I need to take my hat off to the PSS guys in India.  I "met" Girish on the Microsoft internal aliases and then delivering a Technet chat.  I've since seen him post some great blog posts, but also answer key questions in various SBS forums.

Alex recently asked the question:

They (well I) think it is time to virtualise the three SBS servers that support their three micro businesses (plus a terminal server each). Lower energy costs (down to 1 server from 3), quieter in their office.

Girish has recently blogged something that would help implement this:

Content Released: Deploying Terminal Services in a Windows Small Business Server 2003 R2 Environment

Deploying Terminal Services in a Windows Small Business Server 2003 R2 Environment

This document updates and replaces both "Deploying Windows Server 2003 Terminal Server to Host User Desktops in a Windows Small Business Server Environment" and "Installing Virtual Server 2005 R2 on Windows Small Business Server 2003 with SP1."

Kudos to SBS UA team and the SBS Support Staff.

Now, he also commented in the SBS forum with some great advice:

There are a huge number of caveats that make this a very complex and usually disappointing option. Make sure your understand these KBs:
909840 Windows SharePoint Services and SharePoint Portal Server 2003 do not support Virtual PC and Virtual Server for production environments
http://support.microsoft.com/default.aspx?scid=kb;EN-US;909840
840319 A list of supported host operating systems that you can use to run Microsoft Virtual Server 2005
http://support.microsoft.com/default.aspx?scid=kb;EN-US;840319
897613 Microsoft Virtual Server support policy
http://support.microsoft.com/default.aspx?scid=kb;EN-US;897613
320220 Support policy for Exchange Server 2003 running on hardware virtualization software
http://vkbexternal/VKBWebService/ViewContent.aspx?scid=kb;EN-US;320220
897614 Windows Server System software not supported within a Microsoft Virtual Server environment
http://vkbexternal/VKBWebService/ViewContent.aspx?scid=kb;EN-US;897614&PortalId=1
867586 Maximum CPU capacity is less than expected in Virtual Server 2005
http://support.microsoft.com/default.aspx?scid=kb;EN-US;867586

All good advice - people even chipped in with comments like "On the NIC side you should get two four-port server NICs. You should also get very good hardware with incomparable hardware support" and "Don't want to start Microsoft bashing but the paired down core Linux kernel used for ESX along with the VMWare kernel modules make it extremely efficient, reliable and scalable which even though Windows has come a long way over the last few years it still doesn't tick all those boxes."

Lets answer the hardware one.  Some points to consider - none of these are show stoppers, but it needs to be thought of and included in the costings of moving to virtual:

1. If you move your customers to TS instead of desktops then should there be any form of server failure all those desktops fail, qualify of hardware and procedures is vital to stop this being an issue.
2. Moving servers to virtualised system can help when there is plenty of spare resources on each system, but if a system is close to its' CPU or memory limits then virtualisation can make those limits get closer and cause problems.
3. While virtualisation can reduce the number of physical boxes that get managed it increases complexity of managing the hardware - need more memory, cpu, disk etc, then all virtual systems need suspending while you shutdown your virtual server and add it.  Some hardware supports this without powering off, but this moves the price.
4. Again, as with hardware firewalls and virtualised systems, the number of systems that need to be managed increases as you add these boxes.  The virtualisation software will need managing as will all the virtual servers, so overall the number of systems managed will increase - don't forget this.  Even a ESX box needs managing and if it is not your core skill, perhaps best to get trained or not use it

Now onto the ESX versus Virtual Server.  ESX has some lovely technology, but the reasons stated above as reasons to go ESX are in my personal opinion flawed. 

• Linux vs Windows reliability should never be an issue on the same hardware.  The days of "Windows just crashes all the time" have been gone in a well managed environment for years.  It has been years since I have seen Windows cause a BSOD due to anything but poor quality (and nearly always un-signed) hardware drivers.  As for maintaining the environments, both need patching, updating and taking care of.  Again, as Girish pointed to - http://www.virtualization.info/2007/12/patch-tuesday-for-vmware.html - an average of 19 days between having to do maintenance that requires it being put into maintenance mode (no running VMs) for ESX while Virtual Server will be 1 month between the updates due to the managed monthly update cycle.
• Windows can easily be paired down if desired to just run the services you want to manage your Virtual environment, but sometimes it is better to keep a few services running outside the virtual enviroment for performance or management reasons
• ESX does today have something over Virtual Server in scalability in so much as native x64 guests are not available today (it will change soon, but not today), but having 8 VMs on a single box is not a problem today (in fact, you can go to over 64 with a x64 hosts)
• Cost - Virtual Server is a free add-on to Windows Server, ESX is not

Once you go through all the points above, you can decide if virtualisation is for you and then whose to use.  Hopefully you now feel a bit more informed.

ttfn

David