I'm looking into splitting our database server and application server and am evaluating offerings from Rackspace and Azure specifically around the database server. We are a Saas Web application and performance and capacity for future growth is what is important to us.
Rackspace have told me that it is important for performance to have a machine dedicated to SQL server and more importantly that there is no virtualisation layer between the OS and the HDD. ie. Another word for this is a "Bare Metal" configuration.
Azure evangelist has said that they have no problems running SQL Server on a virtual machine that is the sole tenant of the physical machine and that they have finely tuned this configuration to get much higher throughput (3-4x) than Rackspace would achieve through their virtualisation layer (VMWare apparently).
Azure are way cheaper and seem to have a better long term story in terms of scaling out the database easily. Am I going to achieve the performance gains I am after with the virtualisation layer in place? Who is telling the truth? Are there any performance stats or whitepapers where I can research or compare further.