Installation,Storage,and Compute with Windows Server 2016:Microsoft 70-740 MCSA Exam Guide
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Key Management Services (KMS) activation

KMS activation uses a client-server model for client or server operating system activation. The KMS service can reside on a client or operating system; it does not have to be a dedicated server. The KMS service can coexist with other services without operational issues.

A computer that has the KMS service installed is called the KMS server or the KMS host, while computers that connect to a KMS host to perform an activation are called KMS clients. Only KMS clients that reside on the same network as the KMS host can connect to that KMS host and perform an activation.

You can install the KMS host on a virtual or physical computer running any of the following operating systems: Windows 10, Windows Server 2016, Windows Server 2012 R2, Windows 8.1, or Windows Server 2012. If the KMS service is installed on a client operating system, only client operating systems can be activated, so a KMS host installed on Windows 10 or Windows 8.1 cannot activate Windows Server editions. A single KMS host can support an unlimited number of KMS clients and it is recommended that you have at least two KMS hosts in a larger environment in case one activation server becomes unavailable.

A KMS host activates KMS clients based on a minimum number of activation requests, or the threshold level. The KMS clients are activated in bulk. The threshold level for server operating systems and Microsoft Office volume editions is five, while the threshold level for client operating systems is 25. The threshold levels also apply to the period in which clients submit requests for activation. This period is 30 days and is applicable to the 50 most recent contacts.