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do i need to purchase a licence agreement for each computer hooked up to a windows 2000 pro machine that is acting as a server for 5 users...my understanding is that i can have up to 10 connected without having to purchase any extra agreements...or going to server edition
That is correct.
<a href="http://www.microsoft.com/licensing/howtoacquire.asp" target="_blank">How to Acquire Microsoft Product Licenses Through Microsoft's Volume Licensing Programs</a>
Windows 2000 Pro is limitted to 10 inbound connections period. When you connect from a client machine to your 2000 server (which is running Pro), you're using the clients license to access network services on the Pro machine. Since your machine is a Pro version, you cannot buy CALs for it. You can't increase the number of connections it will accept nor do you need to purchase client licenses to utilize the number of connections that the machine was built to accept.
For example, if you had 10 Pro machines in a workgroup setting and each machine had 1 mapped network drive to each other machine and each machine used no other services from any other machine (meaning you're only using 10 inbound "connections" on each machine) you would NOT have to buy 9 licenses for each computer in the workgroup so they could access the other machines. It's build in.
The problem is that each service counts as a connection (File and Print services, Internet Information Services, Remote Access (including connection sharing and telephony services).
* Installation and use. You may install, use, access,
display and run one copy of the Product on a single
computer, such as a workstation, terminal or other device
("Workstation Computer"). The Product may not be used
by more than two (2) processors at any one time on any
single Workstation Computer. You may permit a maximum
of ten (10) computers or other electronic devices (each
a "Device") to connect to the Workstation Computer to
utilize the services of the Product solely for File and
Print services, Internet Information Services, and remote
access (including connection sharing and telephony
services). The ten connection maximum includes any
indirect connections made through "multiplexing" or other
software or hardware which pools or aggregates
connections. Except as otherwise permitted by the
NetMeeting, Remote Assistance, and Remote Desktop
features described below, you may not use the Product
to permit any Device to use, access, display or run other
executable software residing on the Workstation Computer,
nor may you permit any Device to use, access, display,
or run the Product or Product's user interface, unless
the Device has a separate license for the Product.