Virtual Machine Licensing

It is a widely know “fact” that the Datacenter Edition of Windows Server 2008 allows an “unlimited” number of Virtual Machines to be installed and run on the machine for which WS2k8DCE was licensed. When you buy Datacenter Edition, you pay for each physical processor (sockets filled with CPUs) you are currently running in the server hardware. For example, if you have a Dell 1950 III, you might have two processors with four cores on each processor. In this case, you need to pay for, of course, two processors. WS2k8DC has an MSRP of $2999/proc — So, the OS will cost you $5998.
The good news is that you can now install any number of Windows Servers on that Dell 1950 III as virtual machines (running on the Hyper-V layer). So… if I were a clever admin, I’d put 2TB of PC2-5300 into the box and install a gajillion servers on it.
…and now the rest of the story:
First of all, I can’t put 2TB of RAM into the server. But let’s just say I could. If I want support from Microsoft, I can only place 384 child machines on a Datacenter server.
but wait, there’s more… if I like Live Migration and Failover Clustering, I can buy another 1950 and “join” it to my first DC in a MNS cluster (let’s forget about the network, the storage, etc. for now). I would need another licence of WS2k8DC at $5998. My OS license cost is now $11,996 (list) and I can run as many machines as I can shake a stick at… or can I?!
The part of the story that you won’t hear too often is the support limitations regarding virtual machine densities for stand-alone servers versus clustered servers. Net/Net: Clustered servers are only supported with less than 65 virtual machines per cluster node. In a 16-server cluster, you can run 1024 machines — that’s it, period. So — let’s go back to the CFO to pay for this… 16-nodes of Datacenter on Dell 1950 III’s will set me back $95,968. I can run 1024 servers — each server costs me $93.72. Amazing — really amazing. And let’s not forget — this INCLUDES the cost of the Hypervisors and rudimentory management software. It’s really amazing. — Singularly licensed servers would have cost me $999 each — for a total of $1,022,976. To be fair, no one would buy servers that way — with Open, Select, AE, etc… the cost of 1024 servers wouldn’t cost $999, it would be half that. However, it’s easy to see a difference between $93.72 and $500!
Let’s also consider the “flexibility” of the cost model: If I was willing to pay $500 for each server license, what is the minimum number of servers I can deploy and still justify the cost of WS2k8DC licenses in my 16-node cluster? Simple — we’ll divide $95968 by $500 and see that if we implement less than 192 virtual machines (as few as 12 servers per node), we need to start dropping nodes to make the math work.