I've been migrating a client to vSphere 4 this weekend and have encountered this problem with all their servers, and its not the first time either so I thought I should share the solution.

This is most common with Dell servers and their so called "OEM" licensing, and its another one of their sly cost-saving measures that you dont notice until they really cause you a hassle. To elaborate a bit more, you  may or may not be aware that OEM stands for Original Equipment Manufacturer, and such a license is supposed to only be used once on the hardware it is supplied with. HP are more honest about their licensing and offer two types of OEM license, Standard and "BIOS Locked", which sometimes appears as "Restricted OEM" if you run a system information tool such as Belarc. The difference is quite major, standard OEM will require re-activation after a significant hardware change whilst BIOS Locked will not re-activate after a change. You can guess which version is cheaper, hence why Dell use it, but its hard to tell beforehand as they do not tag it any differently.


Its always a good idea to use a tool such as Belarc to get a full system report before you start a conversion, here's part of my one:


Dastardly Dell fail to mention that this is actually an OEM-Restricted license....


Since converting a server to a virtual machine represents a significant change of hardware it will initiate the re-activation process, with standard OEM you will just get the popup reminder after you have logged in. BIOS locked OEM however will not let you get past the logon prompt, even in Safe Mode, you have to complete the re-activation process or shut the system down. Seems simple enough until you go through the process, probably having to use the "Telephone" option as you can't configure the network properties beforehand, and after typing all the numbers you will end up with a Microsoft operator telling you to contact Dell (or the original hardware supplier).

You've probably already spent all the time on the phone to Microsoft and Dell getting nowhere, but if you haven't yet then don't bother. The only way you will get it to activate at this stage is to obtain a new OEM product key and I haven't found a way to convince them yet. There is a not too painful solution though, but it might cost you a new license:

You need to obtain a license key for the version of Windows that you are running that you know will activate and the media to go with it. It doesnt matter if your VM is Windows 2003 R1 and you can only get an R2 license and media, this process will still work and you'll get an R2 update as a bonus. Try and make sure that the media is the same service pack level as the VM though otherwise you may get a lot of errors until you can reapply the service packs later.

Boot your VM off the Windows CD you have obtained, if you are using ESX then you will probably have to go into the virtual BIOS and change the boot order first, and the install process will start. Select the option to install Windows and it will run a scan for existing installations on the hard disks, if at this point it says it can't find any hard disks then you need to check what the virtual SCSI controller is. This is only likely to occur with ESX as HyperV and Xen both use IDE, if the controller is "BusLogic" then try changing it to "LSI Logic Parallel" and you should find the installer recognises it next time. 

The Windows Setup routine should find your existing installation so select the option to repair it, then let it run through the re-install process. About halfway through it will prompt you for a product key, enter the new one you have obtained and it should accept it, if not then you haven't got the right media to match the key type - OEM keys need OEM media, Volume License needs VL media and retail needs full retail media. 

There is another issue which sometimes pops up if your server has .Net 2 installed, you may be prompted for the CD2 media as it wants an "install.exe" file, but this isn't anywhere on the Windows Server media. To get round it you have to download the dotnet2 redistributable and use a program such as 7zip to unpack it (you'll see the install.exe in there!) and then another program such as ISOrecorder to turn it into an ISO. Mount your new ISO on the VM and the installer will happily continue, I've also heard the same thing can occur with IE 7 or 8.

Once the installer has completed the server will reboot and this time you should be able to login without any problems. Before you do  anything else though I advise running Windows Update as the repair process will have effectively uninstalled every update released after the media date.