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Microsoft has provided some generous licensing when it comes to virtualization, but it can still be confusing at times. This article aims to clarify the virtual licensing rights that come with Windows Server 2008 R2. Much of this licensing discussion applies to previous versions of Windows Server (for example, 2003 R2) but this article is strictly written against Windows Server 2008 R2 and is not intended to represent previous licensing policies.

Basic Summary

Windows Server 2008 R2 virtual licensing by version
Licensed VersionVirtual Licenses
This table gives a basic summary on the virtual licenses that come with different versions of Windows Server 2008 R2. This licensing only extends to virtual machines which are running in the licensed host OS. This means that if you have an Enterprise license, the only place you're licensed to use the 4 virtual licenses is on the physical machine running Server 2008 R2 Enterprise.

*For Server 2008 Standard, you can only use the virtual license provided that the physical licensed machine is "used only to run hardware virtualization software, provide hardware virtualization services, or to run software to manage and service operating system environments on the licensed server." Which is educational in that it gives you some experience with virtualization, but it's not a great money saver. With this option you still effectively only have one useful instance of Server 2008 R2.

Downgrade Rights

The virtual licenses granted with Windows Server 2008 R2 are for the same version of Windows that the physical license is for, however Microsoft will allow you to substitute a previous Windows Server OS version via Downgrade. This is a great way to save resources if you don't need the improvements offered in 2008 R2, Server 2003 runs comfortably on much less RAM, for example. It's also useful if you have services which require a former version of Windows Server to run.

The Downgrade Rights page shows which licenses are valid substitutes. If you have the media (and key) for a valid downgrade option, you're all set to install it. If, however, you need the install media (and key) then you're limited to the Downgrade Media Kits offered by Microsoft. Note that page also contains down-edition media kits, allowing you to install a lesser edition of Server 2008 R2 if desired.

Virtualization Cost Calculators

Microsoft provides calculators to estimate the licensing requirements of your virtualization setup.

Calculator 1 allows you to "build" your virtual servers by adding the Microsoft prodcuts you would like to run into containers representing virtual machines, then presents you with a priceout of the licenses you will need (including the licensing of Operating Systems, as well as other Microsoft products you've added).

Calculator 2 is a spreadsheet style calculator, it allows you to set the number of processors, servers, and number of VMs per server to calculate your cost for the different licensing options available. It doesn't have provisions for pricing out additional Microsoft products like the previous calculator, but if you already have those licenses (or don't mind calculating them separately) it's a great way of comparing your pricing options for Windows Server 2008 R2.