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Yes, it's possible.

To execute the cloudbase-init service as Local System, just add the RUNSERVICEASLOCALSYSTEM property when starting the MSI installation, e.g.:

msiexec /i CloudbaseInitSetup.msi /qn /l*v log.txt RUN_SERVICE_AS_LOCAL_SYSTEM=1

This feature has been introduced with Cloudbase-Init 0.9.8 and can be found in stable and continuous releases, e.g.:


The reason why we added a new cloudbase-init user account is that some user data actions performed during guest initializations, e.g. installing non trivial packages like SharePoint server, require a proper user logon profile and fail when executed as Local System.