Databases should always be run on physical servers. ArcSDE should be run on thesame physical server as the database (unless you're using clustered databasetechnology). The only reason to run ArcSDE on a virtual server is if you'll only be using Direct Connect.- V
While possible, and supported, ESRI does not recommend production use of virtual serversfor any ArcGIS Server components. I had a client who requested performance testing of physical v. virtual servers for ArcGIS Server 9.3.1, and quickly agreed to our team's "use physical" recommendation when they saw the results. This same client did not even consider running databases on virtual servers(or if they did, the option was eliminated long before we got involved), which made it easier to sell ArcGIS Server Image Extension (Image Server) as "image database software" that needed physical servers with fibre-attached disk ("just like Oracle").Virtual computing is a great way to configure dozens of test hosts in a single beefy machine,but it just doesn't hold up under the disk and CPU load of database or server-side GIS use.- V
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