One of the most complex issue to solve when dealing with new virtualization technologies is licensing. While approaches like server virtualization (a la VMware, Parallels, Xen and Microsoft itself) and OS partitioning (a la SWsoft, Sun, UML) could represent a real saving also for operating system costs, traditional licensing models weren't created for virtualization scenarios and aren't actually helping new technology adoption. Microsoft, more than any other company, has the majority of problems with OS licensing in virtual machines, and it's moving to adapt to the aspect datacenters are taking. From a certain point of view the fact Microsoft entered in the server virtualization segment is boosting changes, since the company is directly influenced by its own unflexible licensing scheme. The result is a more indulgent term of license for Windows Server 2003 R2 Enterprise Edition, which allows up to 4 installations in virtual instances, apart the physical one, and Windows Server 2003 R2 Datacenter Edition, which allows unlimited installations in virtual instances. But despite this effort customers are seriously confused, sometimes unable to understand how Microsoft licensing fits new virtualization technologies they are evaluating. It's the case of SWsoft OS partitioning solution, Virtuozzo, which is able to create multiple, independent, virtual instances of the same underlying operating system. Something Sun introduced with Solaris 10 and called Solaris Containers and Linux have since years thanks to the UML (User Mode Linux) project. In the SWsoft Virtuozzo case customers are disorientated by the fact partitions don't appear like complete virtual machines, like in VMware products, where you have to install a new operating system from scratch. Recently SWsoft CEO, Serguei Beloussov, commented on CNET News about this topic and, without clearly describe readers how Windows licensing applies to Virtuozzo virtual instances, asked for more transparency:

... Customers deserve more clarity about the licensing issues surrounding operating system virtualization. This should be a straightforward matter unless software vendors decide to suddenly charge per each virtualized environment. If that occurs, they'll essentially be charging extra for the same bits and bytes of software they have already charged for...

His last conditional statement let thinks SWsoft is currently saying his customers they don't need extra operating system licenses for virtual instances, but it's just an interpretation. To provide clarity Mr. Beloussov is demanding virtualization.info reached Mike Neil, Senior Director of Virtualization Strategy at Microsoft, and asked for an official statement about the issue:

A virtual operating system environment that enables a separate machine identity or separate administrative rights requires an operating system license. In this case, each Virtuozzo virtual environment requires an operating system license. Each instance of the OS can deliver value by providing additional flexibility for customers to deploy their business workloads.

Neil also added Virtuozzo partitions, like traditional virtual machines, benefits the new licensing terms introduced with Windows Server 2003 R2 Enterprise Edition and Datacenter Edition mentioned above. It should be now clear Microsoft at today considers OS partitioning indentical to server virtualization from a licensing point of view. This may change in future since the company is expected to launch an OS partitioning technology as well, but for the moment verify your licenses today.