One of my friends recently emailed me to clarify a point on potential implication of Microsoft Server Licensing on VMware, in perticular with regards to VMotioning (moving running VM's amongst different physical "ESX" servers). He was notified by their software partner during a recent audit that either they need to starting buying windows data centre licenses to cover all the ESX server CPUs in order to continue free DRS initiated (or Otherwise) VMotion, or turn off VMotion alltogether.
So I thought I'd share my reply to him with all of you as this seems to be an area that is still either not very clear amongst lot of folks OR often, people simply choose to ignore alltogether (arguably, due understandable reasons). I've obviously modified some lines to remove the identity of my friend...etc but the message remains intact....!!
NB: Please note that this info only applies to server virtualisation and NOT VDI
Unfortunately, the common assessment that Windows Datacentre license is the most practical method to license your VMs within an ESX cluster is the correct one if you want the VMs to freely move in between physical ESX hosts via VMotion as a part of DRS initiated VMotion or otherwise (i.e. Administrative VMotion for maintenance tasks).
In order to understand why, you first need to understand the MS server licensing limitations. Usually, all windows server licenses are tied to the underlying physical hardware. This is still same even if that server is a VM, in which case the VM's OS license is tied to the ESX servers hardware, usually the ESX server where the VM ware created & build with that Windows Server OS. So, when you look at VMotioning that VM off of that ESX server to another, the following limitations apply.
Clearly the Windows Data Center license turns out to be the cheapest in comparison.
Note that if you have Software Assurance on an OEM Server OS, it can be transferred to another device. It is not permanently locked to the device it is installed on. That is true of the desktop OS, but not of the Server OS.
Many people have existing Windows Server licenses that they are not willing to throw out in order to purchase Datacenter. You can add Datacenter licenses to increase the opportunities to use VMotion without throwing everything else out.
For example, let's say that you use Vmotion for load balancing. Let's assume that you have consolidated eight copies of Windows Server Standard on Server A. You have assigned eight Windows Server Standard licenses to that physical server. You also have Server B, a two-proc server licensed for Windows Server Datacenter, with two per-proc licenses. Server B is running four VMs, which also use running Windows Server Standard as the guest OS. At any time, you can move any or all of the VMs on Server A to Server B and back again. You do not need to wait for 90 days. The reason is that at any given time, a VM was covered by either one of the eight Windows Server Standard licenses or by the Server DC licenses. No licenses have been transferred, so the 90-day limit never kicks in.
Note that you could not move a VM on Server B to Server A unless a) the VM is using Windows Server Standard, and b) the total number of VMs running on server A never exceeds eight.
I would recommend Windows DC to anyone just starting server virtualization, with new Windows server licenses, and also to anyone expanding their farm of server hosts. To those with a substantial investment in Windows Server Standard, however, I would say stick with that and use DC only for those situations where you need to quickly move VMs from one host to another and then back again. In many cases, the 90-day limit isn't a huge barrier: production systems can run on the same physical server for a long time and may only occasionally need to be moved.
One final comment: server license counts are based on running instances, not installed instances. In an emergency, if you had to move one of the VMs on Server B (in my example) to another physical server, and Server A was already running 8 VMs, you could take down a less-critical or less-important server instance on Server A and then move one instance from Server B to Server A. When the situation on Server B was rectified, the instance that had been moved to Server A from Server B could be moved back to it. Again, no licenses were transferred, no licensing limits were exceeded, and the 90-day limit was not a constraint.
"Solving the Microsoft Licensing Puzzle"
I believe you are incorrect about the 90-day rule. According to "Licensing Microsoft Server Products in Virtual Environments" it is a pre-requiesite for the old hardware to be retired:
"you may reassign software licenses for server products, but not on a short-term basis (i.e., not within 90 days of the last assignment). However, they may be reassigned sooner if you retire the licensed server due to permanent hardware failure."
Note the use of the word "permanent" - this doesn't include common outage scenarios, such as power failures, which would cause HA to be invoked.
You raise an interesting point about what constitutes a permanent failure. In other circumstances (e.g., the desktop OS), it generally means a motherboard failure. Most other failures, such as bad disk drives or memory, are rectifiable and many not constitute permanent failure. However, I've never seen Microsoft define "permanent" in a contractual document. (It may be in some white papers or FAQs, but they are not contractual documents.)
In the case I outline here (I'm guessing that you're talking about the last paragraph), keep in mind that Windows Server licenses are not assigned to VMs. They are assigned only to physical devices. When the user takes down a less critical instance on Server A, Server A still has its original 8 Windows Server Standard licenses, but only 7 running instances of Windows Server Standard. This allows a Windows Server Standard VM from any other machine to be transferred to Server A with no impact on license assignments. No license is transferred; instead, the VM that is moved to Server A adopts the surplus license (we'll call it License 😎 that already exists on Server A. Whatever license the VM was originally covered by is still on the device to which it was originally assigned. As long as the VM's original license is not reassigned to some other physical device, the VM can be moved back to that device at any time. In short, while the VM is moved, no licenses are moved, and that's what the rule is all about--licenses, not VMs.