Microsoft Desktop Virtualization Licensing for the SMB

I’ve been thinking about virtualizing a couple of desktops at a small non-profit customer site. The desktops are five years old, due and budgeted for replacement. There’s an under-utilized server available. Why not run Windows XP or Windows 7 as virtual desktops on the server, and replace the desktops with thin clients?

Technical Options

There are lots of options for virtualizing desktops on a server. I can run Virtual Server 2005 and create Virtual Machines (VMs) under that. Or I can run a full hypervisor like Windows Server 2008 R2 Hyper-V, VMWare ESX, or Xen and create virtual machines there.

Licensing Options

As usual, licensing is where things get tricky. I am no licensing specialist but I wanted to get down the results of some of my research.

Windows OEM licenses, like you get when you buy a PC from Dell, are tied to the physical hardware. We want to get rid of the old hardware, so that’s not an option.

A full packaged product (FPP) version of a Windows desktop OS can be run in virtual mode. For Windows 7 Professional, that means $300 MSRP per virtual machine. FPP products do not include downgrade rights so you have to actually run Windows 7.

The other option is Virtual Enterprise Centralized Desktop (VECD), formerly Vista Enterprise Centralized Desktop. For use with a thin client, VECD is like renting the desktop software:  for about $110 a year, you are allowed to access the VM from one thin client. One primary, named user of that thin client can also use the VM from home.

Unlike OEM and FPP, VECD does not include perpetual use rights:  once the agreement expires, your right to use the software also expires. Assuming a five-year desktop life span, a VECD license for the same period would run $550.

So let’s add up and compare the five-year costs, assuming $250 for a thin client:

  • Hardware PC with Windows 7 Pro:  $800
  • Virtualize with Windows 7 FPP:  Thin client $250 + FPP $300 = $550.
  • Virtualize with VECD:  Thin client $250 + VECD $550 = $800.

Of course there are lots of other variables that speak in favor of virtualization especially in large corporate environments:  security, management, shared images, reduced power consumption, etc. But for a small business with only a few desktops those benefits are negligible and perhaps even more cumbersome than running physical desktops. One thing that could benefit a small business is that a thin client, with no moving parts, should theoretically outlast a desktop PC. But is that really the case? Many thin clients now offer dual monitor support, for example, but what additional features will be required at the desktop five years from now? USB 3? IPv6?

Another big drawback to the VECD model for this customer is that several part-time users currently share the same desktop. Often the users access the desktop from home. In the VECD scenario, only one of those users would be permitted to access the VM from home; for others, the client would have to buy additional VECD licenses. So if three users need access to the same VM from home, you need two additional VECD licenses for a total of $1650 just for the OS for five years.


According to this PC World article, “an OEM edition can be used to install the new operating system on a brand new, and thus blank, virtual machine….” Although OEM licenses cannot be transferred, e.g. from the old PC’s we’re retiring, the thought here would be to use an new OEM license instead of the Windows 7 FPP. I’d want to double-check with Microsoft if this is legal, but the OEM version of Windows 7 Professional is only $140 at Newegg. Theoretically the client could move its existing SA to the new OEM license and thereby obtain downgrade rights as well. See update below.

Acquiring VECD

Emma Healey, Licensing Escalation Manager at Microsoft UK, has a couple of helpful posts for understanding VECD:

One clarification she posted in the comments of the first article:  “Open [licensing] cannot support the subscription method used to purchase VECD, so it’s only available in Open Value in the small and med business space, and Select/Select Plus and EA/EA Subscription in the large org space, and School/Campus in the education space.”

So for an SMB, the only option to purchase VECD is through Open Value. Another strike for my client, who qualifies for non-profit pricing, which is not available through Open Value.

It’s quite a challenge finding SKUs for VECD. They’re not listed on VECD’s page on the Microsoft Volume Licensing site. They’re not listed on the Microsoft page explaining VECD, although the VECD Licensing Guide available there is helpful. The grand overview of client virtualization in the Microsoft Client Virtualization Strategy White Paper will blow you away with options but will not give you SKUs.

Finally I resorted to searching the CDW store. Search for “OV VECD” and you’ll find 19 Open Value VECD products. Note that the products that begin with DSA- are for when you attach VECD to a thick client that already has a Windows desktop license with Software Assurance. Since I’m looking for the thin client options, I have to look at the part numbers beginning with DTA-. Search again for “DTA-00051” and you’ll see the options.


Microsoft has made significant strides in supporting desktop virtualization, but their VECD model is mostly focused on the large enterprise. However the option of installing a Full Purchased Product, or perhaps an OEM version, into a virtual machine still has some appeal.

Update 9/8/2009:  Regarding the idea of installing an OEM version into a VM, I had started to think that maybe the OEM license would in that case be tied to the host server (also not desirable).  But then I found the OEM System Builder License:

The system builder must pre-install the license on a Customer System, which is defined as “…a fully assembled computer system that includes a CPU, a motherboard, a power supply, an internally mounted NAND or revolving magnetic-based hard drive, and a case. For Server products, a hard drive and separate power supply are not required.”  That sounds decidedly physical, not virtual.

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