Virtualisation can greatly reduce hardware costs, while making network management a lot easier. However, the migration of physical servers into a virtual server environment can be something of a trick. While there is no way I can cover everything you need to know about virtualisation within the confines of a single article, I can show you the basic process.
In this article, I'm going to assume that you are using Microsoft's Hyper-V as a virtualisation platform, and that you have already done adequate hardware and capacity planning.
Prepare your physical server
The first thing that you are going to have to do is to prepare your physical server to be virtualised. There are two very important steps involved in this process. The first step is to make sure that your server is running Windows Server 2003 Service Pack 2 (SP2) or higher. The Hyper-V virtual machine integration services won't install otherwise, and you need those services in order to connect the virtual machine to the network.
The other thing that you will need to do is to test all of the hard disks on your physical server for errors. To do so, run CHKDSK with the /F parameter against each of the machine's hard drives. On occasion, I have gotten lazy and skipped this step, but have paid the price for doing so on more than one occasion.
Create a copy of the server
The next step in the process is to create a copy of the server that you are virtualising. When I first tried this in my organization, I assumed that the easiest way to do this is to disassemble the server, and physically connect the server's hard drives to the machine that will host the virtualised instance of the server. After that, I would open the Hyper-V Manager, and click on the New link (located in the Actions section), and then click on the Hard Drive option. Doing so launches a wizard that guides you through the process of creating a new virtual hard drive. If you choose the option to create a virtual hard drive of a fixed size, and then choose the option to create a virtual hard drive based on the contents of a physical hard drive, Hyper-V will copy the physical machine's hard drive.
What I have found though is that, although this technique works great for secondary hard drives, it doesn't work for the boot drive. Every time that I have tried using this technique to copy a machine's boot drive, I have gotten a blue screen of death when I trying to boot the virtual machine.
What you have to do, instead, is to use NTBACKUP to create a full, system state backup of the physical server. After doing so, turn off the physical machine, and unplug it from the network.
Next, you must manually create a virtual machine, and install Windows on it. It is critically important that this copy of Windows be the same version and service pack level as the one being run on the physical machine. You should connect the virtual machine to the network, but not join the virtual machine to a domain.
Instead, you will restore the backup that you created earlier to the virtual machine. It is important that you perform a full, system state restore, and that you configure NTBACKUP to overwrite all files. When the restoration completes, you must reboot the virtual machine. Again though, your physical server that you are virtualising must be disconnected from the network before you do this.
One caveat that I want to mention is that virtual machines are not able to connect to USB devices. This rules out the possibility of writing the .BKF file used by NTBACKUP to a portable hard drive, and then plugging it into the host server. When I performed this procedure in my lab, I had to copy the .BKF file across the network to a virtual hard drive that was a part of the virtual machine. Only then was I able to restore the backup.
Completing the process
If Windows does not make you activate immediately, then I would advise against doing so. This will give you time to test the deployment prior to activating Windows.
The last step in the process is to install the virtualisation drivers. In a lot of cases, these drivers will install automatically. If not though, then just choose the option from the virtual machine's Action menu to insert the Integration Services Setup Disk. Once this disk is inserted, all of the necessary virtualisation drivers should be installed. This completes the virtualisation process.