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Nov 09 2016

Windows Server 2016: New Release, New Licensing Model


With Windows Server 2016, Microsoft has unleashed the second generation of its cloud-ready server operating system. Along with technical and functional improvements, this latest release introduces a new, core-based licensing model for the popular Standard and Datacenter Editions that replaces the traditional processor-based approach. According to Microsoft, this method "provides a more consistent licensing metric [...], improves workload portability" and generally helps to streamline the licensing process.

Upgrades for the Windows Server OS usually produce mixed reviews. On the one hand, users will welcome any technical or functional enhancement that effects better performance and greater flexibility. On the other, they are usually less fond of changes to the licensing model, mainly because even the slightest shift could lead to unwanted complexity and higher payments, as every seasoned admin and data center chief will tell you. Contrary to popular belief, Microsoft isn't the only leading software vendor that had to face massive criticism about 'overly complicated' licensing terms – in fact, the list is pretty long and includes nearly every household name in the industry. The main difficulty for all of them is to find an exact and consistent metric for measuring how a server handles predefined workloads and how specific system components are utilized. So it's not a surprise to find that most licensing models have evolved over time to allow for finer, more granular approaches than were possible in previous years. Microsoft itself joined the movement some five years ago when it announced its core-based licensing model for Microsoft SQL Server 2012. What's more, the latest switch also doesn't come as a surprise attack, since Redmond first informed channel partners and resellers about the upcoming change at the end of last year.

Affected Software
For a concise roundup, we first have to find out which editions of Windows Server 2016 fall under the new licensing terms and which don't. According to the relevant data sheet, the change solely affects the Datacenter and Standard Edition; all other versions – namely, Windows Server Essentials, and Storage Server – stick with processor-based licenses. Likewise, the terms are not applicable to Microsoft Hyper-V Server, the standalone variant of the Hyper-V role in Windows Server. This means that the licensing terms and costs will not change for many small organizations that rely on the more basic or specialized editions of Windows Server 2016. At the same time, Microsoft is trying to protect SMB customers that have deployed the Standard or Datacenter Edition to average-sized servers from cost increases that could result from the switch in licensing terms.

Core-Based Licensing: Overview
For customers who wish to upgrade their server infrastructures, the following general rules apply:

  • All physical cores in a server must be licensed. Servers are licensed based on the number of processor cores in the physical server. All licenses are strictly linked to physical cores and servers; so the use of virtual cores – e.g. in hyper-threading – will not cause extra costs.
  • A minimum of 8 core licenses is required for each physical processor and a minimum of 16 core licenses for each physical server.
  • Core licenses are sold in packs of two.
  • Eight 2-core packs will be the minimum required to license each physical server.
  • The Standard Edition provides rights for up to two Virtual Machines (VMs) or Hyper-V containers when all physical cores in the server are licensed. For every two additional VMs, all the cores in the server have to be licensed again.
  • The Datacenter Edition provides rights to unlimited virtual VMs and unlimited Hyper-V containers when all physical cores in the server are licensed.
  • Existing customers' servers under Software Assurance will receive core grants as required, with documentation.

As could be expected, many critics argue that Microsoft's main motive for changing the Windows Server licensing terms is to reap a secondary benefit from the hardware industry's ongoing commitment to building multi-core x64 processors and matching server systems. Not surprisingly, Microsoft's own arguments differ considerably from this explanation. According to the official materials, the switch is one of several steps Redmond is taking in order to "evolve [its] server licensing to support hybrid cloud." In other words, Microsoft is trying to consolidate hitherto competing license models into a single one that remains consistent across all environments and usage scenarios – which would indeed be more customer-friendly than to stick with rivaling terms. The fastest way to achieve this is to use cores as a standard unit that supports the quantification of usage patterns, which in turn would make it easier to compare the prices of on-premises installations with those of cloud services delivered via Azure or other platforms.

Model Calculation and Guidelines
The above-mentioned data sheet includes the following table, which explains how the new licensing model works for one-, two- and four-socket servers with different core counts:


As you can see, Microsoft expects that license costs for Windows Server 2016 Datacenter and Standard will stay the same as for the corresponding editions of Windows Server 2012 R2 on all single-socket servers, regardless of whether they are equipped with dual-core or 10-core processors. The same rule applies for dual- and quad-socket systems featuring processors with no more than eight cores. Such configurations are most popular among SMBs and midmarket organizations, i.e. key customer groups that would suffer most from hidden cost increases. In contrast, dual- and quad-socket systems equipped with 10-core processors will require additional licensing, because here the minimum number of available cores exceeds the "8 cores per physical processor and 16 cores per physical server" limitation. Today such setups are more common at the enterprise level; however, this could change over the medium and long term if core counts for standard processors continue to grow at the same pace as they did in recent years. Generally speaking, license costs are also likely to increase where servers with higher core or processor counts are deployed.

The switch to core-based licensing is not mandatory for users with valid Software Assurance agreements until these contracts expire and renewal is due. As a result, many customers will be able to execute smooth and incremental transitions instead of having to adapt to the new model on the spot. It should be noted here, however, that any reliable calculation of total transition costs must include the price of Client Access Licenses (CALs), which are still required for every user or device accessing a server. Put differently, core-based licenses will not replace CALs or make them obsolete.

With the release of Windows Server 2016, Microsoft continues its conversion from one of the world's leading software vendors to one of its most important cloud service providers. This transformation of its core business model has also triggered changes in licensing terms: since the release of SQL Server 2012, the company is gradually moving towards a model that charges customers based on the number of utilized, physical processor cores rather than physical processors or servers. The key benefit for customers is that the new method makes it easier to compare the capabilities and costs of on-premises installations with those of cloud services delivered via Azure and comparable platforms. Moreover, Microsoft says that costs will remain flat for SMBs and midmarket organizations that have deployed industry-standard mono-, dual- and quad-socket servers such as Fujitsu's PRIMERGY products, which can be obtained ex works with the operating system and required licenses pre-installed.

For more details, please refer to our Windows Server 2016 microsite. All key messages regarding Microsoft's latest server OS are condensed in this handy infographic. For added convenience, we've attached the relevant data sheet and licensing FAQs below. And of course you can always contact your Fujitsu account manager.

Icon Windows Server 2016 Licensing Datasheet

Icon Windows Server 2016 Licensing FAQ

Carolin Hausmann


About the Author:

Carolin Hausmann

Marketing Specialist


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