There are licensing restrictions involved when running Microsoft operating systems as guest virtual machines. The particular restrictions that I'll focus on here are the desktop virtualization restrictions and the server virtual machine mobility restrictions.
I'll address the desktop virtualization restrictions first. As many have heard, the EULA on Windows Vista prohibits Windows Vista Home Basic or Home Premium from being installed as a guest virtual machine. While this may prove troublesome for home users, the more troubling restriction is the one barring resellers from distributing OEM-licensed versions of Windows operating systems as virtual machines. This prevents resellers from offering custom solutions prepackaged as virtual appliances.
The server virtual machine mobility restrictions should concern any customer who moves virtual machines from one host server to another. Basically, Microsoft has stated that for server operating systems that are not Datacenter Edition, the license must be tied to a physical server, not the virtual machine. Also, you can only transfer that license between physical VM host servers once every 90 days. This effectively prohibits Vmotion, DRS and HA unless a customer is willing to obtain a Windows Server Datacenter license -- or buy enough other server licenses to cover the number of Windows Server virtual machines that might be active on any of the physical VM host servers.
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This was first published in November 2007