Understanding Windows Server Licensing:

A Step-by-Step Approach
A Beginner-Friendly Approach to Windows Server Licensing

Golam Kibria Ezaz

Table of Contents

What is Windows Server Licensing?...................................................................................................................................................... 2

Types of Windows Server Licenses ........................................................................................................................................................ 2

a) Retail License (Perpetual License):................................................................................................................................................ 2
b) Volume Licensing (Enterprise License): ...................................................................................................................................... 2
c) OEM (Original Equipment Manufacturer): ................................................................................................................................ 3

d) Subscription License: ........................................................................................................................................................................ 3

Understand Windows Server Editions ................................................................................................................................................. 3

Windows Server Essentials: .................................................................................................................................................................. 3

Windows Server Standard: ................................................................................................................................................................... 3

Windows Server Datacenter: ............................................................................................................................................................... 5
Key Terms to Know ........................................................................................................................................................................................ 5
CALs (Client Access Licenses): ............................................................................................................................................................. 5

Core-based Licensing:............................................................................................................................................................................ 5
RDS CALs (Remote Desktop Services CALs): ................................................................................................................................. 6

Steps to Purchase and Activate a Windows Server License ...................................................................................................... 6

Managing and Renewing Licenses ......................................................................................................................................................... 7
Why is Licensing Important?..................................................................................................................................................................... 7
Summary Workflow: ..................................................................................................................................................................................... 8

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What is Windows Server Licensing?
Licensing is a legal agreement between you and Microsoft that allows you to install, use, and run a copy of Windows
Server on your server hardware. The type of license you purchase depends on how many users, devices, or services you
want to run on the server.

Types of Windows Server Licenses

There are several types of licensing models. The common ones are:

a) Retail License (Perpetual License):

For small organizations or individuals. Purchased directly from Microsoft or a reseller (online or retail store). Simple to
use but limited scalability.

b) Volume Licensing (Enterprise License):

For medium or large organizations. Allows multiple installations with a single key. Purchased through Microsoft
Volume Licensing programs like Open License, Enterprise Agreement, or CSP (Cloud Solution Provider).

Understanding Volume Licensing and How to Buy It

Volume Licensing is a way for medium and large organizations to legally use Windows Server on multiple servers or
devices. Instead of buying individual licenses for each machine, organizations can purchase a single license agreement
that covers all their needs. This method is cost-effective, flexible, and easy to manage.

What is Volume Licensing?

When a company needs to use Windows Server for their operations, buying individual licenses for every server or user
can be expensive and difficult to manage. Volume Licensing solves this problem by providing one key, known as a
Volume License Key, which can activate multiple servers or users. It also allows organizations to purchase licenses
based on the size of their company and the number of servers or users they have.

For example, if a company has 50 servers, they don’t need to buy 50 separate boxes of Windows Server software. They
can simply buy a single Volume License that covers all 50 servers.

How to Buy Volume Licensing

To purchase a Volume License, you cannot directly buy it like you would buy a regular retail license. Instead, you must
go through a Microsoft licensing program by contacting a Microsoft partner or reseller.

1. Decide What You Need:

First, figure out how many servers or users you want to license. Then, choose the right edition of Windows
Server (such as Standard or Datacenter) based on your requirements. For example, if you need to run many
virtual machines, the Datacenter Edition is a better choice.
2. Choose a Licensing Program:
Microsoft offers several programs for different types of businesses.

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 o Open License: Suitable for small-to-medium businesses. This option is simple and allows you to buy a
few licenses at a time.
o Enterprise Agreement: Designed for large organizations with at least 500 users or devices. This
agreement covers multiple Microsoft products and lasts for three years.
o Cloud Solution Provider (CSP): Best for businesses that use both on-premises servers and cloud
services. It allows you to pay monthly or annually instead of a one-time fee.
3. Contact a Reseller or Partner:
You will need to find an authorized Microsoft reseller or partner to purchase a Volume License. You can visit
the Microsoft Partner Locator to find a reseller in your area. Once you contact them, they will guide you
through the purchase process and help you choose the best program for your organization.
4. Get Access to Licenses:
After purchasing the Volume License, you will receive access to the Microsoft Volume Licensing Service
Center (VLSC). This is an online portal where you can download the Windows Server installation files and get
the license key. You will use this key to activate the server.

Let’s say a company, "Tech Solutions," needs Windows Server for 10 servers and 200 employees. Instead of buying
individual licenses, they contact a reseller and purchase an Open License for Windows Server Standard Edition. They
also buy 200 Client Access Licenses (CALs) so their employees can access the servers. Once they finalize the
agreement, they receive a single Volume License Key to activate Windows Server on all 10 servers.

Volume Licensing saves money and simplifies management. It’s a good choice for organizations that want to ensure
their servers are licensed properly without spending extra on individual licenses. Additionally, it allows companies to
scale easily as they grow by adding more licenses under the same agreement.

c) OEM (Original Equipment Manufacturer):

Comes pre-installed when you purchase hardware from manufacturers (like Dell, HP). Tied to the hardware (can’t
transfer to another machine).

d) Subscription License:

Available through cloud models (Azure or CSP). Pay monthly/yearly (like renting the license).

Understand Windows Server Editions

Before purchasing a license, you need to choose the right edition based on your organization’s needs:

Windows Server Essentials:

For small businesses (up to 25 users and 50 devices). Simple licensing (no CALs required).

Windows Server Standard:

For organizations that need on-premises servers. Allows you to run 2 Virtual Machines (VMs).

The Windows Server Standard edition is designed for organizations that need servers installed in their own office or
data center (on-premises). This edition is best suited for environments that require limited virtualization. It includes a
specific feature: the ability to run up to 2 Virtual Machines (VMs).

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What Does "2 Virtual Machines" Mean?

When you purchase a Windows Server Standard license, it allows you to:

1. Install the Windows Server operating system on one physical server (bare metal installation).
2. Use the Hyper-V role on that physical server to create and manage up to two Virtual Machines (VMs)
running Windows Server.

In simpler terms, it means you can have one physical installation and two virtual installations of Windows Server
using a single license.

What Happens if You Create More than 2 VMs?

If you create more than 2 VMs on the same physical server, you will violate the licensing terms of the Standard
Edition. This can cause legal and compliance issues, especially during audits. To create more VMs, you will need to:

1. Buy additional licenses: Each extra license covers another 2 VMs.

2. Alternatively, consider using the Datacenter Edition, which allows unlimited VMs.

Do You Need to Install Hyper-V to Create VMs?

Yes, if you plan to create Virtual Machines (VMs), you need to install the Hyper-V role on your physical server. Hyper-
V is the built-in hypervisor in Windows Server that allows you to create and manage virtual machines.

Here’s the process in simple steps:

1. Install Windows Server Standard on the physical machine.

2. Add the Hyper-V role through the “Add Roles and Features” wizard in Server Manager.
3. Create and run up to 2 VMs on this server using the Hyper-V Manager.

Do You Need a License for Servers Installed Inside the VMs?

Yes, you need to license the operating systems inside the Virtual Machines (VMs) separately. However, with the
Windows Server Standard license:

• You already have licenses for the 2 VMs running Windows Server.
• If you create additional VMs or install other operating systems, you’ll need to purchase licenses for those
separately.

Example Scenario:

• Physical Server: Licensed with Windows Server Standard.

• VM 1: Runs Windows Server (license included in Standard Edition).
• VM 2: Runs Windows Server (license included in Standard Edition).
• VM 3: Requires an additional Standard Edition license if running Windows Server.
• If you install Linux or another non-Windows OS in any VM, you must follow its separate licensing terms.

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Additional Logic and Points to Consider

1. Why Only 2 VMs?

Microsoft limits the number of VMs to encourage larger organizations to purchase the Datacenter Edition,
which allows unlimited VMs. The Standard Edition is meant for smaller setups with minimal virtualization
needs.
2. What if You Don’t Use VMs?
If you don’t plan to use virtualization, you can install Windows Server Standard directly on the physical server.
In this case, the license is only for the physical server, and no VMs are used.
3. Nested Virtualization:
If you create a VM (e.g., VM1) and then install another hypervisor inside it to create additional VMs, this is
called nested virtualization. These additional VMs will also require their own licenses if they are running
Windows Server.
4. CALs (Client Access Licenses):
Remember that for users or devices to connect to your Windows Server (physical or virtual), you’ll need CALs
in addition to the server license. These are not included with the Standard Edition and must be purchased
separately.

Summary

• Windows Server Standard allows up to 2 VMs plus a physical installation.

• If you create more than 2 VMs, you need additional licenses or upgrade to the Datacenter Edition.
• You need the Hyper-V role to create VMs on the physical server.
• The Standard Edition includes licenses for the OS inside the 2 VMs, but additional VMs require separate
licenses.
• Always ensure you’re compliant with licensing terms to avoid legal issues.

Windows Server Datacenter:

For organizations using large-scale virtualization (unlimited VMs). Advanced features like Software-Defined
Networking (SDN).

Key Terms to Know

CALs (Client Access Licenses):

For every user or device accessing the server, you need a CAL. Example: If 10 employees need access to your Windows
Server, you must buy 10 CALs.

Core-based Licensing:

Licenses are based on the number of processor cores in your server hardware. Minimum 16 cores must be licensed
(even if your server has fewer).

You need a minimum 16-core license for Windows Server, it does not mean you need to buy a single "16-core
license" package. Instead, Microsoft licenses Windows Server per core, and the licenses are usually sold in packs of 2
cores or 8 cores.

Here’s how it works:

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 • Each physical server requires at least 16 cores to be licensed, even if your server has fewer cores (this is
Microsoft's minimum licensing requirement).
• To meet this requirement, you can buy either:
o 8 packs of 2-core licenses (8 × 2 cores = 16 cores), or
o 2 packs of 8-core licenses (2 × 8 cores = 16 cores).

If your server has 12 physical cores, you still need to buy enough licenses to cover 16 cores because that’s the
minimum requirement. However, if your server has 20 cores, you’ll need to purchase licenses to cover all 20 cores. In
this case, you would buy:

• 10 packs of 2-core licenses (10 × 2 = 20 cores), or

• 3 packs of 8-core licenses (3 × 8 = 24 cores; the extra cores don’t hurt but are unavoidable in this case).

Why is there a Minimum 16-Core Rule?

Microsoft introduced this rule to simplify pricing and ensure consistent licensing across servers of different sizes. Even
if your server hardware is smaller (e.g., an 8-core server), you’re required to license it as if it has 16 cores.

RDS CALs (Remote Desktop Services CALs):

Additional licenses if users are accessing the server remotely.

Steps to Purchase and Activate a Windows Server License

Purchasing and activating a Windows Server license can seem complex at first, but by breaking it into manageable
steps, the process becomes straightforward.

Step 1: Identify Your Needs

The first step in purchasing and activating a Windows Server license is to determine your specific needs. Start by
selecting the correct edition based on your organization’s requirements. For example, if you are running a small
business with basic server needs, the Essentials Edition might be sufficient. However, if you need to host up to two
Virtual Machines (VMs), the Standard Edition is more suitable. For large organizations that require extensive
virtualization or multiple servers, the Datacenter Edition is the best option. Additionally, consider the number of users
or devices that will access the server and whether you will be running virtualized environments. These factors will
influence your licensing choice.

Step 2: Check Hardware Compatibility

Before purchasing or installing Windows Server, ensure that your hardware meets the system requirements for the
chosen version. The server must support 64-bit architecture, have enough RAM and storage, and be equipped with
compatible network adapters. This step is crucial to avoid issues during or after installation. You can find detailed
hardware requirements on Microsoft’s official website. Verifying compatibility beforehand ensures smooth
performance and minimizes potential downtime.

Step 3: Choose the Right Licensing Model

Selecting the correct licensing model depends on your organization’s size and operations. Small businesses often
prefer Retail Licensing, which involves purchasing licenses individually for Essentials or Standard Editions. Medium to
large organizations benefit more from Volume Licensing programs, such as the Open License or Enterprise

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Agreement, which are cost-effective for managing multiple servers. If you plan to use cloud services or hybrid setups,
consider Subscription Licensing through Microsoft Azure or a Cloud Solution Provider (CSP). Each licensing model
serves different purposes, so evaluate carefully to match your setup.

Step 4: Purchase the License

After determining your needs and the appropriate licensing model, proceed to purchase the license. Retail licenses can
be bought directly from Microsoft’s store or authorized resellers like Amazon or local IT vendors. For volume licensing,
contact Microsoft directly or work with a Certified Microsoft Partner who will guide you through the process and
ensure you get the best deal. If you’re buying a new server, you may also opt for an OEM License, where the hardware
comes pre-installed with Windows Server. This option is convenient as it saves time on installation.

Step 5: Install Windows Server

Once you’ve purchased the license, you can install the operating system. Start by downloading the ISO file from
Microsoft’s website or the Volume Licensing Service Center if you’re a volume license customer. Burn the ISO onto a
USB drive or DVD, and then boot your server from this media. Follow the installation wizard to set up the operating
system on your hardware. Make sure to choose the correct edition (e.g., Standard or Datacenter) during installation
based on your license.

Step 6: Activate the License

After installation, you must activate the Windows Server license to use it fully. During the setup process, or later via the
system settings, you will be prompted to enter the Product Key provided in your purchase confirmation. If your server
is connected to the internet, activation happens automatically once the key is validated. For offline servers, you can
activate the license by phone using Microsoft’s automated system. Activation is crucial to ensure compliance and
unlock all features of the operating system.

Step 7: Configure Client Access Licenses (CALs)

If you’re using the Standard or Datacenter editions of Windows Server, you need to set up Client Access Licenses
(CALs) for users or devices that will connect to the server. Open the Licensing Manager on the server, enter the details
of the CALs you purchased, and assign them accordingly. Remember, CALs are required for every user or device
accessing the server, except for those running the Essentials Edition, which does not require CALs but has a
user/device limit of 25/50. Proper configuration of CALs ensures that your server complies with Microsoft licensing
policies.

Managing and Renewing Licenses

• For retail licenses, no renewal is needed (one-time purchase).
• For subscriptions (cloud or CSP), renew annually or as per your plan.
• Use tools like Volume Activation Management Tool (VAMT) to track licenses in a larger organization.

Why is Licensing Important?

• Ensures legal compliance with Microsoft policies.
• Provides access to updates, support, and security features.

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 • Avoids penalties or system limitations due to unlicensed use.

Summary Workflow:
Step Action

Decide Needs Pick edition (Essentials, Standard, Datacenter)

Select License Type Retail, OEM, Volume, or Subscription

Purchase From reseller, CSP, or pre-installed on hardware

Install Download and install server ISO

Activate Use product key or volume key

Apply CALs (if needed) Configure user/device CALs

Monitor License Track with tools like VAMT

Windows Server Pricing: https://www.microsoft.com/en-us/windows-server/pricing

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