Understanding Windows Server 2016 Licensing

Azure Hero Server
This post will describe some of the significant changes to Windows Server licensing that are coming with Windows Server 2016, that are sure to catch most of you by surprise.
Note that this post will focus on the “core editions” of Windows Server, Standard, and Datacenter, that affect the majority of people. Always consult a certified licensing expert if you are unsure about any Microsoft licensing issues or have any licensing questions for your specific scenario.

The Past

In Windows Server 2012 (WS2012) and Windows Server 2012 R2 (WS2012 R2), things were pretty simple. The only feature differences between the two were:

  • You got unlimited Windows Server installations on a host licensed by Window Server Datacenter Edition, and 2 installations on a host for every Standard Edition that was assigned to that host.
  • The Datacenter Edition supported Hyper-V Automated Virtual Machine Activation (AVMA).

Every processor in a server/host had to be licensed. A single Windows Server license covered two processors. That means if a machine had 4 processors, I needed to purchase 2 copies of Windows Server for that server or host.

Per-Core Licensing

Everything changes starting with the general availability of Windows Server 2016 (WS2016). Note that you always purchase the latest edition of Windows Server, so the latest rules always apply to you. You might opt to deploy an older version of Windows Server, if the license allows that, but the latest rules still apply.
You can now purchase a Xeon processor with 24 cores. This means that Microsoft has started to lose money on larger customers. Once upon a time, a server with 2 of those processors (48 cores) might have required 6+ processors, which is at least 3 copies of Windows Server, but the old license program requires just 2 processors for a pair of those 24 core CPUs.
And this leads us to the biggest change in WS2016 licensing; Microsoft has switched to per-core licensing. Each copy of Windows Server will license 2 physical processor cores (cores, not threads). Every physical core (core, not thread) in a server/host must be licensed for Windows Server.
There is a minimum purchase requirement per physical server. You must license at least 2 processors with 8 cores each per server; that’s 16 cores that must be licensed, even if you are only going to use a single quad core processor. More on this in a moment.
Let’s jump back to that machine with 48 cores. That machine will now require 24 copies of Windows Server to license it either as a server or as a host.
Is Microsoft trying to squeeze more cash out of us? Back in 2015, I predicted that Microsoft would make the change to per-core licensing, and I hope that the resulting per-server cost would be the same as licensing a machine with a pair of 6- or 8- core processors. If licensing a machine with 16 or fewer cores under the WS2012 R2 rules cost $6,155 (Datacenter Edition under Open NL) then I hope that the same machine would cost the same in WS2016. The good news is that it does; Microsoft has reduced the cost of WS2016 licensing so that the minimum purchase (16 cores across 2 processors) in WS2016 is the same as 1 copy of WS2012 R2 Datacenter Edition.
So if you are licensing a small server with a small processor, the actual cost of Windows Server will not increase for you, even if the logistics of the purchase do get a bit more complicated.
Those that will see changes are:

  • Sales people who now have to understand and account for cores when pricing solutions for customers – that should be “interesting”.
  • Customers with servers that have more than dual 8-core processors, whose costs will increase.

While I believe that the per-processor model was designed to protect Microsoft revenue in larger client sites (which I am OK with), Microsoft has stated that the have switched to this model to align on-premises licensing with that of the cloud, where virtual machines are priced (partly) per core. I would argue that if this was the case, the requirement of a Windows Server CAL for on-premises machines would have been removed, to match the true per-core/processors licensing found in the cloud.


As always, the rules are the same no matter what hypervisor you use; you license a host to cover the maximum number of possible (even for 1 seconds) Windows Server virtual machines that could run on that host – and I stress the word “possible” because cluster nodes must be licensed equally to cater for failover and vMotion/Live Migration.
The rules stay pretty much the same regarding the benefits of the Standard and Datacenter editions. The subtle change is with Standard edition. You do not get 2 VOSEs (virtual operating system environments) for each Standard assigned to a host. Instead, you get 2 VOSEs for every time you fully license a host.
For example, I have a vSphere host with dual 10 core processors (20 cores, not threads). I want to license this machine to run 4 Windows Server virtual machines. I will start by licensing the 20 cores with 10 copies of WS2016 Standard. This gives me to VOSEs, covering 2 of my virtual installations of Windows Server. To license a further 2 Windows Server virtual installations, I need to purchase another 10 copies of WS2016 Standard for this host. That gives me a total of 4 VOSEs that I can now use to license the 4 virtual machines for WS2016 (or lower, based on the licensing program’s downgrade rights) on this host.

Feature Differences

For the first time in a very long time, there are going to be real feature differences between the Standard and Datacenter editions, and this mostly impact those highlight features that will be talked about at WS2016 launch events around the world.

WS2016 edition comparisons [Image Credit: Microsoft]
WS2016 edition comparisons [Image Credit: Microsoft]
I am not a fan of this change. Microsoft has argued that the cost of Datacenter Edition is lower than the cost of purchasing SAN replication licensing,

Nano Server

The last item that I will mention is the headless Nano Server installation option. You can deploy it using either edition of WS2016, but to be supported in production, you must have attached Software Assurance to the licensing of the physical server.