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Matt McSpirit on Virtualisation, Management and Core Infrastructure

Licensing Windows Server in a Virtual Environment

Licensing Windows Server in a Virtual Environment

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Following on the theme around licensing, I thought I’d take the opportunity to explain, in detail, for anyone who doesn’t already know, how to license Windows Server Operations Systems in a Virtual Environment.  Now, I’m not a licensing expert, but I’ve been through this enough times to understand it, and articulate it correctly, however, if something doesn’t make sense, add a comment!  It’s important to note, that everything I discuss below, is relevant for Microsoft and non-Microsoft virtualisation environments.

So, let’s start…

Windows Server 2008 Standard

So, say we’ve bought a copy of Windows Server 2008 Standard, and we install it on the Physical box below.

Physical Host

If we’re not bothered about Virtualisation, this is a very simple licensing scenario indeed – all I’ve done is installed (and thus assigned) this Windows Server 2008 Standard license to this physical box.  Easy peasy.  From here, I could enable any of the roles of the OS, such as AD, DNS, DHCP etc, and have a great time doing it.  If need be, I could downgrade this OS to a previous version of Windows Server (but I’m not going to go through this process today).  There are a couple of very important things that we need to get out in the open early on here, as it’s relevant throughout this post.

- First important thing to note is, if I’ve bought this Windows Server 2008 OS on a piece of hardware, through an OEM channel, that license lives and dies with the hardware, so there’s no moving this license to another physical host.

- Second important thing to note is, if I’ve bought this license through a volume licensing program, and I want to re-assign this license to another physical host, I can do this, but, I can’t re-assign it again for another 90 days.

Now, as you know, Windows Server 2008 contains Hyper-V, so, if we enable this role, we can start running virtual machines on that particular host, but, what we do have to think about, is how we license those virtualised Windows Server guest OS’s running on that Windows Server 2008 Standard Host.

Physical Host - 1 VM

So, in this example on the left, we’ve decided to virtualise 1 guest server OS on our Windows Server 2008 Standard Host.  We’ll say, for arguments sake, that this is a Windows Server guest OS.  Now, with Windows Server 2008 Standard, I get 1 free running virtual instance on that particular host.

What that means is, when I assign a Windows Server 2008 Standard license to a physical box, I get the added benefit of not only being able to install the Windows Server 2008 OS on the physical hardware (and thus enable the Hyper-V Role), but I also get 1 free Windows Server guest OS, which can be Windows Server 2008 Standard or Downgraded

Read that last paragraph, then read it again to make sure you’ve got it.

I used a keyword in that paragraph.  That keyword was ‘assign’.  The reason I use the word ‘assign’ rather than ‘install’, is because this licensing is Virtualisation agnostic, which means I can ‘assign’ a Windows Server 2008 Standard license to a physical VMware ESX or Citrix XenServer (or A.N.Other!) host, and for free, run 1 instance of Windows Server 2008 Standard (or downgraded) in a VM on those platforms.  If you want to run 2 instances of Windows Server Standard on those platforms, assign a 2nd Windows Server 2008 Standard license to that physical host, and that will give you another, and so on.

So, those bright sparks among you are going to say, well, if I not only assign the Windows Server 2008 Standard license to a physical host, but choose to install it on the physical host too (instead of A.N.Other Virtualisation platform), and then I create a Windows Server 2008 Standard (or downgraded) VM, am I not effectively getting 2 OS’s for the price of 1?  Well, yes, and no.

The reason I say yes is, because you are getting 2 fully featured versions of Windows Server 2008 Standard – one for use on the actual physical host, and one for use in the VM.  However, here’s the caveat.  If you are using your maximum ‘free allowance’ of Windows Server VMs on a host (1 in this case), you must use the host machine to purely manage the virtual machines running on it, and nothing else.

So, in the example directly above, that physical box, with Windows Server 2008 Standard & Hyper-V running on it, can only be used to support the VM(s) above it, and not be providing other infrastructure features into the environment, such as Active Directory, Domain Controller, Web Server etc.  It should be used purely for Hyper-V and managing the VMs running on it.

So, imagine this scenario:


In this scenario, we’re looking to run 3 Virtual Machines, which, for arguments sake, are Windows Server guests.  To do this, using Windows Server 2008 Standard licensing, we’d assign 3 licenses to the physical box, which would not only give us the OS for the physical host, but the 3 guest OS’s we desire.  If we wanted to move these VMs to another host, we’d have to reassign the Windows Server 2008 Standard licenses to the chosen host, however we wouldn’t be able to move it for another 90 days.  Now, Windows Server 2008 Standard retails at about $999 I believe, so, this scenario will set us back just under $3000, and will go up by $999 for each guest Windows Server OS we want to consolidate.  This pricing does not change whether you have 1 CPU, 2 CPUs or 4 CPUs in the physical box.  So, a license of Windows Server 2008 Standard on a 1 CPU Dual Core System, is the same price as one on a Quad CPU Quad Core System.

If I was consolidating Linux guest’s onto this platform, perhaps open-source rather than commercial distributions, then the guest OS’s would effectively be free.

From a licensing perspective, using Windows Server 2008 Standard Edition is the least beneficial and flexible when compared with Enterprise and Datacenter editions when it comes to Virtualisation.

Windows Server 2008 Enterprise

So, hopefully you’ve got the gist from reading the bit above.  Now, licensing Enterprise is very similar indeed, however, this time, instead of getting 1 free running instances, you receive 4 free running instances when you assign a Windows Server 2008 Enterprise license to a physical host.

Windows Server 2008 Enterprise


So, in this scenario, we’ve simply assigned the Windows Server 2008 Enterprise license to the physical box, and we receive 4 free running instances of Windows Server 2008 Enterprise, or downgraded, in virtual machines.  We could have 100 virtualised Windows Servers on this particular box, but the license gives you 4 free running instances at one time.

So, if you assign this license to an ESX or XenServer host – no problems, you receive 4 free running Windows Server instances.  If you assign and install it, you’re getting a Hyper-V platform for free, and the 4 free running instances.  Same rule as above applies – If you are using your maximum ‘free allowance’ of Windows Server VMs on a host (4 in this case), you must use the host machine to purely manage the virtual machines running on it, and nothing else.

This licensing is cumulative too, so if you want to assign 2 licenses of Windows Server 2008 Enterprise to the physical host, for 8 free running instances, just do it!  Or assign 3 licenses for 12 free!  It just keeps going, but remember, you can’t reassign Windows Server licenses from physical host to physical host more than once every 90 days.  Another key area to be aware of is when you are using migration technologies, like Quick Migration on Hyper-V, VMotion on VMware’s platform, or XenMotion on the Citrix platform to name but a few.  So, take this scenario:

Migration Example

In this example, we’ve assigned a Windows Server 2008 Enterprise license to both physical nodes, and we’re using our maximum 4 free running instances on both nodes.  All is great :-)

We encounter a situation (Manual, DRS etc) where we need to migrate a virtual machine from one node to another.  Technically, not a problem, however a move is going to put us out of compliance from a licensing perspective, because what we may find is that we’re running more than 4 guests on one of the nodes and less than 4 on the other.  On the node that’s running less than it’s maximum of 4, there’s no problem.  It’s just we’re incorrectly licensed on the node that’s now running more than 4.

One way to counter this, is to assign 2 Windows Server 2008 Enterprise licenses to each node, giving us a free allocation (or, breathing space) of 8 free running Windows Server VMs on each node.  Whether we choose to use all 8 on each node is up to us, but if we do, we could get into a similar situation as we found before if we’re not careful.  If it’s only a very temporary situation, i.e. you’ve moved all VMs onto physical host 2 for a short window whilst host 1 is patched, then you should be fine – Microsoft’s licensing is based on a trust model and understands the importance of temporary maintenance etc.

In the same way Windows Server 2008 Standard was licensed per box, so is Enterprise, so again, this pricing does not change whether you have 1 CPU, 2 CPUs or 4 CPUs in the physical box.  So, a license of Windows Server 2008 Enterprise on a 1 CPU Dual Core System, is the same price as one on a Quad CPU Quad Core System.  The retail price of Windows Server 2008 Enterprise is $3999, which, if you think about 4 free VMs per license, it works out at about $1000 per VM, so roughly the same price as Windows Server 2008 Standard, yet you get the Enterprise features like Clustering etc, inside the VMs.

Also remember, that any of these VMs can be downgraded to older Windows Server versions, such as 2003, or 2000.  2000 SP4 is the earliest supported version on Hyper-V, and runs great! :-)

Windows Server 2008 Datacenter

OK, so, we’re on the home straight here – just Datacenter edition to go!  Stay with me!

Hopefully you understand what I’ve been talking about so far, because it’s very important when devising solutions based on Microsoft server technologies, regardless of the Virtualisation platform.  I wouldn’t want to be a customer, who’s paid good money to embrace VMware’s technologies (for example), and been told incorrect information about Windows licenses running on those ESX hosts, which has resulted in the customer buying more licenses that necessary.  Not good.  It’s therefore critically important that both customers, and partners understand and can articulate this information.

So, what’s the deal with Datacenter edition, and is it too ‘big’ for my business?  Well, let’s dip into a little history first – In previous versions of Windows Server, i.e. 2003, you could only buy Datacenter edition on hardware.  There was no other channel, bar OEM, that organisations could get hold of Datacenter, so, in many cases, it would have been restricted to the larger organisations who were buying whopping hardware.  That’s changed for 2008.

Update - As Mike rightly points out in the comments section "Windows Server 2003 Datacenter became available through normal channels in October 2006 - the same day these virtualization rights were introduced. You still get the rights with Windows Server 2003 and 2008 and can use the downgrade rights for earlier versions of the OS"

For the first time, Datacenter edition of Windows Server is available through regular Volume Licensing channels, so it’s instantly more mainstream and accessible for many more people, but, why would you want it?  Well, if you take Windows Server 2008 Datacenter as an OS, it’s our most scalable version of the Windows Server 2008 versions, supporting the highest number of procs/cores, but feature wise, it’s pretty much the same as Enterprise.  Where it changes massively, is when you bring in Virtualisation.

The Hyper-V bits themselves are identical to those in Enterprise, scaling up to 1TB RAM in the physical box, 24 cores with the latest Intel 6-core chips, 64GB RAM per VM etc etc.  It’s the Virtualisation licensing that’s pretty darn different than Enterprise.  Here’s the scenario:


Imagine we want to achieve a 16:1 consolidation ratio, so, 16 VMs (in this case, Windows Servers) running on 1 pretty powerful box.  Seems pretty achievable I’d say, but what’s the most cost effective way of licensing it?  Well, so far we have Standard edition, which gives us 1 free VM per assigned license, so we’d need 16 licenses @ $999 each, so we’re talking around $16k.  We don’t have much flexibility using Standard edition, plus we can’t use any Failover Clustering, so we’re putting quite a few eggs in one basket here!  What are the alternatives?

We have Enterprise edition, which, as I detailed above, provides 4 free running instances per assigned license, so, for 16 VMs, we’d need 4 Enterprise licenses assigned to this box.  4 Enterprise licenses @ $3999 per license weighs in at $16k, so pretty similar to Standard edition really, but with greater scalability and features under the hood.  Final option?  Datacenter Edition.

Now, first important point, Datacenter edition is licenses per physical processor, not per box, like Enterprise/Standard are.  So, in our scenario, imagine the box on the left has 2 physical procs, each with quad cores.

So, in this case, we’d need to assign 2 Datacenter licenses to the box on the left, as it has 2 physical processors.  Datacenter licenses go for $2999 per processor.  That would mean that this scenario would cost us just under $6k.  But what are we getting for our money?  I haven’t mentioned any ‘free’ virtual machines yet….

Windows Server 2008 Datacenter Edition, when assigned to a host, allows an unlimited number of free running Windows Server guest OS’s on that host.  So, for our scenario, where we want a 16:1 ratio, assigning 2 Datacenter licenses to that box (for a total of just under $6k) gives us what we need, and more.  I could double, triple or even quadruple (and more!) the number of Windows Server Guest OS’s on that box, and still only ever pay $6k.  This would only change if I upped the number of physical procs in the machine. So, $6k Datacenter, vs. $16k for Standard/Enterprise.  Double the ratio to 32:1 and Datacenter is still $6k, but Enterprise & Standard are now coming in at around $32k – in fact, Standard would probably have hit it’s limit by that point, depending on how ‘big’ the VMs are  (Standard edition supports 32GB RAM in the host).

The great thing to mention about Datacenter Edition (aside from the great Virtualisation licensing benefits!) is that it really eases the licensing headache around migration of virtual machines between hosts.  If you have a 3 node cluster, each with Datacenter licenses assigned, it will never matter how many Windows Server VMs you’re running on each physical node.  You can have 20 VMs on one, 10 on another, and 35 on another, and never have to worry about being incorrectly licensed from a Windows Server perspective.  Excellent.

To summarise:


If these were the requirements of a project, on the top right, the first thing to note is, Standard Edition is pretty much out.  It doesn’t have the clustering element to it, so it would have to be Windows Server 2008 Enterprise of Datacenter.  I’m using Hyper-V as my virtualisation technology here, as I’m getting it as part of my license anyway, but if there was a requirement for a VMware or Citrix (or A.N.Other) deployment, then you’d factor those costs on top.  So, Enterprise and Datacenter licensing assigned to the physical hosts will give me the features I need in terms high availability, and migration with minimal downtime.

So, do I choose Enterprise, or Datacenter for my licensing?  Well, I think these results speak for themselves – I’d save $30k on these 3 nodes alone by using Datacenter.  I could double my CPUs in each node too, up to 4 CPUs in each node, and it would still only come to $36k using Datacenter, so it would still be cheaper than Enterprise, and I get the added flexibility that Datacenter brings, plus, and this is a key point, future scale-up growth at no cost.  I wouldn’t get this with Enterprise.  For every 4 VMs I wanted to scale up, I’d be paying an extra $4k per license with Enterprise.  Datacenter really is a compelling choice from a licensing, and a cost saving perspective.


Well, phew, we made it!  Hopefully that’s made sense – if it hasn’t, that’s what the comment box is for on this post!  Let me know!  Hopefully this has given you clarity around licensing the different versions of Windows Server in virtual environments, and also some of the caveats you need to be aware of, like not being able to move OEM licenses around, or re-assigning licenses to hosts more than once every 90 days.  You should also remember that the keyword is assign, not install.  Microsoft would be naive to think that just because someone has bought Windows Server 2008 licenses, that they will always use Hyper-V as their virtualisation platform.  Using the word ‘assign’, clears this up; simply assign a Windows Server license to a physical box, and you get the free VM rights.  Whether you choose to utilise the added benefit of a free virtualisation layer in the form of Hyper-V on that system, is entirely up to you…

  • After a long search about the topic, I found your article. Great write up. Helped me a lot. I just need somthing more to figure out.

    I'm looking at testing Hyper-V by getting a server with Windows 2008 Standard x64 (OEM). Once I assign the license to the VM will it be a 64bit environment as well or can it be a 32 bit environment? Will it make me choose? Do I need a 32 bit media disc? Many thanks.

  • Hi Eric,

    There is no reason why it can't be a 32-bit environment, however you will need to download the 32-bit media.  You could download the eval, or you could contact the OEM vendor and see if they will supply it.  In terms of product keys, you should receive your 'virtual' keys' in the box with your physical server.

    Just remember though, the eval of Windows Server 2008 RTM will run for 240 days (60 days x 4 licence-resets) so that should give you plenty of test time.



  • Great and easy to understand article. Thanks for the effort.

  • Thank you very much for this write up. Very useful. Oh and you have the patience of a saint. Also thanks to mikedatl for the link to Emma Healey's site. She has a very useful post (16th Jan 2009) relating to changes CALs and Virtualisation. This answered the perhaps the only area I was still unclear about after reading your article Matt.


  • Hi Wotcher,

    Thanks for the comment - I really appreciate it.  I know how frustrating it is to find clear licensing information, especially on Microsoft's technologies, so I've tried my best to explain it as simply and clearly as possible - so far, it looks like it's worked.  I'll be working on follow-ups for our Server Management Suite, and VECD for Deskops.

    You're also spot on about Emma's site - she's a legend! :-)

  • two concerns:  

    1.  let's take the 16:1 server consolidation scenario where you've said that with win2k8 enterprise, it would cost $48k, but with datacenter it would cost $18k.  you've left out a variable that i would think applies to most people doing a server consolidation -- i'm already running 16 windows servers.  I already own 16 windows standard licenses.  I already pay SA on them.  I already can move these to a new machine running someone's hyperV w/o paying a dime (as long as I don't move them back in 90 days, according to you).

    2.  ladylicensing says on her blog, dated Aug 19 that ms is removing the 90 day restriction on moving stuff back.

    I'm interested to know your thoughts on each of these points.  I admit that I might be completely in the dark, so please let me know where my thinking is wrong on the first point.

    thanks so much for shedding light these confusing issues!

  • I'm curious if when you say, "If it’s only a very temporary situation, i.e. you’ve moved all VMs onto physical host 2 for a short window whilst host 1 is patched, then you should be fine – Microsoft’s licensing is based on a trust model and understands the importance of temporary maintenance etc.", you are surmising, or are you stating a legal fact.  I don't see anything in the EULA that says something like that.  this could have drastic implications in a purchasing decsion assuming we already own the windows standard licenses for the servers we want to consolidate - see previous post.

    thanks again for such an enlightening article.


  • Hi Jim,

    You're spot on with the first comment - you can indeed move your 16 Windows Server Standard licenses over, as long as they aren't OEM.  You're also spot on about the reassignment rule - if I assign a license, I can't reassign it for another 90 days.

    In Emma's (Lady Licensing) post, she's talking about Server Application Licensing, not the Server OS, so, for things like Exchange 2007 in a VM, that's fine to float around as a VM across physical nodes, with no reassignment necessary.

    In terms of the temporary situation - In all honesty Jim, I was just trying to be realistic for customers, so it's not a legal statement as such, but it would be unfair of MS to make customers buy more licenses just to allow for a patch schedule.

    I'll check with Emma for a better, more 'official' line, but MS would know that you aren't abusing the system on that occasion.

    Thanks for reading,


  • I have a win 2008 x64 datacenter edition (hosted&rented in a datacenter) with 2 x86 vm (win2008 web x86, win 2008 std x86). how do i activate theese vm's? i only have the host serial number (product key); it doesnt work on x86 systems.

  • Hi Catalin,

    When you buy your Windows Server license, you should get a 'physical' and a 'virtual' key, plus you should have access to both the x64 and x86 media (and keys) - have you tried to contact the distributor who supplied your licenses?


  • Hi Matt,

    Actually it's a hosted server. we rent it from a datacenter (the 'rent' means hardware+software). it is fully dedicated to us. i have the original product key, but it's a x64 product key.

    am i to understand that the hoster should have provided mi with both keys?



  • Hi Catalin,

    The hoster would be the first place I would start asking, yes, after all, it's them that you are renting your software from, so they should be able to get you the keys (or should help you activate it based on the software being in their name!)


  • this is one of the best blog posts I've ever read.  It's a little long-winded for me, but as you pointed out, if you don't write for the lowest common denominator, you'll just end up creating more questions.

    well done.

  • Hi, thanks for the great explanation.  I have a question regarding licensing to virtual machines' CPU counted by Datacenter edition.

    You mentioned that Datacenter edition is licensed to CPUs.  If I have 2 physical quad-core CPU.  I only need 2 licensing of Datacenter edition.

    How about the guest virtual machines?  Can I assign more than 2 cores to the guest virtual machines to install Windows Server 2008 Datacenter edition??  Or I am limited to assign only "2" CPU to my guest virtual machines??

    Thank you,


  • Hi Leon,

    Thanks for the comment.  To my knowledge, Datacenter licensing is purely associated to the physical CPU, so, in your example, you would need 2 x Datacenter licenses, but each of your VMs could have 1-4 vCPUs.

    Bear in mind, Hyper-V V1 supports up to 8vCPUs per Physical Core, so you have 8 cores total, so you can run up to 64vCPUs total.  This isn't a hard coded limit however.  That could be 64 x 1vCPU VMs, or 16 x 4vCPU VMs.  Don't be lured into using multi-vCPU VMs for the sake of it though - make sure your virtualised app / service can take advantage of the multiple threads!

    I'll double check with licensing to make sure I'm correct here, but I've never heard of any restriction through to the VMs.  If you don't hear from me again in the comments in the next day or so, take my above information as correct.



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