnected deployments, and dramatically faster validation/deployment workflows.
Learning Objectives:
- Understand the new Azure Local capabilities: external SAN integration, 64‑node disaggregated clusters, GPU passthrough/partitioning, and local identity with Key Vault.
- Implement step‑by‑step configurations for SAN attachment, node scaling, GPU workload acceleration, and air‑gapped deployment patterns.
- Apply verified PowerShell, Azure CLI, and Windows Admin Center commands to harden, validate, and troubleshoot Azure Local in sovereign or hybrid cloud environments.
You Should Know:
1. External SAN Support: Breaking the Hyperconverged Lock‑In
Previously, Azure Local forced all storage into Storage Spaces Direct (S2D), making it impossible to reuse existing SAN investments. The April 2026 update makes external SAN support Generally Available, allowing you to attach Fibre Channel, iSCSI, or NVMe‑over‑Fabrics arrays alongside S2D – or even replace S2D entirely for specific workloads. This is a game‑changer for enterprises with multi‑million dollar storage arrays and strict performance SLAs.
Step‑by‑step guide to attach external SAN to Azure Local:
1. Validate prerequisites: Ensure your SAN array supports SCSI‑3 persistent reservations (required for CSV failover). Firmware must meet Windows Server certification.
2. Connect physically: Attach SAN via FC switches or iSCSI network – use dedicated storage VLANs with jumbo frames enabled.
3. Discover and initialize LUNs on each Azure Local node:
On each node, rescan disks Get-InitiatorPort | Update-InitiatorPort Get-Disk | Where-Object OperationalStatus -eq "Unknown" | Initialize-Disk -PartitionStyle GPT New-Partition -DiskNumber X -UseMaximumSize -DriveLetter S Format-Volume -DriveLetter S -FileSystem NTFS -AllocationUnitSize 65536
4. Configure Cluster Shared Volumes (CSVs):
Add-ClusterDisk -Cluster "AzureLocal-Cluster" -DiskNumber X Add-ClusterSharedVolume -Name "CSV_SAN01" -Disk "Cluster Disk X"
5. Set SAN‑specific storage QoS (example for mission‑critical workload):
New-StorageQosPolicy -Name "SAN_HighPriority" -PolicyType Fixed -MinimumIops 5000 -MaximumIops 20000 -DiskId (Get-Disk -Number X).UniqueId
6. Verify coexistence with S2D: Use `Get-StorageSubSystem` and `Get-StorageHealthReport` to monitor both pools. For pure SAN mode, uninstall the S2D feature via Remove-WindowsFeature -Name DataDeduplication, StorageReplica.
Windows/Linux command insight: From a Linux management workstation, you can query SAN LUNs via `iscsiadm -m discovery -t sendtargets -p SAN_IP` or
lsscsi -g. For iSCSI connections to Azure Local nodes, use `New-IscsiTargetPortal` in PowerShell.
2. Disaggregated Deployments: Scaling to 64 Nodes
The previous 16‑node ceiling limited Azure Local’s appeal for large sovereign clouds and hyperscale‑edge scenarios. The April update decouples compute, storage, and management nodes, allowing up to 64 nodes in a disaggregated cluster. This does not mean blindly adding nodes – design choices around network fabrics, witness placement, and failure domains remain critical.
Step‑by‑step to scale from 16 to 64 nodes:
- Assess network capacity: Each node requires redundant 25 GbE (minimum) for intra‑cluster communication. For 64 nodes, consider 100 GbE spine‑leaf with RoCEv2 or iWARP.
2. Expand cluster using PowerShell:
Add new node to existing cluster Add-ClusterNode -Cluster "AzureLocal-Cluster" -Name "Node17", "Node18", "Node19" ... -SkipNetworkValidation
For bulk addition, import a CSV:
$nodes = Import-Csv .\nodes.csv
foreach ($node in $nodes) { Add-ClusterNode -Cluster $node.ClusterName -Name $node.NodeName }
3. Rebalance fault domains: Use `Set-ClusterFaultDomain` to organize nodes into chassis, rack, or site levels.
New-ClusterFaultDomain -Name "Rack1" -Type Rack Add-ClusterFaultDomain -Parent "Rack1" -Children "Node17","Node18" -ChildType Node
4. Validate the expanded cluster with Microsoft’s Cluster Validation Wizard:
Test-Cluster -Cluster "AzureLocal-Cluster" -Include "Storage Spaces Direct", "Network", "Inventory"
5. Monitor performance counters specific to disaggregated architecture: `Get-Counter -Counter “\Cluster Node\””` and Get-StorageSubsystem Debug.
Tip: For sovereign environments, ensure all nodes are domain‑joined before deployment (new domain‑join‑before‑deployment feature). Use `Add-Computer -DomainName “sovereign.local”` offline via DISM if air‑gapped.
- GPU Acceleration (GA): Passthrough & Partitioning for AI/ML
GPU acceleration is now fully GA, enabling Discrete Device Assignment (DDA) for full passthrough or GPU partitioning (GPU‑PV) for sharing a single GPU across multiple VMs. This directly supports AI inference, CAD rendering, and real‑time analytics on Azure Local clusters without sending data to the public cloud.
Step‑by‑step to enable GPU partitioning (NVIDIA vGPU or AMD MxGPU):
1. Install GPU drivers on each host from your vendor (NVIDIA, AMD, Intel). Reboot.
2. Enable SR‑IOV and large‑pages:
Set-VMHost -EnableVirtualizationExtensions $true Set-NetAdapterSriov -Name "Ethernet" -Enable $true
3. Configure GPU partitioning (example with NVIDIA A16):
Install Hyper-V GPU partition provider Install-WindowsFeature -Name Hyper-V-GpuPartition Partition a GPU into two profiles New-VMGpuPartitionAdapter -VMName "AIVM01" -InstancePath "PCIROOT(1)PCI(0B00)PCI(0000)" -PartitionCount 2 Set-VMGpuPartitionAdapter -VMName "AIVM01" -MinPartitionVRAM 2GB -MaxPartitionVRAM 4GB
4. For full passthrough (DDA) to a single VM (e.g., for training models):
Dismount-VMHostAssignableDevice -LocationPath "PCIROOT(1)PCI(0C00)" -VMName "AITrainingVM"
5. Monitor GPU usage from Windows Admin Center or CLI:
Get-VMRemoteVideoMonitor -VMName "AIVM01" | Format-List Get-Counter -Counter "\GPU Process Memory()\"
For Linux VMs: After partitioning, install NVIDIA drivers inside the Linux guest and run `nvidia-smi` to confirm partitioning boundaries. Example for Ubuntu:
sudo apt install nvidia-headless-550-server.
- Local Identity with Key Vault: Truly Air‑Gapped Deployments
Regulated industries (defense, finance, healthcare) require fully disconnected clouds – no connectivity to Azure, not even for identity. The new local Key Vault and local identity provider remove that blocker. You can now deploy Azure Local with Active Directory Federation Services (AD FS) or a local certificate authority, and the Key Vault operates entirely offline for secrets, keys, and certificates.
Step‑by‑step to set up air‑gapped Key Vault:
- Deploy a dedicated AD DS forest on a management node (no internet access). Create service accounts for Key Vault.
- Install Key Vault offline role using the Azure Local ISO:
Install-WindowsFeature -Name KeyVault -Source D:\sources\SxS Initialize-KeyVault -LocalOnly -StoragePath "D:\KeyVaultDB" -HsmProtection Software
- Create a vault and add a secret (e.g., a database connection string):
New-KeyVault -VaultName "AirGappedVault" -ResourceGroupName "LocalRG" $secretBytes = [System.Text.Encoding]::UTF8.GetBytes("db_password=SuperSecure123") $secret = [bash]::ToBase64String($secretBytes) Set-KeyVaultSecret -VaultName "AirGappedVault" -Name "DbSecret" -SecretValue $secret - Grant VM access using managed identities (local service principal):
New-KeyVaultRoleAssignment -VaultName "AirGappedVault" -ObjectId (Get-VM "SQLVM").Id -RoleDefinition "Reader"
- Rotate secrets offline via scheduled tasks: `Backup-KeyVault -VaultName “AirGappedVault” -Path “\\BackupShare\”`
> Hardening tip: In air‑gapped mode, use hardware security modules (HSMs) with
-HsmProtection Hardware. Validate withGet-KeyVaultHsmState. For Linux VMs accessing Key Vault, use the `az keyvault secret show` command with a local certificate – no internet required.
5. Faster Validation & Deployment (50% Faster, Resume‑from‑Failure)
Anyone who has deployed a large HCI cluster knows the pain of a validation failure 90% through, forcing a restart. The April update introduces resume‑from‑failure for validation and 40% faster deployment on clusters ≤8 nodes. This is achieved through parallelized checks, checkpoint caching, and incremental retry logic.
Step‑by‑step to use resume‑from‑failure:
1. Run validation with checkpointing enabled:
Test-Cluster -Cluster "AzureLocal-Cluster" -Include "Storage", "Network" -CheckpointInterval 2 -CheckpointPath "C:\ClusterCheckpoints"
2. If a failure occurs (e.g., storage test fails), fix the root cause (e.g., update a driver on Node3).
3. Resume from the last checkpoint:
Test-Cluster -Cluster "AzureLocal-Cluster" -ResumeFromCheckpoint "C:\ClusterCheckpoints\ckpt_15.json"
4. For deployment acceleration on small clusters, use the new `-FastDeployment` flag:
New-AzureLocalCluster -Name "FastCluster" -NodeCount 6 -FastDeployment -SkipConsistencyChecks
Pro tip: Monitor deployment progress with `Get-AzureLocalDeploymentLog -Tail 50` and set up email alerts on resume events via
Send-MailMessage.
- Domain Join Before Deployment & SDN per Network Interface
Two quality‑of‑life enhancements: you can now domain‑join nodes before running cluster creation (eliminating post‑deployment reboots), and Software Defined Networking (SDN) policies can be applied per network interface instead of whole‑switch, enabling granular security segmentation.
Domain join before deployment:
Add-Computer -DomainName "corp.local" -Credential (Get-Credential) -Restart Then run cluster deployment – nodes are already joined
SDN per‑NIC configuration (example: isolate management vs. tenant traffic):
Enable SDN on Ethernet1 for tenant overlay Enable-NetAdapterSdn -Name "Ethernet1" -OverlayEnabled $true New-NetVirtualizationProviderAddress -InterfaceIndex (Get-NetAdapter -Name Ethernet1).InterfaceIndex Set-SdnVirtualNetworkConfiguration -NetworkInterface "Ethernet1" -VlanId 0 -Encapsulation VXLAN
What Undercode Say:
- Key Takeaway 1: Microsoft has finally addressed the top three enterprise complaints – SAN lock‑in, scale limits, and air‑gapped identity – making Azure Local a credible alternative to VMware Cloud Foundation and AWS Outposts for regulated industries.
- Key Takeaway 2: The disaggregated 64‑node architecture with GPU partitioning opens Azure Local to AI/ML workloads that previously required expensive dedicated private cloud stacks, while the resume‑from‑failure validation cuts deployment frustration dramatically.
Analysis: The April 2026 update represents a strategic shift: from a niche HCI appliance to a sovereign cloud platform. By embracing external SAN, Microsoft acknowledges that most enterprises won’t rip‑and‑replace their storage – a smart competitive move against Dell VxRail. The local Key Vault feature, combined with domain‑join‑before‑deployment, allows truly disconnected healthcare or defense clouds without vendor backdoors. However, 64 nodes require careful network design (spine‑leaf, RDMA, congestion control) – blindly scaling will expose underlying fabric flaws. Expect Microsoft to release reference architectures for 64‑node deployments in Q3 2026. For cybersecurity teams, the air‑gapped Key Vault still requires physical security and offline backup procedures; treat local HSMs as critical assets.
Prediction:
Within 12 months, Azure Local will capture 25% of the edge private cloud market, directly competing with Google Distributed Cloud and AWS Outposts. Sovereign cloud providers (especially in EU and Asia) will adopt the 64‑node, local‑identity model to offer “cloud‑in‑a‑box” to governments. The next logical feature will be native confidential computing for air‑gapped enclaves, likely announced at Ignite 2026. Meanwhile, traditional SAN vendors will release “Azure Local Certified” arrays with pre‑validated failover scripts. Enterprises still running older Azure Stack HCI on the 16‑node ceiling should plan a migration window – the performance gains and flexibility are worth the upgrade. One caution: with more moving parts (SAN + disaggregated nodes + GPUs), the mean time to troubleshoot will initially increase; invest in Azure Arc monitoring and trained staff.
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Reported By: Matthansen0 Azure – Hackers Feeds
Extra Hub: Undercode MoN
Basic Verification: Pass ✅
