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Unraveling the cost of Microsoft virtualization licensing

A significant cost of any computing environment is licensing. Gone are the days when you could install Windows NT Server and enter all 1's Product ID key and make it work. Today it can be quite complex, with each vendor having its own way of licensing and enforcement for each of its products.

Microsoft virtualization licensing has ratcheted that confusion up a couple of notches. For instance, if you have one physical server with a Windows Server license on it, and then you run some virtualization product and install four virtual machines -- how do you license them?

You could do it by the physical server for one license. Or you could license the four virtual machines plus the host for a total of five licenses. And what about virtual desktops where a server in the data center runs 30 instances of XP and 15 of Vista but has only 20 people connect at any one time?

Does it make a difference if you license VMware Inc.'s VDI virtual desktop product versus Microsoft's SoftGrid in terms of licensing the OS for the virtual desktops? What about managing 12 virtual servers on a single box? Do you have to license something like System Center Operations Manager for each VM?

There are more questions, as you can imagine, but let's look at some answers too.

First, consider the licensing for virtual machines running the Windows Server OS. This is a key concept to understand because calculating the price point can get tricky. In addition

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to any licenses you have for your virtualization product, you still need to license the OS and applications. Here is the current Microsoft virtualization licensing strategy for servers:

  • Windows Server 2003 requires a license per machine -- physical or virtual.
  • Windows Server 2003 R2 Enterprise Edition provides up to four licenses for virtual machines per physical server.
  • Windows Server 2003 Datacenter has unlimited licensing of virtual servers per physical host, with a couple of gotchas.
    • It requires one license per physical processor – a four-processor server requires four licenses for unlimited virtual machines.
    • It does not license cores – so a single quad-core processor requires one license. This could work to your advantage in planning new hardware purchases.

A major change was made recently in Microsoft's virtualization licensing scheme for servers. Now licenses are consumed per running instance rather than per total virtual machines. Thus, if you have a Windows 2003 Enterprise Edition R2 server with its four free licenses, you could build, say, 16 virtual machines for a library for fast rebuilds and just leave them turned off. The four licenses will be consumed only by active instances.

Another licensing wrinkle is the technology that allows virtual servers to move from one physical server to another. VMware calls this "VMotion." Microsoft refers to it as "migration." Although it is amazing technology that permits virtual servers to continue running even when their physical host dies, it messes up the licensing aspect.

Suppose you have three Windows 2003 Enterprise Edition R2 servers running, and you have four virtual machines loaded on each one. Three total licenses are required. But you have implemented the "migration" technology and one of the servers has a hardware problem, so you migrate the VMs to another physical server. You have just broken the licensing agreement because Microsoft licenses by the "high watermark" in this case.

It means that if you assume that any given server could have a maximum of eight virtual machines -- four from another server -- then you will need an additional four licenses for each of the three servers, for a total of 12 licenses. Of course, this assumes you have the resources to handle that many VMs.

An alternative to this would be to purchase Datacenter, which gives you unlimited virtual licenses and requires only a single license for each physical processor. Datacenter is considerably more expensive than an Enterprise server OS, so you will have to sharpen your pencil and see if this is advantageous or not to your overall cost management plan.

In licensing management software, Microsoft will sell you one license per physical server to run four of its System Center products. This is definitely a plus. It could be beneficial to get a bigger host to store more VMs and use Datacenter. The license includes these products:

  • Data Protection Manager
  • System Center Configuration Manager
  • System Center Operations Manager
  • System Center Virtual Machine Manager

Desktop virtualization is a whole 'nother ballgame. It allows the user's machine and OS to run in an instance on a server, as is the case with thin clients. Although Citrix Systems Inc., Microsoft, Quest Software Inc. and VMware all have their own "virtual desktop infrastructure" – or VDI – product, the licensing for XP or Vista is tricky.

Because a server license doesn't allow licensing of XP or Vista, we need a way to do this. Microsoft has a licensing program -- not a product -- called the Vista Enterprise Centralized Desktop (VECD), which allows licensing for centrally managed desktops. You actually buy an upgrade to the OEM license for the OS. The thing to remember is that while servers are licensed on a per-instance of the virtual machines, the client OS is licensed by the total number of people connecting to XP or Vista instances. So if you have 30 virtual XP desktops for 30 users, but only 20 people connect at a time, you still need 30 licenses.

The only way you can accomplish the licensing is by attaching the VECD to a Desktop SA agreement. If you have thin clients, you can buy a standalone subscription per device, which then allows the user to connect to up to four instances per subscription. You have to buy these licenses via subscription. You can't get them a la carte. You must license the client OS no matter whose virtual desktop product you are using.

Need a hand to help you figure out Microsoft virtualization licensing costs? Microsoft has a nice tool called the Microsoft License Advisor that tells you step by step how to determine your potential costs. Microsoft's licensing Web page and its virtualization Web page are two more great resources.

Using virtualization technology to consolidate servers will reduce costs. However, licensing costs can make or break the return on investment for a virtualization project. Take advantage of Microsoft's server licensing policies, which grant free Windows Server licenses, to maximize the cost benefit. Determine the number and distribution of your virtual servers and then see if it makes sense to use Windows Server 2003 R2 or Datacenter for the virtual machine licensing advantage.

Gary Olsen is a systems software engineer for Hewlett-Packard in Global Solutions Engineering. He wrote Windows 2000: Active Directory Design and Deployment and co-authored Windows Server 2003 on HP ProLiant Servers. Olsen is a Microsoft MVP for Windows Server-File Systems.

This was first published in August 2008

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