Editor's Note: This article was adapted from an article authored by Chris Peters in March 2009.

Microsoft's server licensing can be complicated. Do you need a client access license (CAL)? If so, should it be a User CAL or a Device CAL? And should your CAL operate in per-server or per-seat mode? If choosing licenses for your Microsoft products is making your head spin, our guide to Microsoft server and client licensing is here to help.

We'll cover licenses for server software, licenses for clients, and some advanced Microsoft licensing scenarios. And while this article focuses on Microsoft server applications, similar issues can arise with other server applications.

Licenses for Server Software

The license required to install and run most server applications usually comes bundled with the software itself. So you can install and run most applications "out of the box," as long as you have the right number of client licenses. More detail on client licensing is provided below.

In some cases, though, you may need additional licenses in order to run your server software:

• Every time you install server software (on a physical server or a virtual one), you create an "instance" of that application. The number of "instances" of a particular application that you can run using a single license varies from product to product.
• With a processor license, a separate license is needed for each physical or virtual processor on which the server software runs. For example, if you run Windows Server 2008 DataCenter edition on a server with two processors, you need a separate license for each processor. SQL Server 2008 works the same way.

Licenses for Clients

Depending on the licensing scenario, "clients" can be either the end users themselves (employees, contractors, clients, and anyone else who uses the software in question) or their computing devices (for example, laptops, desktop computers, smartphones, tablets, etc.).

There are a few things to think about when you're planning for client licenses.

User CALs or Device CALs?

• User CALs allow each user access to all the instances of a particular server product in an organization, no matter which device they use to gain access. This means each user can access the server software from as many devices as they want (for example, from a desktop, laptop, or smartphone). User CALs are the more common licensing option.
• Device CALs allow access to all instances of a particular server product from a single device (a laptop or a desktop computer, for example), regardless of how many people use that device. Device CALs are less common that user CALs, but they do make sense when multiple employees use the same computer. For example, in 24-hour call centers, different employees on different shifts often use the same machine, so Device CALs make sense in that situation.

Per User/Per Device or Per Server Licensing Mode?

With Windows Server 2003 and Windows Server 2008, you use a CAL in one of two licensing modes: per user/per device (sometimes referred to as "per seat") or per server. You make this decision when you're installing your Windows Server products, not when you acquire the CALs. The CALs themselves don't have any mode designation, so you can use either kind of CAL in either licensing mode.

• Per user/per device or "per seat" mode is the default mode, and the one used most frequently. In this mode, you need one CAL per user or device that will be accessing the server software, regardless of the number of servers being accessed.
• In per server mode, you are allowed a specified maximum number of simultaneous connections to the server. In other words, if you have 40 CALs, Windows will let 40 authenticated users have access. The 41st user will be denied access. Per server mode works for some small organizations with one or two servers and limited access requirements.

Some Key Points About Client Licensing

• Do your reading — Make sure you read the product descriptions and any other available documentation carefully to make sure you understand all the details about licensing a particular application.
• You don't always need CALs — Not all server-based software requires CALs. Although many Microsoft products — including Windows Server 2003 and Windows Server 2008 — do require CALs, SQL Server and other products don't require any client licenses. Software licensed with a processor license usually doesn't require CALs either.
• You need only User CALs or Device CALs, not both — For example, you don't need to get a user CAL for yourself and a device CAL for your computer. And while legally you can use a mix of the two different types of licenses, it's not recommended in most situations.
• You may get some CALs bundled with your server software — A few Microsoft server applications come bundled with CALs. Windows Server 2012 Essentials does not need CALs even.
• You often get a few administrative client licenses — Microsoft server products always include one or two client licenses for administrative use so you or your IT staff can access, configure, and troubleshoot the software.
• Client apps don't come with client licenses — Client licenses aren't bundled with the standard Microsoft client applications. They have to be obtained separately, even when there seems to be a natural connection between two types of software. For example, Microsoft Outlook (an email client application) doesn't come with a client license for Microsoft Exchange (an email server application).
• Consider CAL suites — If you need CALs for several different Microsoft products, see if there are CAL suites available. For example, Microsoft Core User CAL Suites and Core Device CAL Suites are available through TechSoup donations. These suites bundle together the CALs for four key Microsoft server technologies: Windows Server, Exchange Server, SharePoint Server, and Systems Management Server.
• You often need multiple licenses per client — A single client (either a person or machine) often needs multiple licenses when accessing one physical server. For example, if you use your desktop computer to access a SharePoint Server on a Windows Server 2008 machine, you have to have a client license for both products.
• Pay attention to the Microsoft donation program rules — For example, there is a 50-license maximum for Microsoft title groups that contain client access licenses or other licenses that provide for connection to or management of a server. There is a five-product maximum for server products, regardless of title group. For further details, see Quantity and Frequency of Microsoft Requests on the Microsoft Donation Program — Eligibility and Allotments page.

Advanced Microsoft Licensing Scenarios

The licensing scenarios described in this section are less common, so we'll cover them only briefly. The Additional Resources section provides more information on these advanced scenarios.

• Client licenses for external users — If you have any authenticated external users who need to access services on your Windows-based servers, you have several options: You can obtain CALs for each user who needs to access your servers. Or you can acquire a single External Connector License (ECL) that covers the server they will be accessing. The ECL covers use of that server by all authenticated external users, but it's a lot more expensive than a CAL, so only get one if you'll have a lot of external users. If only a handful of external users access your Windows servers, you're better off acquiring user CALs.
• Windows Remote Desktop Services(RDS) licensing — Windows Remote Desktop Services (formerly known as Windows Terminal Services) is built into Windows Server 2003 and 2008, but you will still need to get a separate Windows RDS User CAL for each client that will access Terminal Services in your organization. The RDS CAL replaces the older Terminal Services (TS) CAL.
• Standard CALs and Enterprise CALs — Some Microsoft server products have two client licensing modes, standard and enterprise. An Enterprise CAL grants access to more advanced features of a product. With some products, a user needs both a Standard CAL and an Enterprise CAL in order to access the advanced features.
• Licenses for System Center products — Microsoft's System Center products (a line of enterprise-level administrative software packages) generally use a special type of license known as a management license (ML). Any desktop or workstation managed by one of these applications needs a client management license. Any server managed by one of these applications requires a server management license. There are two types of server management licenses – standard and enterprise. You need one or the other, but not both. There are also special licensing requirements if you're managing virtual instances of Windows operating systems. For more information, see TechSoup's Guide to System Center Products and Licensing.

Additional Resources

• Microsoft server basics — Microsoft's Client Access License page provides a clear summary of available license types and why you might choose a particular type of license. TechSoup's Guide to Windows Server Editions and Licensing is another good introduction to the topic.
• For more advanced Windows scenarios — See Licensing Windows Server, CALs and External Connectors, and Windows Server 2008 Licensing Guide (pdf).
• Microsoft Volume Licensing — Microsoft's Volume Licensing Home Page can help you find answers to both basic and advanced questions. The Volume Licensing Reference Guide is a well-organized, well-written introduction to a wide variety of Microsoft licensing topics, and Volume Licensing Briefs are especially useful for complicated scenarios such as licensing in virtualized environments.
• For licensing in virtualized environments — See Microsoft Licensing for Virtualization.