One important rule in server licensing (especially in the Microsoft environment) is understanding your peak capacity. Very simply, you must be licensed for the maximum usage of your server - the maximum number of running instances. Even if you, for example, only ever need one instance, but there is a possibility at some point there will be two instances run on that server at the same time - it needs to be licensed for two.

The number of instances that can be run on a server at one time will vary based on the version you have. For example, Windows Server 2008 Standard only allows one instance at a time, where the Enterprise version allows four and the Datacenter version is unlimited.

It’s very important to know what the maximum instances running will be in order to properly license and remain in compliance.

When using Parallels’ Virtuozzo on a single physical server, silos are created (running instances  that act as the host operating system). Because of this, Virtuozzo is unable to run more than one edition of Windows Server on the physical server. With some products, Microsoft will allow you to run different editions of Server 2008 on different Operating System Environments (OSEs), but in the case of Virtuozzo, you (obviously) cannot take advantage of this.

If you are running all instances through the host operating system, all instances are exposed to all physical processors in the server, and therefore must be licensed on a per processor basis. That’s a lot of licensing, baby.

With most Microsoft servers in a virtualized environment, there are two types of licenses that you can, and in some cases must, acquire - Client Access Licenses (CAL) and External Connectors (EC). The requirements for both are the same - one is required for each device that accesses an instance of server software. This can be on either a physical or virtual server.

For example, if you have an employee who needs access to the physical server on some occasions and also requires access from an external location (they travel frequently, work from home, etc) the server must have both a CAL and an EC license. You may also reassign EC licenses to different users and servers, within a 90-day period. There are exceptions to this rule, such as in a server farm.

EC licenses have become a necessity as more workforces move to the cloud and have greater mobility that they did 10 years ago.

If you have implemented VMware’s ESX on your server as the core virtualization technology, a license is required for every instance running in the virtual environment. If you have only assigned one license to Windows Server 2008 Standard while using ESX, you may only run one instance of the software at a time. Windows Server 2008 cannot be deployed as the operating system in the physical environment since ESX takes its place.

If you have the Enterprise version - you are permitted to run four instances at a time only, taking into account that the normal circumstances of being able to run a fifth instance on hardware virtualization software and software managing and servicing the OSEs on the server does not apply.

Datacenter is the ultimate package - you must license every physical processor in a server, but then you are allowed to run the software in the physical environment and an unlimited number of virtual environments on the licensed server. You are also granted an unlimited number of simultaneous running instances on a licensed server. This makes licensing much easier to deal with as you don’t have to track instances across your servers and worry about being under-licensed.

You are also permitted to run any software or application you have licensed in the physical environment.

While this sounds like a dream come true, you still need to do your due diligence to ensure you’re getting the right package, licensing, etc.

The enterprise version of Windows Server 2008 differs from the Standard version because it grants you the right to run the software on one server in one physical operating environment with up to four simultaneous virtual environments instead of only one virtual environment.