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How to make Hyper-V server virtualization licensing work for you

The different options for Microsoft Hyper-V licensing and some real-world examples can demonstrate the savings needed to gain management approval of virtualization.

The benefits of server virtualization are clear. Less rack space, less power, less cooling and fewer peripherals...

require more efficient data centers. Despite potential environmental gains, concrete financial savings are the primary reason why management and CIOs would approve plans to deploy server virtualization within an organization. Microsoft has made virtualization licensing very attractive, especially if you are virtualizing a fair number of virtual machines (VMs) on a particular host. In this article, I outline the licensing benefits that Microsoft has cited and give some real-world examples from my own environment that illustrate excellent cost savings. These savings helped me get management approval for virtualizing servers with Hyper-V.

First, let's start with how various editions of Windows and Hyper-V can assist with license savings. I am using the retail numbers here just to give a starting point. If you have a Select or Enterprise agreement with Microsoft, these numbers will be less, but the cost savings percentages should be approximately the same.

The full virtualization licensing benefits and obligations can be found at the top of page 8 of this Microsoft document. Below is a summary of the document.

Hyper-V Server/Hyper-V Server R2
Approximate cost: Free. This stand-alone product is used just for the Hyper-V role. The newest version, Hyper-V R2, has some very useful additions that allow most of the features found in the full version of Windows Server 2008, including clustering and live migration. From a licensing perspective, any virtual guest operating system environment, Windows or otherwise, needs to be purchased.

Standard Edition
Approximate cost: $799. This base edition allows for the Hyper-V feature to be installed. This version is also able to run one free Microsoft server virtual operating system on top of the physical operating system. Microsoft calls this "1+1." This edition works best for small virtual environments. If you get to the point where you need more than three VMs, then Enterprise Edition becomes more economical to run at the host level.

Enterprise Edition
Approximate cost: $2,999. The Enterprise Edition allows you to run four Microsoft server virtual operating system environments as part of the license and allows for more resources at the host level, which is necessary if running multiple VMs or resource-intensive guests.

Datacenter Edition
Approximate cost: $2,999 per processor. Note that this edition is purchased per physical processor/socket and not per server like previous editions, so picking your CPU architecture will be important in keeping costs down. The price seems high, but this edition allows for an unlimited number of Microsoft server virtual operating system environments with the most host resource capabilities. You may think that this is just for very large enterprise customers, but depending on the CPU architecture, this edition can pay for itself in a short time.

Note: Windows Server 2008 Datacenter Edition can only be purchased through Microsoft volume licensing or through an OEM channel.

That's the synopsis of the virtualization licensing. Let's look at some real-world experiences. In a previous article, I spoke of how to determine the number of VMs that can be provisioned on a particular host. A common Hyper-V host in my environment consists of two quad-core CPUs and 64 GB of RAM connected to a storage-area network over dual 4 GB Fibre Channel host bus adapters. Theoretically, with this hardware configuration, I can provision about 31 low-utilization, Tier A virtual machines. This has never been the case, however, because about 18 to 22 VM workloads are provisioned to a particular host in my environment. So let's say 20 for our licensing figures.

The table above takes into account the cost of any VMs beyond what is allowed by the edition as well as the cost of the Windows Sever 2008 host license at retail pricing. Observe the line at which using one operating system edition makes sense over another. In a small office or branch-office environment with fewer than three VMs, Hyper-V server or Standard Edition would be the cost-effective choice. A host with between four and seven VMs would do best with Enterprise Edition. For all environments with more than seven VMs on a host with two physical processors, Datacenter Edition is the clear choice. At 20 virtual machines per host, this would save $9,982 (62%) over Hyper-V Sever or Standard Edition and $9,785 (61%) if using Enterprise Edition. Even at 10 VMs per host, the cost savings are compelling. For a qualifying nonprofit, educational institution or volume license holder, the costs for each of these editions would be less, but the number of VMs specified for optimal licensing benefits should still fit.

Note: If an organization is using volume licensing, the cost savings should continue for all Microsoft server VMs. No Software Assurance is needed. Only the host operating system license needs to be under Software Assurance.

Figures like this are hard to ignore, but they are commonly left out of the equation in the "Whose hypervisor is the best?" debate. Cost may be only one factor in determining which hypervisor fits best in a particular environment, but in numbers like these should open doors for management to evaluate Hyper-V.

About the author
Rob McShinsky is a senior systems engineer at Dartmouth Hitchcock Medical Center in Lebanon, N.H., and has more than 12 years of experience in the industry -- including a focus on server virtualization since 2004. He has been closely involved with Microsoft as an early adopter of Hyper-V and System Center Virtual Machine Manager 2008, as well as a customer reference. In addition, he blogs at, writing tips and documenting experiences with various virtualization products.

This was first published in September 2009

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