The Lion Server installer downloads a server software package during installation. This includes upgrading Snow Leopard Server, installing Lion Server onto a blank volume and promoting OS X Lion to Lion Server.
In most cases, the server software package is downloaded from the Apple Software Update Server, but you can also configure your computer to download the package from a local Software Update Server running Lion Server or Mac OS X Server v10.6.8, as described below.
To configure the computer where you are installing Lion Server to use a local Software Update Server, enter the following command in a Terminal window (substituting your Software Update Server's fully qualified host name for su.domain_name.com):
defaults write /Library/Preferences/com.apple.SoftwareUpdate CatalogURL http://su.domain_name.com:8088/index-lion-snowleopard-leopard.merged-1.sucatalog
On the Software Update Server, make sure that the update named "Server Essentials" is downloaded and enabled. Note that there are several versions of this package. Make sure that you enable the one whose build number matches the build of OS X Lion that you are using. You can identify the build number of the Server Essentials package by selecting the package in Server Admin and looking at the Product ID at the bottom of the window. For example, if you are running or installing OS X Lion v10.7.3 build 11D50, enable the Server Essentials package with the Product ID "11D50_ServerEssentials".
Important: If your Software Update Server is running Mac OS X Server v10.6.8, you must first prepare the server using the instructions in Hosting Lion updates on Snow Leopard Server.