• Illustration: Virtualization Licensing Scenario

Laying the licensing groundwork for a significant shift in computing in which multiple "virtual computers" will run simultaneously on a single physical machine, Microsoft has modified its licensing rights for server software running on virtual systems. The changes reduce costs, improve the flexibility of virtual systems, and lay the groundwork for Microsoft's Dynamic Systems Initiative, a multiyear effort to improve PC manageability. The changes will also affect hardware vendors, ISVs, application hosters, and other partners. However, before customers can take full advantage of virtual environments, Microsoft and partners must develop management software, development tools, and applications that are compatible with them.

Licensing for Virtual Environments

Microsoft has announced changes that will make Microsoft licensing friendlier to customers who want to use virtualization software on servers. (The company has not announced any changes in licensing for desktop OSs and applications.)

Virtualization software enables an organization to run multiple OS instances on a single physical server. Each OS instance runs in an emulated hardware environment called a virtual machine (VM). The technology has many uses: for example, it can be used to test applications in an isolated environment, or to run legacy applications from diverse platforms on consolidated servers.

The licensing changes announced in Sept. 2005 include the following:

• Waiving license requirements for copies of Microsoft server software that are installed but not running
• Providing the right to run the host OS plus up to four VMs on Windows Server 2003 R2 Enterprise Edition with a single OS license
• Changing the way the company counts processors when server applications are running in a VM.

The company also reiterated plans to make its Virtual Hard Disk (VHD), the file format for Microsoft VMs, a royalty-free standard that other vendors could use.

The new rules take effect for volume licensing customers on Dec. 1, 2005, and will apply to the current versions of all Microsoft server software shipping on that date. (Note that this excludes software such as Exchange 2000 that is not the currently shipping version. Also, the company has not announced any changes in licensing for desktop OSs and applications.) The changes will be phased in over time for licenses acquired through other channels. (For an illustrated example of the new licensing rules, see "Virtualization Licensing Scenario".)

License to Run

Almost every installation of Microsoft software currently requires a license. Thus, a customer who elects to run an instance of Exchange on each of two VMs hosted on Windows Server requires at least three Windows Server licenses, two Exchange licenses, and one Virtual Server license (or a license for some other server virtualization software, such as VMware's GSX Server). If one of those VMs is turned off and stored as a VHD on a server share for future use, the customer must still license the copies of Windows Server and Exchange. If the customer creates another VM with Exchange running on Windows Server, they must purchase additional Windows Server and Exchange licenses, even though a VHD with those licenses remains in storage.

In the future, Microsoft will license components of its Windows Server System, which include Windows Server, Exchange, Virtual Server, and many other products, by each running instance rather than each installed instance. (Microsoft defines a running instance as software that is loaded into memory and executing one or more of its instructions. Once running, an instance is considered to be running until it is removed from memory, whether or not its instructions continue to execute.)

Thus, using the example above, the customer can create and store numerous VHDs, perhaps representing different Exchange configurations, without having to purchase additional Windows Server and Exchange licenses, as long as the number of copies of Windows and Exchange that are actually running do not exceed the number of instances for which the server is licensed.

The new rules mark a sharp departure from the past, in which servers that were turned off or used only as emergency backups required full licenses (with the exception of SQL Server). For example, Microsoft in 2004 touted a change that permitted customers who had purchased its maintenance offering, Software Assurance, for Exchange servers could keep a "cold backup" server without requiring an additional license. When the new rules come into effect, any customer will be able to keep a cold backup of any Windows Server System product without requiring additional licenses.

As a corollary to this change, the ties between physical machines and the software that runs on them will be removed for licensing purposes. Any VM can be moved to another physical server as long as that server is running a properly licensed host OS and the total number of licenses required for all running physical and virtual machines on that server is adequate.

Additional Virtual OS Instances

With the release of Windows Server 2003 R2 (expected before the end of 2005), Microsoft plans to further promote virtual computing by giving licensees of the Enterprise Edition the right to run four additional instances of the OS on VMs without additional payment. Furthermore, the Datacenter version of the next major Windows Server release, code-named Longhorn Server, will permit unlimited instances of the OS to run in VMs.

Although such beneficence is rare for Microsoft, there's a strategy behind it. For one thing, the additional instances cover only the guest OS. Any applications running in the VM, such as Exchange or SQL Server, must still be licensed for each running instance. For another, the change will boost sales of the more expensive Enterprise Edition, which costs approximately three times as much as the Standard Edition—estimated retail prices are US$3,999 for the Enterprise Edition with 25 Client Access Licenses (CALs), compared with US$999 for the Standard Edition with 5 CALs, with additional CALs for either edition costing about US$40 each.

Per-Processor Licensing Change

Microsoft will also modify its licensing rules for VMs to better reflect the trend toward multiprocessor servers.

Under existing rules, a customer who licenses SQL Server on a per-processor basis and runs it in a VM must purchase an expensive per-processor license (approximately US$5,000 for SQL Server Standard Edition and US$5,000 for Enterprise Edition) for each processor in the physical machine. While this is understandable when the database software is actually making use of every processor in the machine, such as when SQL Server runs on a physical, multiprocessor server, most PC-based VM environments—including Microsoft's Virtual Server—can utilize only a single physical processor for each VM. (Although one processor can run multiple VMs, Microsoft's current Virtual Server, when running on a multiprocessor machine, cannot create VMs that use more than one of the processors. Future versions of the product might be able to utilize more processors within a VM.)

This limit made licensing of Microsoft applications on a per-processor basis prohibitive in virtual environments hosted on multiprocessor servers—running one VM instance of SQL Server licensed on a per-processor basis on an eight-processor server would require purchase of eight per-processor licenses, even though the VM and one instance of SQL Server running on it can utilize only one processor.

Under the new rules, per-processor server application licenses are required for only the number of virtual processors that a VM actually uses. Note that Microsoft already permits additional instances of a per-processor server application to run on a computer without additional payment once a per-processor license has been purchased for each processor. Thus, on a one-processor server only one per-processor license of SQL Server is required, even if several instances of SQL Server are running simultaneously on the machine.

Management Tool Licensing

The new rules will also have an impact on Microsoft's System Center products, such as Microsoft Operations Manager (MOM) and Systems Management Server (SMS). These programs run agents on each computer that help manage it. SMS can be used to (among other things) patch or automatically install software; depending on how the software has been designed, MOM can report on various performance parameters, such as CPU utilization or database transaction rates.

Microsoft has decided to license the agents per physical device, rather than per VM. Since MOM agents have a retail price of more than US$500 per server, licensing them per VM would be prohibitive. However MOM plays is likely to be critical for the DSI, and by licensing it per physical computer rather than VM, Microsoft better ensures the success of the DSI.

An Aggressive Strategy

At minimum, the new rules clear many of the obstacles to using VMs on the Microsoft platform; at best, they position Microsoft to move aggressively into the world of virtual computing and to make Windows the dominant platform for virtual computing. Virtual computing will play a significant role in the company's Dynamic Systems Initiative (DSI), the company's long-term strategy for "baking" management into all system components, including applications. The DSI recognizes that management includes not only physical machines but also the VMs running on them. For example, one of the reasons to use VMs is that a VM running on a server starved for resources can be quickly relocated to a different server, even at another site. This creates a truly dynamic system, which can rapidly and automatically detect and respond to faults—if systems management tools have been designed to detect performance problems and know what steps to take to resolve them.

As the already-announced VM licensing for Longhorn Datacenter indicates, the company expects interest in virtual environments to increase in the future and future server versions are likely to be written with virtualization and application management in virtual environments in mind.

The strategy is also forward-looking in that many of the capabilities of virtual computing are yet to be realized on the Microsoft platform. Customers will need to look carefully before leaping into Microsoft's current VM products. Even as the company's Virtual PC and Virtual Server products are still being refined, the possibility exists that they may be retired in a few years, and virtualization will be built directly into Microsoft's OSs, probably as a "hypervisor" service that allocates system resources to VMs. (Microsoft says that VHDs created with today's versions will be portable to future virtual environments.) DSI is also still a work in progress, and today Microsoft has no tools for dynamically managing VMs (although MOM can monitor them).

Customers could also face some interesting compliance issues: counting the number of servers in their data center will not give them an accurate picture of their licensing requirements. Rather, licensing will depend on the number of VMs running, the OS running in those VMs, and a single physical machine could easily require multiple OS and application licenses.

The company has also not indicated whether it will change use rights for client versions of Windows that use VMs (such as Virtual PC) that parallel those for its server products. Virtual systems could significantly enhance security and reliability on client systems, for example, by providing easy backups of full system state and limiting the damage that malware can do to a desktop computer.

Resources

The new use rights will appear in the Dec. 1, 2005, release of Microsoft's Product Use Rights for volume customers. The Product Use Rights can be downloaded from a link at www.microsoft.com/licensing/default.mspx.

Roadmaps for Microsoft server, management, and virtual computing products can be found in the latest Directions on Microsoft Enterprise Software Roadmap.

Evaluation copies and other information about Microsoft Virtual Server are available at www.microsoft.com/windowsserversystem/virtualserver/default.mspx.

A white paper describing the Dynamic Systems Initiative, including an extensive discussion of virtual computing, is available at www.microsoft.com/windowsserversystem/dsi/dsiwp.mspx.

An overview of the change in licensing for virtual systems can be found at www.microsoft.com/presspass/features/2005/oct05/10-10virtualizationlicensing.mspx.