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Cannot start VM on VMware ESXi 4.0.0 - get error 'there are insufficient licenses to complete this operation. feature vsmp not licensed, requires 8 have 4'

We have an HP Proliant ML370 with 2 physical CPUs and 4 cores in each
We have installed VMware ESXi 4.0.0 on to it and have one VM installed.
We registered for the free ESXi license and have added this to the server and it shows up.
I have recently shut down the VM but cannot now start it again and am getting the error - 'there are insufficient licenses to complete this operation. feature vsmp not licensed, requires 8 have 4'

I thought with the free license that we could use the 2 physical CPUs with 4 cores in each. I am not totally sure what the VSMP is although now i notice that in the license details it mentions only 4-way Virtual SMP but clearly states 2 CPUs with 1-6 cores in each.

What are we doing wrong?

Product: ESXi 4 Single Server Licensed for 2 physical CPUs (1-6 cores per CPU)
License Key: xxxxx-xxxxx-xxxxx-xxxxx-xxxxx
Expires: Never

Product Features:
Up to 256 GB of memory
Up to 4-way virtual SMP

p.s. using vSphere client 4.0.0
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Andrew Hancock (VMware vExpert PRO / EE Fellow/British Beekeeper)
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how many CPU have you assigned to nthe virtual machine?
Read here:http://www.vmware.com/products/vsphere/buy/editions_comparison.html
All versions support VMs with 4 way vSMP except for Enterprise Plus which gives 8 way vSMP
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bgoering
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You can use 2 physical processors with up to 6 cores each with your free license. However for any single vm to have more than 4 processors requires a higher (not free) license for ESXi
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The reason it ran with 8 before is that while in "trial" mode, all of the features including 8-way vsmp are available to you. Go to the configuration tab in vSphere client and select Licensed Features and it will tell you what all you can do with the free license.
bgoering is onto something there, but you still need to change the number of core's in the settings... you don't have the right license to run it any other way...

best practice is only one core per server anyway... this seperates everything...
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Changing to 4 CPUs and 8GB RAM does allow it to start up. I understand now about the licensing and the limit on cores per VM. I am worried that the SBS2008 will not perform as well now?

Also it will not start with the 12GB RAM as was originally. Does not start with 10GB either. Will start with 8GB. Again can someone possibly explain why this is and if I should take action to sort this or if 8GB is going to be OK.

Since the Enterprise Plus license is pretty expensive we would consider the Standard license or the Small Business license and I assume these don't allow cores per VM? Is it more of a big business requirement?

What are the limits for RAM per VM? is 8 the max under the free license?

Thanks for comments so far - all really helpful!
@cuteadder - as I said in my first response...
I am not aware that the free license limits the memory size for guests. It does limit the host to 256 GB. In edit settings check the Guest OS type is set to Windows 2008.

Enterprise plus is the only edition that allows 8-way vsmp.
Are you sure you need 4 CPUs and 12GB of ram in the SBS server?
I would venture to guess that 8GB woulld be plenty for SBS... Doesn't that limit you to a certain number of clients.

I would probably drop back to 1 vcpu and 4GB of memory and observe the guest. If you see lots of page faulting up the RAM. If you see sustained periods of high CPU add another procesor - it is very easy to do.
Do you plan on putting more vms on the box? If you do then resource management becomes a bit more important. I can understand you wanting to give all of the resources of the physcal box to a vm, but it isn't generally done.

On the 8GB limit, it is possible the datastore where the vm is stored is running out of space. This can happen easily if you have snapshots. How it is relevent is that a VM can't start if there isn't enough free space on the datastore (or wherever swapfile is configured to be placed) to create a swap file equal in size to configured memory.

How much free space is there?