so today I attended a vmware virtualization seminar. It is amazing how quickly technology changes. The key savings that they tout is power and cooling savings. The example that they gave was TXU going from 100 servers to 20. The TCO study showed went from 20 servers down to two and the first year cost went from 200K to 50K. Most of there cost savings were based on fewer dual cpu boxes but a major percent was cooling and power savings.
Business continuity and disaster recovery are key reasons to buy vmware. When I worked at Rice we had a lot of independent servers. It looks like NAS or iSCSI ar critical technologies to make this work.
http://www.vmware.com