Licensing for Windows Server and SQL Server
Windows Server and Microsoft SQL Server are core infrastructure platforms for many organizations.
They are also two of the most complex products to license correctly. Missteps in licensing these products can lead to compliance risks or unnecessary expenses.
This practical guide breaks down the approach to licensing for Windows Server and SQL Server, covering the main licensing models, common scenarios (including virtualization and client access), and tips to avoid common pitfalls.
Understanding these fundamentals is key, whether you are an IT manager ensuring your data center is compliant or a procurement leader looking to optimize costs.
Windows Server Licensing Basics
Edition and Model: Windows Server is licensed based on the edition and the number of processor cores in the physical server.
Since Windows Server 2016, Microsoft has shifted to a core-based licensing model (replacing older per-processor models).
The two primary editions for most businesses are Standard and Datacenter, both of which use core-based licensing and require Client Access Licenses (CALs) for user or device access:
- Core Licensing: You must purchase licenses for all physical cores on each server where Windows Server is installed (physically or as a VM host for VMs). Core licenses are sold in packs (commonly two cores per pack). Microsoft requires at least 16 cores to be licensed per server (even if the machine has fewer), and at least 8 cores per physical processor. In practice, even a small single-socket server with four cores needs 16 core licenses to be compliant, once you’ve licensed the required cores, which covers the Windows Server operating system on that server.
- Standard vs Datacenter Edition: The edition determines the rights to run virtual instances:
- Standard Edition allows up to two Windows Server VMs on the licensed server (assuming all cores are licensed) plus one instance on the physical host (typically used only to run the Hyper-V hypervisor). If you need to run more than two VMs on that server, you can purchase additional core licenses (in 16-core increments) again to license a second “instance” of Standard edition on the same hardware, which grants rights for two more VMs. This is often called stacking licenses.
- Datacenter Edition allows unlimited Windows Server VMs on the licensed server (plus the host OS). Once you license all cores on a server with Datacenter, you can run any number of Windows Server virtual machines on that one physical machine.
For example, if you have a server with 2 CPUs and 20 total cores:
- With Standard, licensing all 20 cores gives you rights for 2 VMs on that server. If you want to run 6 VMs, you must license the 20 cores three times (each set of 20 cores equals 2 VM rights, so three sets equal 6 VMs). At that point, it may be more cost-effective to just use Datacenter.
- With Datacenter, licensing the 20 cores once covers as many VMs as you need on that server (no stacking required).
- Client Access Licenses (CALs): Besides the server licenses above, if you use Windows Server to serve internal clients (users or devices), each user or device accessing the server software needs a CAL. CALs come in two flavors: User CALs (license a person to access any Windows Server in your organization) or Device CALs (license a device such as a PC or tablet to be used by any number of users). You can choose whichever CAL type makes sense (you don’t need both for the same environment – you can mix, but it’s usually best to stick to one type for simplicity). The CAL requirement applies to services like file sharing, Active Directory authentication, print services, etc., provided by Windows Server to your users. Exceptions: You do not need CALs for users who access the server only over the internet and are not employees/affiliates (in that case, an External Connector license can be used on the server instead), and you don’t need CALs for Windows Server if it’s being used purely as a virtualization host and not providing services to users. Additionally, note that if you use Remote Desktop Services (RDS) or certain other features, additional CALs (such as RDS CALs) are required in addition to the base CALs.
Common Windows Server Licensing Pitfalls:
- Under-licensing cores: Forgetting the 16-core minimum or the requirement to cover all cores. Always double-check physical CPU counts and core counts when ordering licenses.
- Using the Standard edition beyond its capacity: Standard can quickly become more expensive than Datacenter if you need a large number of VMs on a single host. A common mistake is trying to stack Standard licenses excessively – if you need to stack Standard more than twice on a server (i.e., more than 4 VMs on one host), calculate whether Datacenter would save money in the long run.
- Ignoring CAL requirements: Purchasing Windows Server licenses without accounting for CALs can leave you out of compliance. Every internal user or device accessing the server’s services legally requires a CAL (unless covered by certain exceptions or alternative licensing, such as Microsoft 365, which may include Windows Server CAL rights). Ensure that you budget for CALs in addition to server licenses.
- Using the wrong CAL type: For instance, if employees use multiple devices (such as a desk PC, laptop, and phone), a User CAL is usually more cost-effective. If many users share a few devices (such as shift workers at kiosks), Device CALs could be more effective. Review your usage periodically to ensure you use the optimal CAL type for cost savings.
Read Licensing Microsoft Products in Virtualized Environments.
SQL Server Licensing Basic
Microsoft SQL Server, a widely used database platform, offers two primary licensing models: Server + CAL and Per Core.
The best choice depends on your usage scenarios (particularly number of users vs. processor power) and the edition of SQL Server you are running.
- SQL Server Editions: The primary editions are Standard and Enterprise (with additional options such as Web and Developer – Developer is available for non-production use, and Web is intended for service providers only). The edition matters because:
- Standard Edition can be licensed either Server+CAL or Per Core. It has some features and performance limitations (for example, it supports less computing and lacks some high-end features), but it is sufficient for many departmental or mid-tier applications.
- Enterprise Edition is the top-tier option, offering a comprehensive feature set and optimized for large-scale, mission-critical deployments. Since SQL Server 2012, Enterprise has been licensed per core only (you cannot use the Server+CAL model for the Enterprise edition).
- Server + CAL Licensing: This model requires one SQL Server license per server (or per VM or instance of SQL Server running) and a CAL for each user or device that accesses any SQL Server in your organization. It’s very similar to the Windows Server CAL concept, but note SQL CALs are separate from Windows CALs. They are product-specific. This model is typically cost-effective for a relatively small or defined user population that requires database access. For example, you have an application that 30 employees will use – you could license one SQL Standard server (perhaps running on a single VM or physical server) and buy 30 SQL CALs. However, if that application suddenly needed to be used by 500 employees, the CAL costs would multiply, and this model might become less attractive. Also, external or public user access is generally impractical under the CAL model (because you’d need a CAL for each user). In those cases, Per Core is the go-to.
- Per Core Licensing: This model requires you to license all the CPU cores of the system (or VM) where SQL Server runs. You purchase core licenses (sold in 2-core packs) for each core. Unlike Server+CAL, no separate CALs are needed – any number of users or devices can access the SQL Server. This is advantageous for scenarios with a large or unpredictable user count, or when SQL is exposed to external users (where CALs aren’t feasible). It’s also the only option for the Enterprise edition. A minimum of 4 core licenses is required per SQL Server instance, so even a small 2-core VM would need two 2-core license packs (4 cores total) to meet the minimum. Per-core licensing aligns cost with processing power rather than user count. For instance, if you run SQL Standard on a VM with eight vCPUs and have 100 users, you might compare the costs: eight core licenses (no CALs needed) versus one server license plus 100 CALs. Depending on the pricing, one option may be cheaper. Generally, as the number of users grows, the core model becomes more economical (around the breakeven point of ~25–30 users for SQL Standard, as a rough rule of thumb, but it varies).
- Licensing in Virtual Environments: As mentioned in the previous section, if you run an SQL Server in a VM, you can license it per VM or host. With the Standard edition, if using Server+CAL, you simply need a Server license for each VM (plus CALs). If using cores, license the vCPUs in each VM (with a 4-core minimum each). With the Enterprise edition, many choose to license the entire physical host’s cores (with SA) to allow unlimited SQL VMs on that host, which is a powerful feature for data center consolidation.
- High Availability and Disaster Recovery: SQL Server’s licensing has some allowances for passive secondary servers. If you have Software Assurance, you are typically allowed to set up one passive failover instance (in a separate OSE or server) for high availability and not pay extra licenses for it, as long as it’s truly passive (not serving data to clients except during a failover). This is a benefit called “Always On Failover Server” rights. Without SA, any secondary server running SQL for any purpose (even just for failover) must be fully licensed. This is a major incentive to include SA for any large SQL deployments where HA is needed.
Common SQL Server Licensing Pitfalls:
- Under-counting cores in virtual deployments: Remembering the 4-core minimum per VM is critical. If you allocate two vCPUs to a SQL VM and license only 2 cores, you’re not compliant – you still need four licenses for that VM. Similarly, update your licensing count accordingly if you dynamically change a VM’s vCPU count.
- Misusing Developer Edition in production: SQL Developer Edition is a free edition with all Enterprise features, but it is strictly intended for non-production use (development, testing, demos). It’s common and allowed for dev/test environments, but occasionally, organizations mistakenly use it in a production environment to save costs, which is not legal. Ensure all production instances are licensed with Standard/Enterprise as appropriate, not left on Developer.
- CAL overload: Using Server+CAL licensing without tracking the number of users/devices can lead to compliance issues if your organization grows. Sometimes businesses forget to true-up their SQL CAL count as they hire more employees or add more client devices accessing the databases. There is no annual “CAL true-up” notice – it’s on you to ensure you have a CAL for every user/device. Regularly review AD or application user lists vs. purchased CALs.
- Mixing editions/features without proper licenses: If you have a Standard Edition license but implement an Enterprise-only feature (like online indexing or certain high-end BI features), that’s a compliance problem. The rule is you must license based on the edition of the software bits installed/used. So if a developer turned on an Enterprise feature in a Standard server environment (maybe by deploying an Enterprise trial or similar), you either need to upgrade that server’s licenses to Enterprise or remove that feature. Keep an eye on what features are in use via tools like SQL Server’s feature usage reports.
Practical Examples: Choosing the Right Licensing Approach
- Small Business Scenario: You have a single physical server with eight cores, running Windows Server 2022 Standard as a Hyper-V host, with 2 VMs: one for Active Directory/file sharing, and one for a small SQL Server Standard database used by 15 employees.
- Windows Server: You license eight cores (actually 16 core licenses, due to the minimum) with Standard edition, which covers the host and up to 2 VMs – perfect for your two VMs. You also purchase 15 User CALs, allowing each employee to access domain and file server services.
- SQL Server: Since there are only 15 users and one database VM, you opt for the SQL Server Standard Server+CAL model. You buy 1 SQL Standard server license for that VM and 15 SQL CALs (likely the same 15 users, if they’re the ones using the database). This setup is cost-efficient for a small environment and meets requirements.
- Mid-size Scenario: You run a VMware cluster with three hosts (each 16 cores) and want to virtualize many workloads: ~10 Windows Server VMs (various infrastructure roles) and 2 SQL Server instances for different applications (one is customer-facing with potentially hundreds of web users). Your user count internally is 200 employees.
- Windows Server: You calculate that, between all VMs and growth, each host may run 6-8 Windows VMs. Stacking the Standard edition could work (each host would need the cores licensed twice to cover up to 4 VMs, and three times for up to 6 VMs), but this approach becomes unwieldy. You decide to license each host with the Datacenter edition (16 cores per host). This way, you don’t worry about counting VMs – any number of Windows VMs is fine. You also acquire 200 User CALs to cover all employees across all Windows Servers. This covers your Windows infrastructure completely and gives flexibility to add more VMs.
- SQL Server: For the SQL instance that’s customer-facing (unlimited external users) and for the one with internal users (200 users), you decide Per Core licensing is the only practical option (external users can’t be CAL’d, and 200 CALs for the internal one might cost more than cores). You choose SQL Server Enterprise for the customer-facing DB for performance and features, and SQL Standard for the internal app. You have SA on your SQL licenses and plan to run them on the virtual cluster:
- You could license just the VM’s cores for the Enterprise DB, but because it’s critical and might be scaled out or moved, you license one of the hosts entirely with 16 SQL Enterprise cores + SA. You then pin that Enterprise DB VM to that host (or use DRS rules to prefer that host) to use the unlimited virtualization rights in case you later add a second Enterprise DB VM. (Alternatively, you might even license all three hosts with Enterprise if high availability across hosts is needed – it’s a budget call.)
- The Standard DB has four vCPUs. You license that VM with 4 SQL Standard core licenses (with SA, giving you flexibility to move it on the cluster under License Mobility). If the internal app user count exceeds a few hundred, you’ll consider migrating it to core licensing on the Enterprise edition later. For now, four cores cover it.
- This configuration avoids any per-user SQL licensing issues and leverages the virtualization rights of Windows Datacenter. It does mean a larger upfront cost (Datacenter and SQL Enterprise are premium), but it provides simplicity and scalability. Compliance-wise, each host is fully covered for Windows, and your SQL instances are properly core-licensed, regardless of user counts.
Optimizing and Managing Over Time
After deploying Windows and SQL Server licenses, continuously monitor usage to ensure optimal performance. For Windows Server, ensure that new VMs don’t exceed your licensed counts (in our example, with Datacenter, this’s not an issue – a significant reason we chose it).
Track your CAL usage – if your company hires more people, you’ll need more CALs.
If you switch people to devices or vice versa (such as shared kiosks), consider changing the CAL types at true-up or renewal.
For SQL Server, monitor performance and load. If you see one instance heavily used, confirm you’ve assigned enough core licenses for any vCPU increases. Also, look for any Enterprise features that may have been accidentally enabled on Standard servers.
Conduct periodic internal audits (perhaps annually or before a Microsoft true-up) to verify that your license entitlements match deployments.
Engage Experts if Needed:
Windows and SQL Server have use-case-specific tweaks (e.g., licensing for development and test environments via MSDN subscriptions, or handling hybrid cloud use with Azure Hybrid Benefits).
It’s wise to consult with a licensing specialist or Microsoft licensing partner when architecting a new environment or if your current setup is not cost-optimal.
For instance, an expert might point out that your 200 SQL CALs for a given system cost more than simply switching that system to core licensing, or that an SQL Server is lightly used and could be moved to a more cost-effective edition.
They can also help stay compliant, especially if Microsoft announces changes (such as when core licensing was introduced or Azure benefits were expanded).
Read Microsoft Licensing Implications for Cloud Migration.
Conclusion:
Windows Server and SQL Server licensing may seem daunting due to core counts, CALs, and multiple models, but breaking it down step-by-step makes it manageable.
First, assess your environment’s size and needs: How many cores does it require?
How many users? How many VMs now and in the future? Then choose the editions and licensing models that fit those parameters, balancing upfront cost with long-term flexibility.
Always remember the CAL component for Windows and (if applicable) SQL—it’s part of the cost of ownership. Avoid common pitfalls by staying informed (Microsoft’s licensing rules do evolve) and keeping accurate records of what is deployed where.
With careful planning and periodic review, you can ensure your Windows Server and SQL Server deployments are compliant and cost-effective, powering your organization’s IT needs without unnecessary licensing headaches.
Read SQL Server Licensing 2022: Strategic Guide for ITAM Professionals.
Read more about our Microsoft Optimization Services.
