The biggest advantage of having a virtual machine, is the lack of needing to reinstall the whole machine if hardware fails. It will take you less than 5 minutes to boot that virtual machine right back up. But if that server was running on its own server and the hardware failed you'd be in trouble. It could take hours to reinstall the OS on a new machine and then recover the data, and if you don't have a full time IT guy on staff, then it could cost you a lot of money too.

VMWare also allows you to let your hardware have a longer life span without fear of a catastrophe. Server dies? Big deal boot the virtual machine from another server. Don't have another server? Install VMWare on the nearest computer and boot it on that.

That whole scenario happened in less than 15 minutes for a slow poke IT guy. 15 minutes vs hours... Arguing doesn't seem to have much point here.

So why have a dedicated server at all?  In some scenarios you need some serious number crunching power, but in the SMB world the need of a dedicated server is few and far between.

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