For all the flexibility server virtualization affords today's IT departments, there's one type of flexibility IT managers would love to have but aren't likely to get: the ability to save money on Microsoft software licenses. Even when carving a physical server into multiple virtual machines, customers using virtualization probably won't find any way to circumvent the licensing terms set by Microsoft for software running on virtual machines, Forrester analyst Christopher Voce said at Forrester's IT Forum last week.

"If you are getting any benefit from Microsoft's software, you need to have a license, whether that benefit is for physical machines or virtual machines," Voce said in a session titled "Microsoft Licensing in a Virtual World." "You cannot engineer your way around licensing requirements. You can't use the technology as a way to cut corners around licensing."

Some customers are trying to cut corners, though. A recent Burton Group report said customers of numerous software vendors deal with support limitations by "accidentally" failing to disclose that an application is running on a virtual machine, or by cloning virtual machines to a physical server before calling support.

One question is whether Microsoft intends to use licensing policies to steer customers away from VMware's hypervisor and onto its own upcoming server virtualization software, known as Hyper-V. Two audience members who are rolling out desktop virtualization initiatives reported that Microsoft would charge them extra for operating system licenses if they use VMware or Citrix rather than Microsoft's own desktop virtualization software.

While Voce said there's no way to "engineer" your way around licensing requirements, there are ways to save money by carefully evaluating Microsoft's terms.

Microsoft offers a few licensing models for Windows Server 2008. The standard model, Voce said, grants one virtual machine per license. The enterprise model allows four virtual machines per license. The data center model prices are based on the number of processors.

Data center licenses cost less than the alternatives when you're running 10 to 20 virtual machines per server, Forrester research has found.

Voce advised customers to plan for Windows Server licensing at the same time they devise virtualization and consolidation plans. Too often, he said, the people negotiating software licenses aren't the same ones implementing server virtualization. When negotiating new licenses for virtual servers, you should push Microsoft for more favorable trade-up conditions, he said.

Microsoft's Software Assurance, a maintenance program that allows users to spread payments out over several years and get free upgrades, can offer some good terms for virtualized environments, Voce said. With desktop virtualization, Software Assurance can allow a user to work at home or in the office without needing an extra license, he said.