Microsoft Migration Accelerator (MA) currently in limited preview provides the ability to migrate workloads running in your enterprise to Azure. One of the limitations that customer face is the 127GB cap on the OS disk size of the Azure Virtual Machine. When you protect an on-premises server using Migration Accelerator, 'Readiness Check' is done to validate the size of the system volume to meet this requirement. If the OS disk size equal to or greater than 127GB then you will get “The VM(s) <your VM name> could not be protected as their system volume is greater than 128GB.” message. Shrinking the C: will not resolve the issue because it shrinks the volume not the disk.
This limitation is now removed by Azure, it can support OS disk size up to 1 TB. We have enabled this functionality in MA to migrate servers with OS disk size up to 1023 GB. You can now migrate those servers that previously didn’t qualify to take advantage of Azure. For more information, read Azure VM OS drive limit has octupled.