Smarter Microsoft licensing can reduce VMware environment costs

If you consolidated physical servers with virtualization, you probably did so to reduce the costs of maintaining many physical servers -- namely power and cooling, rack space, support contracts, physical hardware and so on.

As a consultant, I often work with clients who have embarked on large server consolidation projects, migrated many physical hosts to virtual machines (VMs), and have almost all their former physical servers running as VMs.

Many companies think the cost savings associated with virtualization stops here. Those projects could, however, save more money if IT managers reviewed Microsoft licensing for their Windows servers and took advantage of virtualization-focused products and licensing. If a company uses Microsoft systems monitoring products, the same rule applies.

Windows 2008 Server Enterprise: Don't forget the included virtual licenses
Many people forget that Windows licensing is dependent not only on how many instances are installed but also on where these instances are installed. For example, when you buy a Windows Server 2008 Enterprise license, you can run four virtual Windows Server instances for free (NT4, Windows 2000 Server, Windows Server 2003, Windows Server 2003 R2, Windows Server 2008 Standard, Windows Server 2008 Enterprise). But these four instances must run on the same host (for more information, see Windows Server 2008 Licensing FAQs).

In other words, when buying Windows 2008 Server Enterprise you get one license for the hardware that will act as the host server and four licenses for the guest OSes. It doesn't matter whether your hardware host runs VMware ESX, XenServer or Hyper-V. This means that, for example, running eight VMs on one VMware ESX host requires two Windows 2008 Server Enterprise licenses; running 10 VMs requires three Windows 2008 Server Enterprise licenses; and so on.

If you were to organize your virtual environment to take advantage of the four free Windows 2008 licenses per physical host, the cost savings could be significant. A Windows 2008 Server Enterprise license costs $3,999 (list price). If you were to consolidate 200 physical hosts into virtual machines, those free virtual Enterprise licenses could save you up to 75% of your license cost.

If you weren't aware of or didn't fully exploit the free virtual licenses per physical host included in each license, you would end up purchasing 200 Windows 2008 Server Enterprise licenses at $3,999 each, for a grand total of $799,800. If you accounted for the four free virtual Enterprise licenses and planned accordingly, however, you would only purchase 50 Windows 2008 Server Enterprise licenses at $3,999 each, for a total of $199,950. Cost savings: $599,850.

More savings: Windows 2008 Datacenter Edition
Even more savings can be obtained with Windows 2008 Datacenter edition. The Datacenter Edition is licensed per CPU, per host and independent of the number of VMs running on a host. When calculating with a virtualization ratio of four VMs per core and dual quad-core CPUs per host, it is possible to run 32 VMs per host.

To virtualize 200 VMs, you would need seven hosts with dual quad-core CPUs. In this scenario, you would need a total of 14 Datacenter CPU licenses. At $2,999 each, you'd spend $41,986, which is significantly less -- $157,964 less, to be exact – than if you virtualized with Windows 2008 Server Enterprise, including the four free virtual licenses per host.

Note: Windows Datacenter Edition does not include Windows Server Client Access Licenses (CALs); Enterprise edition includes 25 CALs.

Using the most cost-effective Microsoft monitoring product
When virtualizing an environment, it becomes increasingly important to monitor your environment, because when one host server goes down, it can affect a large number of virtual machines. Many companies already use Microsoft System Center Operations Manager (SCOM) to monitor the health of their physical Windows hosts and Windows OSes. SCOM also works in a virtual environment, so it can be a natural candidate for monitoring your virtual environment as well -- but be aware of the difference in licensing.

In a physical environment, you need a license for the host that runs the SCOM service and a separate agent license for each Windows OS that you want to monitor. For virtual infrastructure -- whether it's Microsoft, Citrix or VMware -- Microsoft has released System Center Server Management Suite Enterprise (SMSE). With SMSE, you need only one license per hypervisor host, which allows you to monitor an unlimited number of VMs on that host. The SMSE package includes the following:

• Microsoft System Center Virtual Machine Manager 2008 for managing your virtual infrastructure
• Microsoft System Center Configuration Manager 2007 for flexible configuration and deployment of Server, workstations and software
• Microsoft System Center Operations Manager 2007 for end-to-end service management
• Microsoft System Center Data Protection Manager 2007 for continuous data protection

Looking at the previous example of 200 Windows instances that will be virtualized onto seven hosts, we again see a major licensing cost savings for monitoring. In the table below, the first three rows indicate how much each product would cost separately for 200 simple client licenses. The last three rows show this for 200 enterprise client licenses.

	Operations Manager	Configuration Manager	Data Protection Manager
Client	$32	$41	$27
Server	$579	$579	$579
Total	$6,979	$8779	$5,979
Enterprise Client	$431	$431	$431
Server	$579	$579	$579
Total	$86,779	$86,779	$86,779

With Server Management Suite Enterprise (SMSE) you need to license only the hosts. In our case, that would be seven hosts at a price of $1,497 for a grand total of $10,479. In other words, buying two of these products using standard client licenses would already be more expensive than buying an SMSE license.

Recommended next steps
You made a smart move by visiting my blog and reading this article. Now make the next smart move: Check your current licenses, talk with your Microsoft representative about reviewing your current licenses and see what can be changed and where savings can be made. After that, show your boss what you came up with. Then, bring home flowers for your spouse, and call it a day.