Issues with Server Virtualization
Having said that, there seems to be a performance downside to virtualization. Given that a virtual machine (VM) is yet another layer of indirection the server HW this layer negatively impacts the performance any time there is a need for the application to access IO Channels, SAN disc and other network resources. This is especially so when the application code is either running inside of a JVM or an application server container such as a JEE container, .NET CLR or even a web server servlet container. In all cases, performance profiles of an application seem to vary whether the application is running inside of a virtual layer vs. directly on the physical server.
Vendors are now focusing on this drawback by introducing the concetp of Just Enough OS (JEOS). It remains to be seen how effective these optimizations prove to be in the realm of critical path enterprise systems.