The Licensing of Windows Server in Virtual Environments

Many customers are looking at consolidating the datacentre with Virtualization technology. This article is to provide a quick run down of the approach to Windows Server Virtualization using VMware Technology.

One common scenario that IT Pros look at is VMware server running a virtual guest of Windows Server 2008 R2.

To encourage adoption of premium editions, highly virtualized environments are better supported by the premium licenses (Datacenter and Enterprise).

Microsoft has aligned the functionality of Windows Server across three main editions, namely Datacenter, Enterprise and Standard Edition. Furthermore, Microsoft have aligned the product licensing across those three main editions.

If a customer has VMware ESX as the virtualization technology, then Windows Server is not deployed as a host operating system in the physical OSE. The Volume License is assigned to the physical server to support the corresponding number VOSE (Virtual Operating System Environments)

Physical Operating System (POSE) + Virtual Operating Systems (VOSE)

Windows Server 2008 Standard 1* + 1
Windows Server 2008 Enterprise 1* + 4
Windows Server 2008 Datacenter 1* + Unlimited

*If running the maximum allowed instances, the instance in the physical operating system environment may only be used to run hardware virtualization software (for instance VMware or Hyper-V), provide hardware virtualization services, or run software to manage and service operating system environments on the licensed server.

  • Before you run any instance of the server software under a software license, you need to assign that license to one of your servers.
  • You may assign other software licenses to the same server, but you may not assign the same license to more than one server (Microsoft does not support concurrent use).
  • Please be aware that OEM licenses are pre-assigned to the server.
  • Windows Server comes with ‘Down Edition’ rights. This will support licensing with a Enterprise or Datacenter license to support the peak capacity of virtual machines, while allowing deployment of the standard image. There is not a requirement to ‘stack’ Windows Server Standard licenses If It is not the most cost-efficient licensing model.
  • In addition, once you have one license of a product, you can ‘create and store’ as many (non-running) Virtual Machines with that product as you like without requiring additional licenses


If a server is running ESX as the virtualization technology, then Windows Server is not deployed as a host operating system in the physical OSE.

As an example, If you have assigned a single license of Windows Server 2008 R2 Enterprise to the server running ESX, then you may run up to four instances at a time of Windows Server 2008 R2 Enterprise.

You may not run a fifth instance under the same license since that right requires that the fifth instance be running hardware virtualization software and software managing and servicing the OSEs on the server.


Two common scenarios for high availability datacentres involve running the same workload simultaneously across two servers and running a workload on a primary server and periodically moving it to another server due to failure, load balancing, patching or down-time. In each case, whether POSE (Physical Operating System Environment) or VOSE (Virtual Operating System Environment) Microsoft have sufficient licenses assigned to the server to support the workload running on it and accommodate ‘peak capacity’.


  1. The servers are clustered, each licensed with Windows Server and both running the same virtualized workload in parallel.
  2. Both servers are licensed with Windows Server. The workload is moved from the first server to the second server.

If a customer is running Parallels Virtuoso as the virtualization technology, then any Windows Server Virtual OSEs are running in silo, on top of Windows Server on the physical OSE. The VMs share the same kernel as the Windows Server OS but have isolated registry settings, OS library, OS processes and App software. The virtual OSEs are enabled for separate machine identities and admin rights.

The Virtual OSEs share the same kernel and as such, will need to run the same edition when using Parallels for Physical and Virtual OSEs. All Virtual OSEs will be exposed to all processors on the Server. This can have both a cost and licensing impact for Server Applications that run on a Per Processor licensing model (BizTalk)


Example: As shown above, a two-processor server with three running instances of BizTalk Server in virtual OSEs must have six processor licenses for BizTalk Server. 1u Windows Server 2008 R2 Enterprise License is required since the server is running Windows Server in the Virtual OSEs and One instance in the Physical OSE.

An alternative, would be to look at BizTalk Enterprise Edition – Microsoft provides unlimited virtualization when the physical processors are licensed.

If a customer VMware ESX host, with v-Motion enabled, the main consideration is ensuring that each physical server can support the maximum possible number of VOSE (Virtual Operating Systems) that are enabled by the assigned license(s ). Microsoft does not have a concurrent licensing model and the assigned license(s ) should support the total number of VOSE (Virtual Operating Systems) that could run on the Server.


The same licensing rules apply to Windows Server Clustering Services as VMotion and System Center Virtual Machine Manager (SCVMM). When a customer moves Virtual OSEs between servers, the licenses remain with the physical server to which they were originally assigned.

When an instance is moved to a new physical server, that new server must already have appropriate licenses assigned to it (as above)/. Since Windows Server Datacenter permits an unlimited number of instances of the server software to run in virtual OSEs, in multi-server installations with VMotion, and System Center Virtual Machine Manager, it offers the greatest flexibility to move instances between servers without having to track the number of instances running or worry about being under licensed as VMs start stacking up.


Windows Server 2008 R2 Datacenter – Allows an unlimited number of instances of Windows Server to run simultaneously in virtual OSEs. Windows Server 2008 R2 Datacenter provides the flexibility to move instances of Windows Server without concern about maintaining license compliance.

For Windows Server, licenses may only be reassigned to new hardware after 90 days. This, however, does not restrict the dynamic movement of virtual OSEs between licensed servers. As long as the license(s ) is sufficient to support the corresponding number of Virtual OSEs the administrator can transfer Virtual OSEs at will without having to track license assignments.

Server Repartitioning (Windows Server 2008 R2 Datacenter)

You may reassign licenses sooner than permitted in the Universal License Terms when you:

  • reallocate processors from one licensed hardware partition to another
  • create two or more partitions from one licensed hardware partition
  • create one partition from two or more licensed hardware partitions as long as (i) prior to repartitioning, each hardware partition is fully licensed, and (ii) the total number of licenses and processors remains the same.

[Product Use Rights, January 2012, Page 36]

Determining Which Edition of Windows Server Is Most Cost-effective

The most cost-effective edition of Windows Server for your virtualization needs depends on the specifics of your organisation’s environment. This can also be impacted by existing license footprint and volume agreement that windows server is procured through.

  • Standard is the most cost-effective if you want to run up to three simultaneous instances in a virtual OSE on the server.
  • Enterprise is most cost-effective if you want to run four simultaneous instances in a virtual OSE per processor. Enterprise is licensed by server, not per processor, but more than one Enterprise license may be assigned to a server to have the rights to run more than four instances of Windows Server.
  • Datacenter is most cost-effective for running more than four instances per processor. At four instances per processor, Datacenter is slightly more expensive than Enterprise, but provides room to add instances in a virtual OSE on the server at no additional cost. The flexibility gained from “unlimited” virtualization rights reduces concern of licensing compliance.

The optimum licensing vehicle for Windows Server will be dependent on the level of virtualization in the customer datacentre. If your organisation is looking at high availability and continuity and other benefits commonly associated with imageVirtualization (Whether VMware or Microsoft Hyper-V), then the Premium Editions of Windows Server will support a higher number of Virtual OSEs.

I have often stated in this blog that the optimum licensing model is always dependent on the specifics of the organisation and ultimately that specific “Tipping Point” for that customers’ environment, including but not limited to, access to the most cost-effective Volume Agreement.

It is therefore important not to make decisions about procurement ‘in silo’ without a wider review of the existing environment and vendor contract agreement framework. There will be server licensing considerations both pre and post consolidation and it should acknowledge the impact of v-Motion running across the estate.

The following areas could all be reviewed when when looking at licensing windows in virtual environments,

  • Current Volume Agreements (Procurement Models)
    • Alternative Volume Agreements (Procurement Models)?
  • Current Product Licensing Footprint – Is it sufficient?
    • Does it support current and planned configurations?
  • Software Assurance (Maintenance) – Software Use Rights
    • Does the current Software Use Rights enabled under maintenance contracts cover the current and planned server estate?

VMware  advertise the advantages of vSphere as to  “Perform multiple concurrent migrations to continuously optimize a virtual IT environment.” This is why review of the whole server estate, including existing licensing footprint, current contract obligations, software use rights (both perpetual, subscription based or maintenance enabled), current deployed configuration and planned virtualization plans should all be considered.

The advantages of a holistic approach should not be disregarded. While the cost may be higher than your initial estimated costs for the project, but over a longer period it could deliver cost savings through leveraging economies of scale through procurement on the most appropriate Volume Agreement( s) and secure against unanticipated costs from non-compliance following a vendor review (Microsoft) or independent organisation (BSA or FAST).

Please be aware that nothing on this website constitutes specific technical advice. Some of the material on this website may have been prepared some time ago and therefore may have been superseded. Specialist advice should be taken in relation to specific circumstances.

The contents of this website are for general information purposes only. Whilst the author(s) endeavour to ensure that the information on this website is correct, no warranty, express or implied, is given as to its accuracy and the primary author and website owner or it’s contributing Authors do not accept any liability for error or omission.

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This Disclaimer is not intended to and does not create any contractual or other legal rights. This website is not run by Microsoft and the opinions are the author’s own.


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