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what is the best way to install a bare metal hypervisor (i.e. to host multiple VM's)? I spoke to a friend and he is using a HP server to host all his VMs with VMware ESXi, but he installed the VMWARE esxi software on a flash card. He can then use his full hard disk capacity from each drive for the VMs. Is this a pretty standard setup when configuring a bare-metal hypervisor? How do you guys do it, and what is best?

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Yes, this is a common strategy nowadays. ESXi is a low footprint solution, so the flash (USB, SD) deployments make more sense in terms of optimize datastore space. Also remember that many virtualization solutions incorporate shared storage, so this enables lighter-weight VM hosts.

See: New standalone ESXi 5 deployments - USB versus SD card?

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Hey, thanks for your response. I was also just wondering if any disk read/write speeds would be decreased or improved by using the flash as a way to run the software? – Stephen Nov 23 '11 at 17:57
It's only the hypervisor that boots from flash, it has no impact on VM performance at all. – Chopper3 Nov 23 '11 at 18:05

As an addition to ewwhite's answer: Have a look at the VMWare Homepage. They have an excellent knowledge base and there are tons of guides for everything. They even provide the guides in epub so you can read it on your eBook-Reader.
Interesting for you would be the "vSphere Installation and Setup Guide".

Knowledge Base Home:
Regarding your question:

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