In a major reworking of Microsoft's Windows Server licensing, the company has announced that there will be just four Windows Server 2012 SKUs. With Windows Server 2012, Microsoft is moving to a simpler product line-up, with fewer variations in capabilities, and a greater emphasis on socket count and virtualization rights.

There will be two main editions, Datacenter and Standard. Traditionally, Microsoft has given different Windows Server SKUs different feature sets with, for example, high availability and clustering capabilities only offered in the most expensive editions, and different hardware limits, with cheaper versions supporting fewer processor sockets and less RAM.

That's no longer the case with Windows Server 2012. Both Standard and Datacenter editions will support the same set of features and the same hardware limits. Both will require CALs for authenticated server access. Both will be licensed on a per-socket-pair basis. The only difference will be in virtualization rights: Standard edition can be run in up to two virtual machines (in addition to the host operating system); Datacenter edition can be run in an unlimited number of virtual machines.

For example, a four socket machine with no virtual machines would need either two Datacenter licenses, or two Standard licenses. A two socket machine with 12 virtual machines would need either six Standard licenses, or one Datacenter license.

The current Windows Server 2008 R2 Enterprise, Web, and HPC products are all replaced by Standard and Datacenter licenses, and Microsoft has some complex arithmetic to explain how volume license customers will be able to trade up from the old versions to the new ones.

Standard licenses will be priced at $882, Datacenter licenses at $4,809.

In addition to these fully featured products, Microsoft will also have two limited-capability versions, the $425 "Essentials" and the OEM-only "Foundation". Essentials will be licensed to run on physical hardware with up to two sockets or in a virtual machine (not both simultaneously, unlike the full-strength versions), and Foundation will only be licensed for use on single socket physical hardware.

Windows Server 2012 Essentials supports a large subset of Windows Server's functionality, but many features, including Active Directory and file server features, will be preconfigured and preinstalled. It will support up to 25 clients.

This new edition is intended to replace two current editions: Small Business Server Essentials, and Small Business Server Standard. Like the SBS Essentials product, Windows Server 2012 Essentials is designed to be used in tandem with cloud services such as Office 365. However, there won't be any direct equivalent to the old SBS Standard product; companies wanting a full on-premises installation of Exchange and SharePoint will have to pay for the full-price products.

Windows Server 2012 Foundation is even more restricted than Essentials, and will be restricted to cheap servers designed for the very smallest of businesses, supporting only a maximum of 15 clients.

The new licensing scheme is substantially simpler than the one used for Windows Server 2008 R2. Standard edition now picks up features that previously required Enterprise or Datacenter, making it a much more capable product, and buying decisions are now essentially determined only by the demand for virtualization: if you want to virtualize a lot, use Datacenter, if you don't, use Standard. Though there are sure to be winners from the new license scheme, there may also be some losers too. In particular, non-virtualized workloads depending on the four sockets of the current Standard license will become more expensive; depending on the price breaks and discounts, the same may also be true of some current users of the eight socket Enterprise license. The death of the Small Business Server Standard product is also sure to be a blow to small companies not yet willing to make the leap to the cloud.