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Managing Windows Licensing and Activation : Licensing Windows

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Understanding and managing Windows licenses can be a full-time job. Just as you think you understand it, it changes. The aim of this section is to provide you with the information necessary to build a successful deployment. You will need to ensure that proper licenses are purchased and obtained (better yet, have your purchasing department take care of it for you).

Although much of the purchasing process has to do with price, licenses also have technical restrictions about their deployment and activation.

In general, Microsoft offers three different Windows licensing types. Although all three types provide identical functionality inside the operating system, pricing and management should be concerns when deciding which licensing type to use.

To verify proper licensing, Microsoft began implementing activation with the release of Windows XP. Although obtaining a license gives you the legal right to use Windows, activation verifies your license is valid. As shown in Figure 1, the activation state for Windows Vista can be one of three states:

  • Grace period

  • Notification

  • Activated

When Windows is initially installed, it is typically operating in its grace period. The grace period is a 30-day period in which Windows is fully functional and will attempt to activate itself until activation can be achieved. Ideally, Windows would then enter the activated state. It is important to note that Windows may also return to the grace period state, depending upon the license being used. However, if activation cannot be accomplished after remaining in the grace period for 30 days, then Windows enters Reduced Functionality Mode (RFM) in which the user interface is very restrictive and time limited. Thankfully, RFM has been eliminated with the release of Windows Vista SP1. Now the system enters a Notification Experience, where the user is repeatedly notified that they must activate .

Figure 1. Understanding the Activation process for Window Vista

Managing Windows activation in your environment is highly dependent upon the licensing type you select. Choices include:

  • Retail licensing

  • OEM licensing

  • Volume licensing

1. Understanding retail licensing

Retail products, or Fully Packaged Products (FPP), are versions purchased off the shelf of your local software store or from an online retailer. They come boxed with media and paperwork and are the most expensive of all licensing types. In addition to being the easiest to obtain, the primary advantage of a retail version of Windows is that its license may be transferred one time to another computer, which Microsoft defines as a motherboard. If your computer running Vista crashes or just becomes too old for your needs, you can retire it and reuse the existing retail Windows Vista license on a new computer. Because Microsoft defines the computer as a motherboard, you will also be able to upgrade your motherboard without having to purchase a new copy of Windows Vista. Although the Windows XP license did not explicitly specify the number of times, it was permissible to move a license, the Windows Vista license may be moved one time.

Retail licenses must be activated by the user through either the Internet or a phone call to Microsoft. Additionally each product key may only be activated against one machine. However, you may activate that product key against the one machine as many times as you like, for example, after reloading Windows. The exception is if you are transferring the license to another computer. In that case, you need to call Microsoft and explain the situation. The Microsoft licensing agent can provide you with a manual activation code. Once activated, retail versions of Vista remain activated unless multiple hardware changes are detected within a short period of time. Due to activation issues and expensive licensing, retail licensed media is seldom used to build deployment images.

2. Understanding OEM licensing

OEM is an acronym for original equipment manufacturer, which indicates OEM licensing is intended to be used by vendors who sell Windows Vista as part of a hardware purchase. Typically, vendors get very good pricing from Microsoft for OEM licenses in return for bundling the software with the hardware and purchasing large quantities. This price advantage is passed, at least in part, to the customer, which is this licensing technique's primary advantage. The easiest way to identify OEM licensing is by locating the product key sticker (usually found attached to the top of the computer).

OEM licensing has one major disadvantage, in that it is a nontransferable license. OEM licenses are tied to the hardware that they are bundled with and may not be reused on or transferred to other hardware. In its truest sense, the OEM license is tied to the motherboard of the computer. This means that if you decide to upgrade your motherboard or simply custom build a new computer for yourself, you will need to obtain a new Windows Vista license. Technically, Microsoft also may require you to purchase a new license if replacing a failed motherboard, although it is their current policy to allow reactivation for motherboard failures. Typically, you can call the activation number shown on the activation screen and explain the situation, at which time you would be given an activation code to enter manually.

Activation of OEM licenses is normally handled by the vendor before shipping out the computer and is referred to as OA, or OEM Activation. With OA, the vendor places a special marker in a BIOS table of the motherboard indicating that the computer was sold with a Windows Vista license. During installation, Windows Vista retrieves information from the licensing table (SLIC) and the OEM ID from the BIOS. This information is validated with a native digital certificate and, therefore, bypasses normal activation procedures.

The activation remains valid so long as the OEM ID and SLIC tables in the BIOS remain consistent. When using imaging to deploy to various hardware platforms, this may cause a problem as an OEM licensed image will not activate if moved to a hardware platform with a different OEM ID marker in the BIOS. Due to the large price discounts, OEM is a very popular licensing option among businesses and organizations. However, using OEM licenses to build images can generate a management nightmare. For this reason, most organizations do not use OEM media to build deployment images.

3. Understanding volume licensing

Volume licensing was designed for organizations with a large number of computers. Volume licenses are less expensive than their retail counterparts are, but are only sold as upgrades. This misunderstanding is common with Microsoft licensing. For a volume license of Windows Vista to be considered valid and legal, the computer must have a pre-existing full Windows license that satisfies the upgrade requirements for the version of Windows Vista you will be installing. Microsoft clearly states in its licensing documents and on its Web site that all Windows Volume licenses are upgrades.

Microsoft is beginning to use a new volume activation technology called Volume Activation 2.0. With Volume Activation 1.0, volume licensed products simply bypass activation altogether. Due to the piracy and key leakage in corporations, Microsoft now uses Volume Activation 2.0 for Vista and Server 2008.


Windows XP, Windows Server 2003, and Office 2007 and earlier continue to use Volume Activation 1.0.

Volume licenses offer better activation management for image-based deployments than retail or OEM activation. A large number of Windows Vista computers can be activated with a single product key, by using either a Multiple Activation Key (MAK) or the Volume Activation Key (VAK). Because of this, Microsoft provides what they call re-imaging rights with volume licenses. The main point of re-imaging rights is that a computer with a valid OEM or retail license may be imaged from a volume license-based image. To support the image building process, volume license media includes a full Windows installation rather than an upgrade installation. So although a volume license is only legal as an upgrade, the media can be used to perform a full install without having to perform an upgrade or check for a previous version of Windows.

When building customized images, you will almost certainly want to use Volume License media and product keys. For optimum activation management, it is sometimes considered best to purchase OEM licenses for the bulk of your computers (at the reduced price) and purchase a small quantity of volume licenses to build your deployment images. You may also purchase Enterprise Edition volume licenses to upgrade your Business OEM licenses, because Enterprise Edition is not available as an OEM license.

4. Understanding virtual machine licensing

It has long been established that for physical machines or virtual machines, licensing is the same. You cannot install Vista on a virtual machine without licensing and activating it just as you would a physical machine. However, there have been some changes as virtual machines become more commonplace.

The first good news for those working with virtual machines was the inclusion of four free desktop licenses with the Enterprise edition of Windows Vista. With a single license for Vista Enterprise, four installs in a virtual machine are provided in addition to the installation on the device. Enterprise customers can exercise their downgrade rights to run several different operating systems within virtual machines with Windows Vista Enterprise as the host.

Another licensing offering that has been recently unveiled is Windows Vista Enterprise Centralized Desktop (VECD). VECD provides unique licensing to run Windows in virtual machines (VMs) on servers for allowing remote access from users from their workstations or thin clients. VECD supports hosted desktop architectures, also known as centralized desktop or virtualized desktop infrastructures (VDI), and provides customers the flexibility to explore this particular model of desktop deployment. Windows VECD can be used with the Microsoft virtualization technologies or third-party partner solutions.

The new VECD licensing option provides for unlimited installs of Windows Vista Enterprise (or downgraded Windows operating system) on the server. It allows four concurrent accesses of virtual instances at a time and is licensed by access device (PC or thin client).


For details on the Windows Vista Enterprise Centralized Desktop, visit www.microsoft.com/virtualization/solution-product-vecd.mspx

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