Product Activation and Volume Licensing

Of course, no version of Windows is totally free. Pinning down exactly how much Windows costs can be difficult, at best. Of course, you can always pay the regular list price, which Microsoft includes on its Web site. But practically nobody pays that much; Microsoft offers a variety of volume licensing programs and other discount programs that can significantly reduce your outlay for server operating system software. Microsoft has also carried product activation into Windows Server 2003 to help reduce software piracy and illegal use of its products. We'll discuss both licensing and product activation in the next three sections.

How Windows Server 2003 Is Licensed

No matter how you purchase Windows Server 2003, or how much you pay, you'll still be buying licenses for the operating system. Microsoft server operating systems actually require two licenses: A server license allows you to actually run the operating system on a single server computer; a client access license (CAL) allows a single user to connect to the server and utilize its services.

Windows Server 2003?and indeed, pretty much every preceding version of Windows?recognizes two types of client licensing. The first is per-seat licensing, in which you buy one CAL for each client computer in your organization. The second is per-client licensing, in which you buy one CAL for each connection that will be made between a particular server and a client. This is the same type of licensing that both Windows 2000 Server and Windows NT Server 4.0 use.


Depending on where you purchased your client operating systems, you might be set for CALs. Some editions of Windows XP Professional and Windows 2000 Professional include server CALs.

Microsoft Licensing Programs

Microsoft's three programs are each targeted at different sizes of businesses with different needs and different budgets. Two basic programs apply to Windows Server 2003: Open License and Select License. Other custom licensing programs can be negotiated by larger companies that deal directly with Microsoft.

Open License programs are designed to be easy for businesses to take advantage of. Your initial purchase size sets your discount level for the program, and your program agreement lasts for two years. Additional licenses can be ordered in any quantity at your fixed discount level, and you can buy those licenses on the open market.

Microsoft offers two licensing subprograms under the Open License name: Open Business and Open Volume. The Open Business program allows businesses to place an initial order for at least five Microsoft products and establishes a fixed discount level. Businesses can then purchase additional licenses one at a time at their discount level for the duration of the program agreement. Open Volume is similar to Open Business, but it allows higher discount levels. Your discount level is determined for each of three product categories: applications, systems (including Windows Server 2003), and servers. Your initial purchase quantity in each category must meet a predefined minimum to qualify for the program. Initial purchases larger than the minimum do not result in a higher discount level. Both Open Business and Open Volume agreements last for two years.


Microsoft offers additional open license programs for government agencies, academic organizations, and 501(c)(3) nonprofit organizations. For more details, visit

Open Business is the most straightforward program because you must buy only five products from any category to qualify. Open Volume is more complex because each Microsoft product is assigned a point value. To qualify for the Open Volume program, you have to purchase at least 500 points worth of products from the servers, systems, or applications category. For example, Windows Server 2003 is worth 15 points, whereas a Windows Server 2003 CAL is worth only 1 point. You must purchase at least 500 points worth of product from at least one category, and you receive an Open Volume agreement only for the categories for which you qualify.

One catch with both Open License programs is that they don't include actual product. When you purchase a license, it shows up under your account on Microsoft's eOpen Web site. The Web site allows you to track the licenses you've purchased, which ones have Software Assurance associated with them, and so forth (more on Software Assurance later in this chapter). What you don't get when you purchase an Open License is a CD, manual, or other physical product. So, how do you get the physical stuff? Microsoft offers a special fulfillment channel, which enables you to purchase the media and manuals for a nominal fulfillment and shipping fee.

Select License agreements are for larger companies that have at least 250 computers and the capability to roughly forecast future purchases. Enrollment in the Select program requires a larger initial purchase than an Open Volume agreement, although your eligibility and discount levels are determined by using the same three product categories and the same product point values. Select agreements last for three years; to qualify for the program, you must agree to purchase at least 1,500 points worth of products from any one category within that three-year timeframe. If you agree to purchase more product within your three-year agreement term, you'll get a higher discount level:

  • Level A runs from 1,500 to 11,999 points.

  • Level B runs from 12,000 to 29,999 points.

  • Level C runs from 30,000 to 74,999 points.

  • Level D runs from 75,000 points and up.

When your Select agreement expires, you can renew it for one or three years, at your option. Unlike Open Volume agreements, which allow you to purchase licenses from a large reseller channel, Select agreements and licenses must be purchased through a more exclusive channel, called the Microsoft Authorized Large Account Resellers (LARs) channel. After you're in the Select program, obtaining the actual product is easier than with the Open Volume program: You're shipped a fulfillment kit containing compact discs or DVDs for every product in the categories covered by your agreement. As products are updated, Microsoft ships you updated discs automatically.


Another benefit of the Select program is the ability to pay for your agreed-upon licenses over the term of the agreement, instead of up front, if you're purchasing Software Assurance with your licenses.

Where most companies get into trouble with the Select program is in the point forecasting. Most companies err on the side of caution, selecting a lower point commitment for their term. If you agree to purchase 11,999 points worth of product, and wind up buying 30,000, you'll still get only the level A discount level.


To learn more about how these licensing programs apply specifically to Windows Server 2003, visit and enter this book's ISBN number (no hyphens or parentheses) in the Search field; then click the book's cover image to access the book details page. Click the Web Resources link in the More Information section, and locate article ID# A010102.

When you start to calculate the prices for the licenses you need, don't forget to factor in Software Assurance, Microsoft's new proactive software upgrading program. In the past, Microsoft usually licensed its software outright and offered special upgrade pricing for users of previous versions. Now, Microsoft won't offer upgrade pricing any longer. Instead, you essentially buy your upgrades in advance through Software Assurance.

Software Assurance costs about 25% extra per year. So, for two years of Software Assurance, your licensing costs will increase by 50%. So long as Software Assurance is in effect, you'll receive all product upgrades at no additional charge. Without Software Assurance, you'll still receive service packs and other mid-version fixes, but you won't receive any major new versions of the product. If you want them, you'll have to pay full price.

Activating Windows

To help combat illegal use of its software, Microsoft has begun implementing product activation in many of its products, including Windows Server 2003. When you install Windows Server 2003 from retail media?the CD-ROM you buy in a store or from another retailer?you type in a unique product ID during the setup process. This product ID is generally printed on the back of the CD jewel case. After the installation is complete, Windows Server 2003 contacts Microsoft over the Internet (there's a phone-in option if you're not connected) and registers your product ID. From that point, your product ID is permanently tied to your server's hardware configuration. You can reinstall and reactivate Windows as many times as you want on that particular hardware; if you try to use the same product ID to install Windows on a different server, the activation process will fail.

Activation can present a few problems. Normally, Windows adapts to changes in your hardware configuration and remains activated, provided those changes are few in number and occur over a period of time. If several things?for example, BIOS serial number, memory, hard drive, and CPU type?all change at once, Windows deactivates itself, believing that it has been cloned onto a different computer and is no longer legal. If that happens, you'll have to call the Microsoft Product Activation Center and plead your case for a new activation key.

If you've received your Windows Server 2003 CDs through a volume channel, such as a Microsoft Select License fulfillment package, you won't have a product ID. Instead, you'll have a volume license key, which enables you to install Windows on any number of machines without having to go through product activation. Of course, you can legally install Windows only as many times as your license allows, but there's no product activation feature to act as a watchdog for you.


Don't confuse product IDs and volume license keys. You can't use a product ID with volume license CDs, and you can't use volume license keys with retail CDs. If you have both types of media in your organization, be sure to keep track of which ID numbers go with which CDs.

If you'll be installing Windows Server 2003 on a large number of computers, it pays to acquire a volume license agreement with Microsoft and get volume license media from which to install. That way you won't have to fuss with product activation after every installation. Volume license media makes using automated deployment methods, such as Remote Installation Services (RIS), easier because product activation isn't a factor.

  • For more information on RIS, see "Server RIS," p. 26.