Q. How can I convert a VM to the Windows Server 2016 hardware version 7?
A. Windows Server 2016 introduces VM/configuration version 7 that utilizes the new binary based configuration file instead of the XML configuration file in version 5. To convert a VM to the version 7 configuration with the binary configuration format use the Update-VMVersion PowerShell cmdlet. This is a one-way conversion and once a VM is converted to version 7 it cannot be converted back to version 5 which means it cannot be used pre-Windows Server 2016.
Update-VMVersion -Name "importtst" -Confirm:$false
Once the conversion is performed the XML configuration file is replaced with a VMCX binary configuration file and a VMRS file created for storage of runtime state data.