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There are also other versions of this article available: Reference | Reference7 (this version) | Reference9 | Reference10 | Reference11r2

The DHCP function can either be disabled in DHCP Disabled mode or operated in DHCP Client or in DHCP Server mode. The DHCP function of the Ethernet interface has four operating modes:

Disabled: The IP-Adresse and other parameters are configured manually.
Server: The IP parameters are configured manually in DHCP Server mode. The DHCP server is on and should be configured accordingly as described in "Configuration/ETH/DHCP-Server".
Serve Vendor Clients Only The server will issue leases to reserved clients and to clients with Vendor class identifier = (i.e. innovaphone devices) only
Vendor Server Identifier The server will send this string as DHCP vendor option 250 to the client
Client: In DHCP Client mode, the device receives its IP configuration from a DHCP server to whose network the device is connected.
Wait for Vendor Server The number of seconds the client will wait for a lease from an innovaphone DHCP server (that is, until a lease is received that has a vendor option 250 with proper value).
Vendor Server Only The client will wait for a lease from an innovaphone DHCP server (see above) forever
Vendor Server Identifier The expected value for the DHCP vendor option 250 (see above) expected in the lease offer received. This can normally be left blank.
Automatic: The automatic mode is configured as factory setting on ETH0. It is useful only to get the first connection to the device. If automatic mode is configured the device operates with DHCP mode client after power up, if the device is restarted by pressing the reset button it operates in mode DHCP Disabled. As factory setting the IP address is configured. This way a connection can be established to the device in a network without DHCP server by restarting the device with the reset button an then connect to (this requires the PC to be configured to an IP address in the network).
 DHCP Automatic mode should not be used for normal operation, 
 since an accidental restart may switch the operating mode from DHCP client to a fixed IP address,
 so the device may not be available anymore.
Running an innovaphone DHCP server when there is already one

It might be pretty convenient to run an innovaphone DHCP server in addition to an existing one in a network. This simplifies deployment of vendor specific configuration options. To make sure such leases are only sent to innovaphone (and explicitly reserved) clients, you would turn on Serve Vendor Clients Only on the innovaphone DHCP server. This will not send offers to other requesters and will include a server identifier within any offer sent. By default, an innovaphone DHCP client will wait for a lease with matching Server Identifier for 8 seconds. Also by default, the vendor identifier is empty.

As a result, to have clients with factory settings run with the innovaphone's DHCP offer, you should turn on Serve Vendor Clients Only mode on the server and leave the Server Identifier empty. If so, an out-of-the-box innovaphone DHCP client will prefer the offer sent by the innovaphone server (provided it appears 8 seconds after the first offer the latest).