Microsoft and virtualization licensing

For a couple of months now, we’ve been trying to sort through the mess that is Microsoft’s licensing for the virtual world.  Our research culminated today with a meeting with several Microsoft employees about the status of licensing and the product portfolio that Microsoft is offering.  The biggest issue we’ve had is getting straight answers concerning licensing applied towards a competitor’s virtualization product.  This is a complex issue to try and explain, so bear with me…

I should preface that we have a Microsoft Enterprise Agreement (EA) for our licensing.  This came about several years ago to mitigate auditing and the necessity to keep up with licenses at a granular level within our company.   For a company of our size, this could be one person’s full time job – just to handle license compliance on an ongoing basis.  The EA allows us the ability to add both desktops and servers throughout the year while not needing to purchase anything.  At the end of the year, we perform a true up and pay for the number of new servers or desktops deployed.   It also gives us access to volume license keys which keeps things nice and tidy on the deployment side.  For auditing, we have SMS and other tools to help us know how many devices we’ve added.  

Please note, the information presented here may be slanted for EA customers.  

The take away (as presented to us – your answers may vary by Microsoft rep) was that there are three ways to license for virtual machines in Windows.  With a Windows Server Standard license, you are allowed 1 physical plus 1 VM in Windows 2008.  In Windows 2003, you are allowed on physical server license.  With a Windows Server Enterprise license, you are allowed 1 physical plus 4 VMs in Windows 2008 and 2003.  Microsoft more recently introduced the Datacenter edition of Windows, which is more taylored for virtual environments.  The Windows Server Datacenter edition is licensed on a per-processor model (a la VMware) and allows for an unlimited number of virtual machines to be run on the hardware.  For our existing EA, we can step-up from Standard and Enterprise copies to Datacenter edition.  One copy of Standard or Enterprise equates to a single processor of Datacenter edition in the conversion process.  

Datacenter edition doesn’t have a restriction on how long an instance of Windows must run on the hardware before it can be legally moved.  Microsoft had imposed a restriction on the Enterprise version that an instance of Windows must run on a particular set of hardware for 120 or 180 days before it may be moved, however, we were informed that they have now removed that restriction, also.  

The licensing outlined above is agnostic to the hypervisor, so this information should apply for EA customers using any hypervisor – VMware, Hyper-V or Xenserver.  For our needs, we’re currently planning to continue with Enterprise for some of our VMware clusters and add Datacenter for the servers in at least one of our clusters.  We utilize VMware as a redundancy tool in our burbs and a couple of those clusters are lightly loaded with VMs – less than 4 per host.  So in those locations, Enterprise licenses to account for the virtual machines makes economic sense.  At our price point, the Enterprise license is roughly the same cost as a Datacenter edition one-processor license.  We’d have to purchase two processors for each of our hosts.  

In addition to our ESX licensing, we have been exploring deploying thin clients for our users and moving to virtualized desktops.  Microsoft has created the Vista Enterprise Centralized Desktop (VECD) program to accommodate virtualized desktops.  The VECD is available as part of the Microsoft Desktop Optimization Pack (MDOP) and also directly as VECD licensing for non-qualified desktop products (thin clients, etc. that aren’t capable of running full versions of  Windows XP or Vista).  In the add-on package, VECD allows users to attach to virtual desktops for applications that may not run in their current OS – for instance, applications that won’t run in Vista can be run in an XP virtual desktop that the user connects to.  

One offering that we were introduced to was Kidaro, which is a Microsoft aquistion.  It basically allows a virtual desktop (Virtual PC only, I think) to be packaged for applications that won’t run in the host OS.  It strips away the task bar, start menu and makes it look like a desktop application, even though it runs in a virtual machine.  Basically, the same thing Citrix Presentation Server does for Terminal Services, this does for Virtual PC.  That is compelling, particually if Microsoft can leverage this towards a centralized desktop farm in the datacenter.  

The MDOP includes App-V, which is the rebranding of the Softricity aquisition.  It allows for applications to be packaged and streamed from a centralized server and run on a virtual layer.  This eliminates DLL conflicts and allows otherwise incompatible softwares to run simultaneously on the same desktop.  MDOP packages several other features along with it at a relatively low per-user, per-year price.

VECD in its stand-alone offering allows for what we need in our enterprise.  It allows for non-qualified desktop devices to connect to virtualized desktops run from a datacenter.  The VECD is licensed based on the number of end-point devices.  You may run an unlimited number of virtual desktops for different needs and user groups on the backend infrastructure.  The price point for VECD is lower than purchasing a license of Vista/XP for a qualified desktop device.  VECD seems to provide us with the most flexiblity for running virtual desktops.

One thing not covered during the meeting, but relayed in an earlier call with our sales partner, was the ability to run Vista/XP desktop licenses on virtual desktops – and that’s a no-no.  The Vista/XP license does not allow for things like VMotion and moving virtual machines between physical hosts.  This licensing still has the restrictions that the OS must be tied to particular piece of hardware for 120 or 180 days (can’t remember which).   So, that restriction in play, VECD seems to be the only sanctioned way to run virtualized Windows desktops. 

All in all, the meeting was extemely interesting.  While it was called to answer our licensing issues, the reps took the opportunity to instead make a sales pitch for the entire virtualization product line.  It was a little over the top and it was hard to be thrashed with the same information both at VMworld and again in my own conference room.

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Philip is a IT solutions engineer working for AmWINS Group, Inc., an insurance brokerage firm in Charlotte, NC. With a focus on data center technologies, he has built a career helping his customers and his employers deploy better IT solutions to solve their problems. Philip holds certifications in VMware and Microsoft technologies and he is a technical jack of all trades that is passionate about IT infrastructure and all things Apple. He's a part-time blogger and author here at

12 Responses to “Microsoft and virtualization licensing”

  1. Anders Gregersen #

    How about using Microsoft applications like Office or Visual Studio upon App-V and the licensing in that area?

    October 28, 2008 at 12:01 pm Reply
  2. Denis #

    You are wrong with server licenses usage.

    Please read the official Product Use Rights (PUR) document

    You must assign your server license to a physical server.

    You may reassign a software license, but not on a short-term basis (i.e., not within 90 days of the last assignment). You may reassign a software license sooner if you retire the licensed server due to permanent hardware failure.

    October 28, 2008 at 12:27 pm Reply
  3. Philip #

    Denis, in which regard? If using Enterprise or Datacenter edition to gain access to the VM licenses which are entitled, you do need to assign the Enterprise or Datacenter edition licenses to a specific ESX or Hyper-V host, however the VMs are not bound to the 90 day rule – they can move between hosts (via VMotion or Quick Migration) without being in violation of the agreement. Based on our meeting, the PUR has been revised for Enterprise to allow the VMs to migrate.

    October 28, 2008 at 1:20 pm Reply
  4. Denis #

    Microsoft hasnt removed re-assign rule yet…
    When you assign enterprise edition to server you get to the right to run 4 VMs.
    But if you`d like to vmotion(ie planned) VMs from other servers to this one which already has 4 VMs, you have to assign more license to this server…
    because of the 90rule

    October 28, 2008 at 2:27 pm Reply
  5. John #

    When a hypervisor is run in host mode or Type II virtualization (i.e. vmWare Server not ESX) your licensing comments make sense.

    But, what if the hypervisor is running in bare metal mode or Type I virtualization, where there is no physical instance of Windows Server 2008 running ?

    Hyper-V can run in host mode (as a role enabled on a full install on Windows Server 2008) or in bare metal mode with Windows Server 2008 Core running in the parent partition.

    The licensing seems to require “one physical instance” which dictates Type II or Host Based Virtualization. If the first part of the licensing requirement is not met (one physical instance) how can the rest be valid, regardless of Standard, Enterprise or DataCenter Editions?

    October 28, 2008 at 3:20 pm Reply
  6. Philip #

    John, I think you and I are understanding the same thing. There isn’t a physical instance to reassign when running ESX, but you still have to assign a license to a piece of hardware. There isn’t an actual installable Datacenter edition that I am aware of – is there? Its just a licensing mechanism to allow for an unlimited number of virtual machines, correct?

    Also, thank you to everyone for the comments. This is a tough topic and the feedback is helpful…

    October 28, 2008 at 3:40 pm Reply
  7. John #

    Phillip, In addition to four and unlimited VMs, Enterprise and Data Center Edition also include MS Cluster Server that is not included in the Standard Edition as well as several over services.

    The inclusion of fail-over or clustering software makes sense, since Hyper-Vs “quick migration” requires it. This is clearly a quick and dirty “me too” answer to V-motion from vmWare.

    If we ass-u-me that the ability to reassign server licenses is not an issue, can we still run four (or unlimited, depending on edition) FREE instances of Windows Server 2008 in VMs if there is no Physical Instance of the software ???

    I have not been able to get a definitive answer from Microsoft. I don’t think their being evasive, I honestly don’t think they know (the folks I’m talking to anyway).

    October 28, 2008 at 4:04 pm Reply
  8. Philip #

    The answer I got from Microsoft earlier this week was “Yes” that you can run the number of virtual machines allotted whether or not the physical instance is present. It does not allow you to run 5 VMs (subbing a VM for the physical) – you are still restricted to 4 VMs with Enterprise.

    The answer I was given was that their licensing is hypervisor agnostic, so it should apply to Hyper-V, ESX, Xen, etc.

    October 28, 2008 at 6:07 pm Reply
  9. Scott #

    This is my take from my work as a virtual admin and reading:
    “Licensing Microsoft Server Products in Virtual Environments”.
    Point 1. Enterprise customers have downgrade rights on all server products so buying 2008 server licenses allows you to run all Windows server versions.
    Point 2. None of MS server “OS” licensing models allows re-assignment within 90 days. You can get around this by purchasing datacentre edition which gives you unlimited licenses on each physical host, otherwise you must purchase enough licenses for each host to cover the maximum number of vm’s that will run on that host.

    October 28, 2008 at 6:10 pm Reply
  10. John #

    Scott, there are those pesky words again “unlimited licenses on each physical host”, your interpretation of the licensing agreement seems to be in contrast to what Philip was told.

    Is it your position (well, what you believe MS’s position is) that even with Data Center Edition, you still need a physical instance of the OS (in other words, a hosted virtual environment or type II virtualization) ?

    Their licensing agreement seems to be written like tax law, very ambiguous and open to interpretation.

    October 28, 2008 at 7:35 pm Reply
  11. Scott #

    It states (summary):
    2008 std – 1 license = 1 vm and 1 physical (1+1)
    2008 ent – 1 license = 4 vm and 1 physical (1+4)
    2008 dc – license all physical procs = infinite vm and 1 physical.
    It does say you “may” run the physical instance to provide virtualisation services (type I or type II) it doesn’t say you “must” run a physical instance.
    So my opinion is that as long as you are covered for the vm licenses you may run a physical instance (if required) but you don’t need to.
    I do agree it is ambiguous and stress that this is my interpretation.

    October 29, 2008 at 5:59 pm Reply
  12. This is a good discussion. Here are several corrections.

    “Datacenter edition doesn’t have a restriction on how long an instance of Windows must run on the hardware before it can be legally moved. Microsoft had imposed a restriction on the Enterprise version that an instance of Windows must run on a particular set of hardware for 120 or 180 days before it may be moved, however, we were informed that they have now removed that restriction, also.”

    The restriction is a 90-day restriction as Denis points out in #2. This applies to every version of Windows *Server* OS. Recently (Sept 1) Microsoft relaxed the 90-day restriction for a list of 41 applications. For the list of apps you can move them around with no restrictions. For all of the OS instances they are still bound by the 90-day restriction.

    You don’t need to actually install an OS to have these virtualization rights. Licenses are “assigned” to a physical host. That’s the MS legal term. Basically you just say “you are assigned to this host” and you’re done. No installing. No license key insertion. It’s a legal action – not an IT action. This is why it applies no matter what virtualization solution you are using. That’s clearly outlined in the MS licensing documentation.

    The rest of what you have listed out (about VECD) is fairly accurate although not described fully here with all of the different ways it can be applied. It should also be noted that the 2 versions are VECD for SA (for any device that runs a full-blown version of Windows) and “regular” VECD (for any device that doesn’t run full-blown Windows such as XP Embedded, Linux, thin client, Mac, etc). You don’t have to buy MDOP to get VECD for SA.

    P.S. A great resource for a lot of this is Lady Licensing (Emma)’s site:

    P.P.S. I work for VMware and deal with this licensing stuff on a daily basis and have done several presentations on the topic at VMworlds and other events.

    November 3, 2008 at 12:50 pm Reply

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