On page 413 we adviced against running the data tier under virtualization, however this was based on out of date information, apologies.

The fact of the matter is that Microsoft support virtualization of Team Foundation Server in correctly configured and supported virtualization environments.

For more information, see:

• Best practices and performance recommendations on Running SQL Server 2008 in a Hyper-V Environment
• Server Virtualization officially supported products
• Support partners for non-Microsoft hardware virtualization software.
• Support policy for Microsoft software running in non-Microsoft hardware virtualization software
• Microsoft server software and supported virtualization environments
• Rangers virtualization guidance

The trick to watch out for is that disk i/o is correctly optimized in your virtual environment if you want the best performance.

With older versions of SQL and Virtual Server, things weren't as good as they are today but virtalization technology has advanced greatly in the past few years. Hyper-V is a radical improvement in the Microsoft space and VMWare ESX is also used by some people.

Today there's no question that TFS works great on either VMware or Hyper-V if correctly configured.