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There are three concepts in Microsoft licensing that people often mistake for a single entity, when in fact the three are connected but very separate. They are:
Because the three are so tied together it is easy to get yourself in trouble if you do not take the time to understand how the three of them interrelate. However with a little understanding you should be good to go.
You have paid for an instance of an operating system or an application; you are licensed to use it. Does that mean you are licensed to use it anywhere? Of course not. Depending on the type of license you may be good, or you may be limited. For example, there may be educational licensing that cannot be used outside of a school, or charity licensing that can only be used by a non-profit (and non-religious) organization. Then there are OEM licenses which are tied to a piece of hardware, which means that it cannot be transferred to another physical machine (or, depending on the license, to a Virtual Machine). These types of limitations are important to understand not only when planning your licensing, but also when migrating from older to newer hardware, and from physical to virtual, and even from vSphere to Hyper-V (virtual to virtual).
You install an operating system or an application. Now you are allowed to use it… however before you do it has to ‘call home’ to make sure that your license is legitimate. Unfortunately over the past few decades software piracy and misuse caused companies like Microsoft to come up with ways to try to prevent theft or misuse. In the days before ubiquitous interconnected computing (the Internet) you might have had to call Microsoft with a code and type in their response code. Fortunately today our computers are all connected, and all that software activation requires is your permission (some companies do not ask even that). However what if your computer is not connected to the Internet at the moment? Simple… most companies will let you install and use their software for a trial period (often 30 or 60 days) before having to activate it.
In order to make sure your operating system or application software is legitimate the company that sells it to you will provide you a product key, often represented on a Certificate of Authenticity (COA). This key ensures that you purchased it legitimately, and is encoded with protections to make sure a) you enter a legitimate key, and b) that the key has not simply been stolen or used more often than permitted.
So we’re good to go… we understand the three different concepts. How they interconnect is as such:
Ok… so now that you understand all of this (there will be a test ) it is time to manage your Licenses and Product Keys and Activations.
…What? Are you serious?
Okay okay… we know it sounds like a much simpler task in an organization with ten machines than in one with 10,000 machines, but Microsoft has a solution that is going to make your life easier. For the Enterprise (or at least for organizations with over 25 licenses) Microsoft provides a couple of free tools for managing your Volume License (VL) Activations. The Key Management Server (KMS) is a great way to manage your activations for Windows (Server & Client), Office, and several other Microsoft products, including OEM, Volume License, and even ‘FPP.’
Charity Shelbourne, a Senior Premier Field Engineer with Microsoft, wrote a great piece on Active Directory-Based Activation vs. Key Management Services. It discusses and links to articles on setting up and managing a KMS Server, as well as takes you through installing and configuring the Volume Activation Services role in Windows Server 2012, and managing all of the components of same. You can check out that article on the Ask Premier Field Engineer (PFE) Blog here. I was going to do a similar write-up, but when she has done such a great job I decided it was better to just point to hers. Now go forth and get your Licensed Product Keys Activated!