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Hardware is most often the highest cost in the data center. Reduce the amount of hardware used and you reduce your cost. But the cost goes well beyond that of hardware — lack of downtime, easier maintenance, less electricity used. Over time, this all adds up to a significant cost savings.
When you use a physical server and it dies, the redeploy time depends on a number of factors: Do you have a backup server ready? Do you have an image of your server? Is the data on your backup server current? With virtualisation, the redeploy can occur within minutes. Virtual machine snapshots can be enabled with just a few clicks. And with virtual backup tools like Veeam, redeploying images will be so fast your end users will hardly notice there was an issue.
Not only can you do full backups of your virtual server, you can do backups and snapshots of your virtual machines. These virtual machines can be moved from one server to another and redeployed easier and faster. Snapshots can be taken throughout the day, ensuring much more up-to-date data. And because firing up a snapshot is even faster than booting a typical server, downtime is dramatically cut.
What better testing environment is there than a virtual one? If you make a tragic mistake, all is not lost. Just revert to a previous snapshot and you can move forward as if the mistake didn't even happen. You can also isolate these testing environments from end users while still keeping them online. When you've perfected your work, deploy it as live.
One of the nice things about virtualisation is the abstraction between software and hardware. This means you don't have to be tied down to one particular vendor — the virtual machines don't really care what hardware they run on, so you're not tied down to a single vendor, type of server (within reason of course), or even platform.
Better disaster recovery: Disaster recovery is quite a bit easier when your data center is virtualised. With up-to-date snapshots of your virtual machines, you can quickly get back up and running. And should disaster strike the data center itself, you can always move those virtual machines elsewhere (so long as you can re-create the network addressing scheme and such). Having that level of flexibility means your disaster recovery plan will be easier to enact and will have a much higher success rate.
Task specific servers: with virtualisation, you can easily have a cost-effective route to separating your email server, your web server, your database server, etc. By doing this, you will enjoy a much more robust and reliable data center.
Easier migration to cloud: With a move to virtual machines, you are that much closer to enjoying a full-blown cloud environment.