Beside the Windows Server 2016 Datacenter image, Microsoft also provides an image with Windows Server 2016 Datacenter – Server Core in Azure.
If you are using the Server Core image and want to enable Azure Disk Encryption for the VM, you will see the following error message.
New-AzureRmResourceGroupDeployment : 14:27:53 - Resource Microsoft.Compute/virtualMachines/extensions 'azst-crp4/BitLocker' failed with message '{ "status": "Failed", "error": { "code": "ResourceDeploymentFailure", "message": "The resource operation completed with terminal provisioning state 'Failed'.", "details": [ { "code": "VMExtensionProvisioningError", "message": "VM has reported a failure when processing extension 'BitLocker'. Error message: \"Failed to configure bitlocker as expected. Exception: The system cannot find the file specified, InnerException: , stack trace: at System.Diagnostics.Process.StartWithCreateProcess(ProcessStartInfo startInfo)\r\n at System.Diagnostics.Process.Start(ProcessStartInfo startInfo)\r\n at Microsoft.Cis.Security.BitLocker.BitlockerIaasVMExtension.BitlockerPrep.RunCommand(String cmd, String args)\r\n at Microsoft.Cis.Security.BitLocker.BitlockerIaasVMExtension.BitlockerPrep.SplitOSVolumeForBitlocker(Boolean& rebootRequired)\r\n at Microsoft.Cis.Security.BitLocker.BitlockerIaasVMExtension.BitlockerOperations.PrepareMachineForBitlocker(Boolean& rebootInitiated)\r\n at Microsoft.Cis.Security.BitLocker.BitlockerIaasVMExtension.BitlockerExtension.PrepareMachineForBitlocker(Boolean& rebootInitiated)\r\n at Microsoft.Cis.Security.BitLocker.BitlockerIaasVMExtension.BitlockerExtension.HandleEncryptionOperations()\r\n at Microsoft.Cis.Security.BitLocker.BitlockerIaasVMExtension.BitlockerExtension.OnEnable()\"." } ] } }' At C:\Volume\OneDrive\Sync\Azure\ARM\Azure_Global\setupADE.ps1:31 char:13 + New-AzureRmResourceGroupDeployment -Name $deploymentGUID. ... + ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ + CategoryInfo : NotSpecified: (:) [New-AzureRmResourceGroupDeployment], Exception + FullyQualifiedErrorId : Microsoft.Azure.Commands.ResourceManager.Cmdlets.Implementation.NewAzureResourceGroupDeploymentCmdlet
The official solution is described in the Azure documentation.
You do not need to take the steps 1 to 3. You only need to copy the four files from a 2016 Datacenter installation onto the 2016 Datacenter – Server Core installation. Afterwards you can follow the steps 1 to 3 as stated in the documentation or directly enable ADE for the VM via PowerShell or an ARM template.