When the virtual machine is created, in the Prepare to Install Operating System window, specify the source of installation files and click Start.Select the installation source in the Placement list. Choose Physical Server
if your source installation files are located on the Parallels server or choose Client Computer
if the source installation files are located on the physical computer where Parallels Management Console is installed. If Parallels Management Console is installed on the Parallels server, in the Placement list, you will be able to choose only Physical Server.
Specify the path to the source installation files. If you want to use a disc inserted into the CD/DVD drive of the computer, choose this drive from the Source menu. If you want to use a CD/DVD disc image connected to the virtual machine's CD/DVD drive, click the Source menu and use Choose an image file to locate the file.
Note: Parallels Management Console does not provide users with OS ISO images or OS installation discs. You should purchase an OS installation disc or an OS ISO image if you do not have any.

If you want to connect the installation source to the virtual machine in this step, make sure the Connect the installation media option is selected. If you clear this option and start the virtual machine or start it later, you will have to connect the installation source to the virtual machine manually.
To start the virtual machine and guest OS installation, click Start. When the installation is complete, install Parallels Tools if they are available for the guest OS.
If you do not want to start the virtual machine and install the guest OS, click Done.