In-place upgrade of the guest operating system (between major OS release versions, such as Windows Server 2012 or Windows Server 2012 R2 to Windows Server 2016) is not recommended. The best practice is to install a new major OS releases in a new VM.
Support considerations:
Read OS vendor's documentation to ensure the specific upgrade scenario is supported, e.g.,
Overview of Windows Server upgrades ,
Perform an in-place upgrade of Windows ServerDisclaimer: VMware is not responsible for the reliability of any data, opinions, advice, or statements made on third-party websites. Inclusion of such links does not imply that VMware endorses, recommends, or accepts any responsibility for the content of such sites.
If the OS vendor does not support a particular upgrade scenario, then VMware will not be able to provide support for such scenarios due to lack of ability to collaborate with the OS vendor.
In-place upgrade is a feature of the operating system, if problems are encountered, it is best to first contact the OS vendor for assistance. If the OS vendor has narrowed down problem to be specific to VMware software, then VMware can provide assistance.
Some VMware products do not support in-place upgrade of the guest operating system in a VM. For more details, see
VMware support for guest operating system upgrade (2018695) .
Check
VMware Compatibility Guide to ensure new operating system version is supported as guest on the VMware product.
Check the configuration of VM to ensure that it meets requirements to run new OS release. New major OS releases sometime increase the minimum require amount of memory, video ram, disk space, etc. In addition, performing OS upgrade consumes disk space, so ensure VM has adequate storage to complete the upgrade. It may be necessary to power off the VM to make some of these adjustments before starting the upgrade.
For all applications running in the OS, contact the application vendor to determine their support policies and guidance for conducting operating system upgrades.