Mixed Bag
Virtual machines let hardware run multiple OS instances without compromising application availability and stability. In contrast, running multiple applications under a single instance of an OS can at the very least reduce availability, just through maintenance demands. At worst, multiple apps running on the same OS can cause instability, resulting in unexpected downtime.
Consolidation increases risk as well, of course. Running multiple VMs on a single physical server exposes more applications to hardware failure, compared with running a single application per server. But for many, it's a risk worth taking. Reducing overall server count can help control real-estate and cooling costs by having more servers in a smaller data center. But again, consolidation in a single physical space increases the risk to all applications running in that space if the data center experiences a power failure or fire--the number of applications affected will be greater than if a company had multiple data centers servicing the same number of applications. If you use virtualization to consolidate servers, factor in redundancy to minimize risk.
When it comes to systems management, virtualization provides a layer of mobility and flexibility that can help IT handle hardware maintenance, eliminate hardware as a factor in application support and better manage application performance. A virtualization environment like VMware's provides its own virtual hardware and BIOS on which OSs and applications are installed. This makes it much easier for admins to move an application to another system--apps are less susceptible to hardware compatibility issues because the virtual hardware will always be the same.
In practical terms, this simplifies routine maintenance. If a server must go offline, simply transfer all the VMs from that server to other servers running a virtualization environment. App availability isn't interrupted.
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