Ultimate Windows Server 2016 Licensing Guide

Windows Server licensing has changed once again. With the Windows Server 2016 release date in October, 2016, Microsoft has shifted from a per processor licensing model to a per core licensing model.

This doesn’t mean Windows Server CALs (Client Access Licenses) are going away though, you’ll still need those.

It does however, mean that you’re going to have very different counts for your server licenses AND it means that Windows Server Standard and Windows Server Datacenter will once again have different features, other than virtualization rights.

If you have SA (Software Assurance) you’ll be getting a hand from Microsoft in some scenarios when making the transition to Windows Server 2016, and we’ll get into exactly what that means later on.

For now, if you’re responsible for managing a Windows Server environment, and/or managing the licensing, this Ultimate Windows Server 2016 Licensing Guide was created with you in mind..

If you can’t read through this entire guide now, you can download a pdf copy here [http://volumelicensingcourse.com/windows-server/] to keep it handy for future reference as you make changes to your Windows Server environment.

If you want just the basics, I’ve also put together a 1 page Windows Server 2016 Licensing Cheat Sheet, which you can get here:

Even if you’re not planning on running Windows Server 2016 just yet, now that it’s hits general availability, you’ll be purchasing under the 2016 licensing terms (we’ll also cover when you won’t be in this guide).

Table of Contents:

Windows Server 2016 Editions

Windows Server Standard & Datacenter 2016

System Center
Core Infrastructure Suite (CIS)

Windows Server 2016 Editions

While this guide will focus primarily on Windows Server 2016 Standard and Windows Server 2016 Datacenter, there are other editions available. We’ll briefly cover what those editions are here, along with basic licensing considerations.

Microsoft Hyper-V Server 2016

This is a free hypervisor download with no licensing considerations needed. That means there is no server OR CAL requirement.

This edition is intended to deliver enterprise-class virtualization for your data center or hybrid-cloud.

At the time of this writing it is currently in Technical Preview. You can find the free download, and more details here: https://www.microsoft.com/en-US/evalcenter/evaluate-hyper-v-server-technical-preview

Windows Storage Server 2016

This edition is available in the OEM channel only and is available in both a Standard and Workgroup edition.

For some reason Microsoft decided to leave this Windows Server edition alone in terms of licensing. It continues to be licensed by Processor and Windows Server CALs are not required for access.

Windows Server 2016 MultiPoint Premium Server

This edition of Windows Server is only available for Volume Licensing customers in the Academic space. Similar to Windows Storage Server 2016, MultiPoint Premium Server (now the only edition of MultiPoint Server offered) is licensed by Processor.

Unlike Windows Storage Server, MultiPoint Premium Server requires BOTH Windows Server CALs AND RDS (Remote Desktop Services) CALs.

Windows Server 2016 Essentials

This edition is intended for small businesses with up to 25 users and 50 devices. It is also licensed by Processor however it does not require any Windows Server CALs.

Windows Server Standard & Datacenter 2016

Now that we’ve covered the less common editions of Windows Server, let’s dive right into the main editions, Windows Server 2016 Standard and Windows Server 2016 Datacenter.

These editions are where we see the shift from a Processor based licensing model to a Core based licensing model. We also see Microsoft make the change back to different features between the 2 editions.

In Windows Server 2012 Microsoft made the decision to make these 2 editions identical in features with the exception of virtualization rights. In 2016, Microsoft moves away from that format and includes feature differences between them.

Figure 5 below comes directly from Microsoft’s Windows Server 2016 website and licensing datasheet and highlights the differences between Standard and Datacenter.

Processor to Core Migration

As mentioned above, Microsoft has made the shift with Windows Server 2016 Standard and Windows Server 2016 Datacenter to Core based licensing from the Processor based licensing introduced in 2012.

This shift includes new minimum license counts, license grants for SA (Software Assurance) customers, and keeps the Windows Server CAL requirement.

One mistake many people make when thinking about this Processor to Core migration for Windows Server 2016 is that they try to use the SQL Processor to Core migration from 2012 as a base of understanding.

Don’t do that. These are very different licensing models with different minimums and considerations altogether.

If you’re thinking about SQL Server right now it will only prove to make this more complicated.

Table 1 below highlights the basics of this licensing change from Windows Server 2012 to Windows Server 2016.

Windows Server 2012Windows Server 2016
Processors2 Processors/Server Minimum2 Processors/Server Minimum
CoresN/A8 Cores/Processor Minimum
OSEs (Operating System Environments)Standard – 2 OSE Max

Datacenter – Unlimited OSEs

Standard – 2 OSE Max

Datacenter – Unlimited OSEs

CALs (Client Access Licenses)Windows Server User/Device CALs requiredWindows Server User/Device CALs required

As highlighted in Table 1, the only licensing change from Windows Server 2012 to Windows Server 2016 is that Cores need to be counted now.

Pricing and Licensing Considerations

While Windows Server 2012 was licensed in 2 Processor packs, Windows Server 2016 is licensed in 2 Core packs.

In keeping with Windows Server 2012’s two Processor minimum and adding the new 8 Core minimum per Processor, you’re new minimum license count per server is 16 Cores, or 8 licenses.

Is your head hurting yet? If not, just wait, we haven’t even gotten to the good stuff.

If you’re Processors have no more than 8 cores each, you will see no difference in cost from 2012 to 2016. Microsoft is not raising their prices in that respect.

Where you will start to pay more is if your processors have more than 8 cores each. And since many people, maybe you included, have been buying processors with more than 8 cores over the past several years, this is where Microsoft will experience a nice jump in revenue without having to say they’ve raised prices.

An Important Note on OSEs

An OSE (Operating System Environment) is defined in Microsoft’s Licensing Brief: Licensing Microsoft Server Products for use in virtual environments as: Operating system environment (OSE) means all or part of an operating system instance, or all or part of a virtual (or otherwise emulated) operating system instance which enables separate machine identity (primary computer name or similar unique identifier) or separate administrative rights, and instances of applications, if any, configured to run on the operating system instance or parts identified above. There are two types of OSEs, physical and virtual. A physical hardware system can have one physical OSE and/or one or more virtual OSEs.

A common misconception is that a Windows Server Standard license grants you 2 virtual instances however, that’s only the case if the physical OSE is already licensed or, if the physical OSE is solely used to manage the virtual OSEs.

I’ve personally seen many organizations make this mistake only to find out about it during an audit from Microsoft. I’m sure I don’t have to tell you that having to get approval for an unbudgeted cost because of a counting error isn’t the greatest conversation.

Windows Server 2016 Licensing Scenarios

I’m more of a visual learner myself, and you may be too. Here are some visualizations, along with explanations of each to help with the new licensing.

Windows Server 2016 Standard

Figure 1: Server with two 8 Core processors and 4 VMs (Virtual Machines).

Licensing for the server in Figure 1 above with Windows Server 2016 Standard would require 24 licenses of Windows Server 2016 Standard, or 48 total cores.

Here’s why. The highlighted processors equate to a minimum license with 2 OSEs available for each. This means that the 2 physical processors, highlighted in blue (1 physical OSE), and VM 1, (1 virtual OSE) also highlighted in blue, are covered by 8 core licenses (16 total cores of the physical processors with 8 cores each).

VM 2 and VM 3, highlighted in green, make up 2 more OSEs. These VMs would require 16 more cores or 8 more Standard licenses.

Finally, we have VM 4, highlighted in peach. Because the minimum is still 16 cores per server, granting you 2 OSEs, this server is required to have another 16 cores, or 8 licenses.

So this server would require 24 licenses (48 cores) of Windows Server 2016 Standard and would have room to add 1 more VM without incurring any additional costs.

Figure 2: Server with two 12 Core processors and 4 VMs (Virtual Machines).

Very similar to Figure 1, in this scenario though, we have a server with two, 12 core processors and 4 VMs.

For the physical processors in this server we need 12 Windows Server 2016 Standard licenses (24 physical cores).

While we have more core licenses in this scenario, we still only have rights to 2 OSEs. This means we can again cover the 2 physical processors and VM 1 with those 12 licenses.

For VM 2 and VM 3, we license them with 12 core licenses (24 total cores).

For VM 4, we again license it with 12 core licenses (24 total cores), to meet the minimum requirements. This also leaves us with the ability to add 1 more OSE, on this server, without incurring any additional costs.

Regardless of the number of virtual cores assigned to the VMs, you simply “stack” the physical core licenses meaning you duplicate the physical core licenses for additional VMs/OSEs.

This is why we continued with 12 core licenses for the additional VMs.

We don’t count virtual cores at all when it comes to licensing the additional VMs for Windows Server 2016.

Now let’s talk about licensing Windows Server 2016 Standard for License Mobility or High Availability.

Figure 3: 2 servers, each with two 8 Core processors and 4 VMs (Virtual Machines).

In this scenario we have 2 servers, each with two 8 Core processors and 4 VMs. Our Windows Server Standard licenses here DO NOT have SA (Software Assurance).

These servers are setup to be able to migrate VMs from one to the other for high availability, or for instances where you may need to patch or update one of the physical servers.

This is a common scenario and often licensed incorrectly. The reason for this is because one of the purposes for virtualizing your servers is the ability to dynamically move VMs from one host to another for a variety of reasons.

Because we think of VMs as being very mobile, we often think the licenses for those VMs are just as mobile. However, that’s not necessarily the case.

A license is only transferrable from one host to another only once every 90 days. The only exception is for a hardware failure, in which case your licenses can move to another host temporarily, and then be moved back to the primary host once it’s repaired or replaced.

In any other cases, such as performing updates or patching of a physical server, the licenses can only be moved once every 90 days.

What this means for any servers licensed with Windows Server Standard is that you have to license each host for maximum virtualization.

In the scenario highlighted in Figure 3 above, that means 4 VMs could potentially move from Server 1 to Server 2, and vice versa, at any time.

Four VMs would be an additional 16 licenses (32 total cores) required for each server.

Now, our 24 core licenses for each server becomes 40 core licenses (80 total cores), because we have to license for the maximum potential.

There’s another way to license servers in this type of scenario that’s much simpler and would reduce your total license counts. We can accomplish that with Windows Server Datacenter licenses, which we’ll cover next.

Windows Server 2016 Datacenter Licensing Scenarios

As you may have noticed in the Windows Server 2016 Standard licensing scenarios above, this new licensing model can get complicated, and costly, pretty quick.

The more VMs you start to have, the more complicated this gets. And the more servers you have in a cluster, the more costly it gets and the more difficult it becomes to manage.

Generally speaking, if you need 7 or more Windows Server Standard licenses on a single server, it’s more cost effective, and easier to manage, if you move to Windows Server Datacenter.

Let’s explore exactly why that is and what it looks like.

Figure 4: 2 servers, each with two 8 Core processors and 10 VMs (Virtual Machines).

In this scenario, Server 1 and Server 2 are setup in a cluster to take advantage of High Availability.

This means that all 10 VMs (each with no more than 8 cores here) in either server could potentially move to the other.

Let’s compare this setup between Standard and Datacenter, starting with Standard.

If we licensed these servers with Standard, it would require each server to be licensed with 88 core licenses (176 total cores).

Here’s how we got to that number:

There are 11 OSEs (1 physical + 10 virtual) on each server. That means we need to license for 12 OSEs because of the 16 core minimum per 2 OSEs, which cannot be broken up.

(If our physical processors had more than 8 cores each, we would need to up this number to match the total cores as in Figure 2).


12 OSEs / 2 (for the 2 OSEs per Standard license) x 16 cores = 96 cores

96 cores / 2 (for the 2 core license packs) = 48 core licenses


Because the physical OSE will not migrate from one server to the other, we have 10 OSEs that could potentially migrate.


10 vOSEs / 2 (for the 2 OSEs per Standard license) x 16 cores = 80 cores

80 cores / 2 (for the 2 core license packs) = 40 core licenses


From here, we add the 40 core license packs to the 48 core license packs and get 88 total core license packs per server!

Because we’re talking about Standard, for every new VM you need to determine if you have an available OSE or if you need to buy 8 more core license packs before adding another one.

Now let’s look at the same scenario with Datacenter.

You may have noticed all of the OSEs in Figure 4 are highlighted in the same color.

This is because with Windows Server Datacenter, you’re only required to license all of the physical cores, granting you unlimited virtual instance rights.

Because of that, if you license each server with Windows Server 2016 Datacenter, they’re both always licensed for the potential maximum number of OSEs and you’re free to migrate VMs between servers as often as you like and the 90 day rule is not a factor.

So if we now license these servers with Windows Server 2016 Datacenter, you would only require 8 core license packs each.

Also, because the cost to license 14 OSEs of Standard is roughly equal to the cost of 2 OSEs of Datacenter (a 7:1 ratio), we also come out ahead in costs by licensing these servers, which have to be licensed for 22 OSEs each, with Windows Server 2016 Datacenter.

I hope this helps to highlight why it’s extremely important to get your license counts right the first time.

Many people are under the impression that Datacenter licenses are too expensive and unnecessary when in fact, there are many scenarios where that’s simply not the case.

As a bonus, which you may have already noticed, Datacenter licenses are much simpler to manage because you’re only required to license the physical cores rather than the physical cores and the OSEs.

Windows Server 2016 Standard

Windows Server Standard continues to be intended for physical or lightly virtualized environments.

As we saw in the licensing scenarios above Standard edition can get tricky to manage and even license correctly as we start to deploy more VMs. Fortunately, if you include SA (Software Assurance) with your licenses, Microsoft has an option to step up to Datacenter.

Stepping up is essentially the difference in price between Standard and Datacenter. Once you step up, there’s no going back.

If you have multiple Standard licenses assigned to a server and you decide to step up to Datacenter, you would only step up the licenses assigned to the physical cores and you’re then able to reassign the remaining core licenses to another server or servers, keeping in mind the 90 day license reassignment rule we discussed earlier.

With Windows Server 2012 Microsoft changed their direction in licensing Windows Server which really simplified the decision for choosing Standard vs Datacenter. With 2012 the features were identical and the only difference between these 2 editions was in their virtualization rights.

Standard allowed for up to 2 OSEs while Datacenter allowed for unlimited OSEs. Although the OSE rights remain the same with 2016, Datacenter once again includes additional features that Standard does not. (See Figure 5 above for an overview of these differences).

This means you may have a server that’s not virtualized, or that’s only lightly virtualized, but still requires Datacenter due to features only available in Datacenter edition.

Windows Server 2016 Datacenter

Last, but certainly not least, we have Windows Server 2016 Datacenter edition. Like Windows Server 2016 Standard edition, Datacenter 2016 is licensed per core and requires Users/Devices be licensed with the appropriate Windows Server CAL(s).

Datacenter edition is intended for highly virtualized datacenter and cloud environments.

If you skipped ahead to this section, I highly recommend you go back to the Windows Server 2016 Licensing Scenarios section of this guide for more details on the pricing differences between Standard and Datacenter, as well as scenarios to help you identify when Datacenter, from a purely licensing and cost perspective, makes the most sense.

As we’ve mentioned multiple times in this guide though, Windows Server 2016 Datacenter includes features that are exclusive to this edition. These features mean that a server that’s not virtualized, or that’s only lightly virtualized, may still require Datacenter edition.

Windows Server 2016 Datacenter edition exclusive features include:

As you can see, you’ll have a little more work to do in order to determine when you’ll require Standard or Datacenter edition.

Because it can be very expensive to choose incorrectly, be sure you take time to truly evaluate your specific needs across your environment before making any purchases.

Software Assurance

SA (Software Assurance) is no longer just for maintenance or upgrades. Over the years, as Microsoft was hearing from customers who wouldn’t purchase, or wouldn’t renew, SA on their licenses they continuously heard the same reason.

“We have no plans to upgrade in the next 3 years.”

Even the ability to annualize your payments over 3 years and to only pay for the SA costs after the 1st three years, bringing the costs down long-term, was not enough to persuade many folks.

Well, Microsoft got the message and started including additional benefits into SA like training vouchers, deployment planning services, and more. Over the past few years they’ve even included certain use rights as part of SA.

The whole aim of these changes has been to increase SA adoption, and it’s worked.

Below we’ll discuss some SA benefits/rights specifically for Windows Server 2016.

Nano Server

Nano Server is NOT a new edition of Windows Server. Instead, Nano Server is simply a deployment option within Windows Server Standard and Datacenter.

While this is a deployment option, it’s only an option if you’ve licensed your Windows Servers with SA (Software Assurance), making it a benefit, or right, of SA.

Microsoft does a good job in this TechNet article, Getting Started with Nano Server, describing Nano Server, so let’s use their words:

Nano Server is a remotely administered server operating system optimized for private clouds and datacenters. It is similar to Windows Server in Server Core mode, but significantly smaller, has no local logon capability, and only supports 64-bit applications, tools, and agents. It takes up far less disk space, sets up significantly faster, and requires far fewer updates and restarts than Windows Server. When it does restart, it restarts much faster. The Nano Server installation option is available for Standard and Datacenter editions of Windows Server 2016.

Nano Server is ideal for a number of scenarios:

  • As a “compute” host for Hyper-V virtual machines, either in clusters or not
  • As a storage host for Scale-Out File Server.
  • As a DNS server
  • As a web server running Internet Information Services (IIS)
  • As a host for applications that are developed using cloud application patterns and run in a container or virtual machine guest operating system

Can you think of some ways you can use Nano Server? If so, be sure you include SA when purchasing your Windows Server licenses.

Azure Hybrid Use Benefit

Microsoft is all about the cloud lately. To be more specific, Microsoft is all about their cloud and when it comes to Windows Server that means Azure.

To make it easier, and less expensive, for you to move to the cloud Microsoft has introduced the Azure Hybrid Use Benefit, which is a benefit of SA.

What this means in Microsoft’s own words:

For customers using Windows Server with Software Assurance, you can bring your on-premises Windows Server licenses to Azure and run Windows Server VMs in Azure at a reduced cost. The Azure Hybrid Use Benefit allows you to run Windows Server VMs in Azure and only get billed for the base compute rate.

For more information, including things like pre-requisites and how to verify your VM is using this benefit, be sure to review this article from Microsoft on How to deploy Windows Server using the Azure Hybrid Use Benefit

Now, here’s some fine print from Microsoft’s Windows Server & System Center 2016 Licensing FAQ:

For each Windows Server Standard and Datacenter Edition license covered with Software Assurance, customers can move or add incremental workloads into Azure across two instances, up to 8 cores each, or one instance up to 16 cores, and pay non-Windows (Linux) pricing. With Datacenter Edition, customers get lower-cost instances in Azure as well as rights to maintain existing on-premises deployments. With Standard Edition, customers still get lower-cost instances in Azure, but must assign the license to Azure and decommission the corresponding on-premises workload.

License Grants

As Microsoft makes the move from processor to core based licensing, similar to what they did when SQL made that shift, customers with SA receive what’s called a license grant, reducing the amount they’d have to spend on cores.

A license grant works by trading processor licenses for cores licenses. If your processors don’t exceed the minimum of 8 cores each, you will receive 8 core licenses (16 cores) for each 2 processor license you currently own.

In situations where your processors exceed the 8 core minimum per processor and 16 cores per server requirement, Microsoft will grant you additional core licenses to make up the difference.

Example 1: A 2 processor server, where each processor has 8 cores.
License Grant: 8 core licenses (16 total cores).

Example 2: A 2 processor server, where each processor has 12 cores.
License Grant: 12 core licenses (24 total cores).

Example 3: A 4 processor server, licensed with Standard, with more than 2 OSEs.
License Grant: 8 core licenses (16 total cores) will be provided for each 2 processor license with SA (if no inventory is done, only the minimum requirement is licensed).

It’s important to note that to receive your full license grant for each processor, you have to perform, and report, inventory to Microsoft.

This can be done with the free, MAP Toolkit (Microsoft Assessment and Planning Toolkit) or another inventory tool.

Also, a license grant only grants you the licenses, not the SA for processors with active SA. This means you’ll be responsible for paying the SA for any additional core licenses granted because, after all, the license grant is a right/benefit of SA.

System Center

Just like with Windows Server and System Center 2012 Microsoft continues to match the licensing models between Windows Server and System Center 2016.

Since this is not a guide on System Center I’m not going to go into great detail on it here. Instead, know that the same processor to core migrations we discussed for Windows Server 2016 apply to System Center 2016 as well.

If you’re a System Center user, or are considering System Center for your environment, you can use the licensing counts for Windows Server.

You can use the scenarios we talked about above to determine how many core licenses you need, what your core license grant will be, and ensure you’re compliant while not overspending.

Because Microsoft encourages System Center be included, or added to, any and all Windows Servers Microsoft hasn’t simply aligned the licensing models, they’ve created a suite, which we’ll discuss in the next section.

Core Infrastructure Suite (CIS)

Simplify and reduce costs. That’s what you get with the Core Infrastructure Suite.

If you’re purchasing Windows Server and System Center this is really a no brainer. The Core Infrastructure Suite gives you a single sku at a discount over licensing these products individually.

You can purchase CIS sku’s across multiple volume licensing agreements but the lowest possible price you’ll pay is if you license this via the Server and Cloud Enrollment (SCE).

The reason for the lower cost via an SCE is because you’ll need to commit to licensing all of your server licenses with CIS sku’s. Because you commit to license your entire environment, Microsoft gives you a break.

Another major reason for the discount, there’s a minimum of 25 servers to get into an SCE. So you have a larger minimum commitment and a requirement to license your entire environment.

Even if that doesn’t meet your needs, you can still purchase CIS sku’s on other agreements without those requirements.

Often times software suites try to sneak in products we don’t use in an attempt to get us to start using them. CIS is different because, in most cases, we’re either using both products or we’re not.

If you’re not using both Windows Server and System Center this sku will not make sense for you. I didn’t want to end this guide without talking about it though because it’s another purchasing option that many of you would benefit from taking advantage of.


Thank You

Thank you for checking out and using this Ultimate Guide to Windows Server 2016 Licensing. My goal with this guide is to help ensure more people understand the licensing and avoid getting to a non-compliant state.

In working with so many companies across the US over the past several years I’ve learned a few things.

  • Most, nearly all, organizations want to be compliant.
  • Microsoft licensing is complex and confusing.
  • Even Microsoft employees and “Software Advisors” struggle with understanding Microsoft licensing.

Knowing that the vast majority of organizations want to be compliant, and that there’s a lot of confusion and misinformation around Microsoft licensing, what’s needed is clarity.

Since Microsoft is moving away from clarity with Windows Server 2016 licensing there needs to be a single source of information you can reference with confidence.

That’s my goal with this guide, to be a single source of accurate information that you can reference to confidently make decisions on licensing your Windows Server environment.

I welcome your comments, criticisms, and questions. Tell me what you think of this guide and what else would be helpful for you to understand Microsoft licensing.

Email me directly here: http://volumelicensingcourse.com/contact/

All the best,

Pete Bebber | MCP
Volume Licensing Course

P.S. One more thing. If you haven’t already, you can enter your information below to download my Windows Server 2016 Licensing Cheat Sheet. This 1 page pdf gives you 80% of the information you need to properly license Windows Server 2016.

Windows Server Licensing Cheat Sheet


Windows Server 2016 Licensing Broken Down Into 1 Page

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