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Microsoft Server Licensing Differences for Virtualisation

Posted on 18th October 2017

A question that's regularly asked by our customers is what is the difference between OEM and Volume licensing, and which one should they purchase when they're purchasing their new server equipment.

Whilst OEM typically offers the best price when looking to purchase Microsoft Server software, Volume licensing has a number of benefits which may or may not explain the large pricing difference between OEM and Volume Licenses.

The lines get blurred more when you look at virtualisation so I hope to help clearly explain the differences, as when searching for information online I only came up with articles from 5+ years old!

Essentially, OEM is tied to the Hardware you purchased the licenses with.

Volume licenses can be purchased separately and have more flexibility, but that comes at a price premium.

Once OEM licenses are installed, they cannot be be moved from the server (unless Microsoft Software Assurance is added). *Software Assurance can be added within 90 days of initial license purchase.

Question: If I retire a server with an OEM license on it, can I use that software on a new server?

No, the license is tied to the hardware and cannot be moved to any other server.

Downgrade Rights

A well known fact is that you receive downgrade rights with Volume Licenses, but a little-known fact is that these downgrade rights can still apply to OEM licenses, providing a downgrade kit is purchased.

This is a one time right, and Volume licensing still provides far greater flexibility with downgrade rights as the product can be downgraded at any point during it's life.

Deployment Options

Quoted from Microsoft's own 'Commercial Licensing Brief' - Downgrade rights for Microsoft Commercial Licensing, OEM, and full-packaged product licenses:

Rights to server software are granted in the OEM License Terms. The OEM License Terms for most OEM versions released with or after the Windows Server 2003 R2 operating system allow for the user to downgrade to an earlier version. New products that do not have earlier versions do not allow a user to downgrade. See the full text of the applicable OEM License Terms for the specific downgrade rights."

Also Microsoft detail how to access, and how many prior versions can be downloaded:

While you have the right to downgrade products, in general, the Microsoft Commercial Licensing Service Center (VLSC) provides download access only to the current (N) and the prior version (N-1) of products. Note: In addition to the VLSC download software access, all Commercial Licensing customers may choose to purchase physical media (CD/DVD) copies of their licensed software through their Microsoft reseller.
If you have legally obtained physical media (CD/DVD) of earlier Microsoft products that your organization is currently licensed to use through downgrade rights, you may use these prior software versions at your discretion.
For more information about access to prior product versions, please see the fulfillment information at www.microsoft.com/licensing/existing-customers/fulfillment.aspx.

Further information can be found direct on Microsoft's website via this link: https://www.microsoft.com/en-us/licensing/default.aspx

Proof of Purchase

All Volume License information is kept within the Microsoft VLSC portal, so your licenses, the product keys and downgrade information is all stored online.

With OEM you have no other information other than the paperwork received at purchase, as proof of purchase.

This adds complexity if you ever have a Microsoft software audit (becoming more common lately) as for OEM purchases, you will have to provide proof of purchase to Microsoft.

For Volume licenses, Microsoft will already have full records on what you have purchased, thus completely remove all of the hard work.

Virtualisation

Yes, you can virtualise OEM licenses on any of the virtualisation platforms, such as VMware, Hyper-V and Citrix XenServer.

Where virtual servers are balanced between multiple physical servers, the Windows Server licenses are assigned to physical servers and remain with the physical server to which they were assigned. When an instance is moved to a new physical server, that new server must already have appropriate licenses assigned to it.

From Server 2016, Microsoft changed the way that Server Operating Systems are licensed.

Previously (From 2012 R2 and before) a single license would cover a single Physical installation, or 2 Virtual Installations per Standard License.

In 2016, Microsoft have changed this to licenses on a per core basis, with a minimum requirement of 16-Cores.

You need to license all of the cores in the server to provide 2 virtual servers.

If you wish to have 4 virtual servers then you must license all of the cores twice.

If you have a Dual Processor, 10 Core Server then you need enough core licenses to cover 20 cores. This can be made up however you wish, from purchasing a 16-Core license and then a 4-Core license, or 10x 2-Core licenses, and so forth.

This allows you to run 2 Virtual Servers. If you wanted to run 4 Virtual servers then you must license all of the cores again (40-cores in total).

If you have a Single processor with 8 cores, you have to meet the minimum requirements of 16-Cores. However this will allow you to run 4 virtual servers, as you have enough licenses to cover all of the 8-cores twice.

Question: What are the differences between Datacenter and Standard licenses?

Datacenter allows an unlimited number of virtual servers, provided all of the server cores have been licensed once.

Standard only allows 2 virtual servers per license.

With this information, and depending on how many VMs you wish to run, you can easily calculate if it's best to buy Datacenter or multiple Standard licenses.

OEM Limitations

Whilst the information above may indicate that OEM has almost all of the benefits of the Volume license, it still has a number of drawbacks overall.

  • Licenses are non-transferrable
  • Licenses expire with the hardware
  • A change of motherboard or processor will deem OEM licenses invalid.
  • There is no upgrade path
  • You will need to keep proof of purchase, invoice or certificate of authenticity.
  • If these proof of purchases are lost, you will need to purchase new licenses.
  • No on-line portal to manage & track licenses
  • No re-imaging rights, due to the license key usage (one different key per install) you cannot create custom images for deployment.
  • Each installation has a different license key compared to a Volume license which has a single key for all installations.

Summary

I hope this information has been useful to you. Please do get in touch if you have any comments or suggestions around any additional information which would be useful to include in this article and I will do my best to update accordingly!