You probably know that the different versions of Windows allow you to run additional virtual instances of Windows. The standard version allows you to run one additional virtual instance, the enterprise version allows four virtual instances and the datacenter version allows unlimited instances. The additional virtual instances are linked to a physical server. This means that when you buy the enterprise version of Windows for example, you can run four virtual instances on one physical server.

You should also know that these rules are not linked to Microsoft virtualization technologies such as Virtual Server or Hyper-V. They apply to VMware VI3, XenServer and any other hardware virtualization product.

But what happens in an environment with live migration features such as VMotion, XenMotion or even Quick Migration like in Virtual Server and Hyper-V? In that case you need enough licenses for the amount of virtual machines that can potentially run on one physical server.

An example should make this clearer. If you have two hosts running ESX with eight virtual machines in total and VMotion/HA enabled you might be tempted to buy two Windows Server Enterprise licenses. You can do this but then you have to run four virtual machines on one server and four virtual machines on the other and never move them! (Note: there are some exceptions to this in the official Microsoft documents)

So how many Enterprise licenses do you have to buy? The answer is you should buy four Windows Server Enterprise licenses: two for the first server and two for the second server. Depending on the amount of physical processors in the server, Windows Server Datacenter licenses will quickly become cheaper.

More information: Microsoft