The reason for this limitation is that SmartBear locks their node-locked licenses to the MAC address of the host computer (https://support.smartbear.com/viewarticle/75290/)
The license activated on a virtual computer will be bound to the
virtual computer’s MAC address and to the host computer (the computer
on which the virtual computer is currently running). If the virtual
computer’s MAC address changes or you move the virtual computer to
another host computer, your license will be blocked and you will not
be able to use it.
This is common with big box licensed software (and is a whole lot LESS restrictive than some of the other major test automation solutions). If you are unable to work with a physical machine as the license manager server, you will need to follow the advice in the linked article (which may or may not work: License Manager may not install on a virtual system even when configured as described).
The minimum requirements of a possible workaround would seem to be:
- Ensure that the MAC address of the VM will not change.
- If you can install the license manager on the VM, once it's installed snapshot the VM and ensure that it will never be reverted to a snapshot without License Manager.
- Ensure that the virtual machine will never be run on a different host.
If you can do this, you may be able to use a virtual machine as your License Manager host.