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I have a dual-core machine with the host OS and many guest virtual OSs. Although I have 8GB of RAM, I notice a slowdown when I turn some virtual machine on (and it takes only 1GB RAM).

I was told that I should move virtual machine hard disk file to a separate (another) physical hard drive in my PC to get better performance. This way the head of the hard disk would not have to jump from the virtual OS to the host OS as each hard drive would have its own head to deal with the OS: hard drive 1 head for host OS and hard drive 2 head for guest OS.

Is this true? Should I get another hard disk only for virtual machine hard disk files?

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It will improve performance significantly if you are trying to run the host OS and the guest(s) on the same drive. Disk I/O will be the bottleneck based on your question. . We use either a second (or third, or...) internal drive or a USB 3.0 or eSATA external. We try to have drives with good size cache and 7200RPM rotational speed. WD Black work well. Basically, one drive per guest. I would even try a USB 2.0 drive is that is all you have. While not ideal, it may give you a performance improvement as the I/O is taken off the host drive. Worth a try if you alerady havehardware but USB 3.0 would be best right now with eSATA a close second.

You will see a significant improvement in performance

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Really, external drive. I have some but I never thought of using it. I will check its specs –  JoeM Apr 3 '12 at 16:47
    
A significant improvement if the bottleneck is caused by the host and the guest attempting access at the same time. If it's, for example, two guests, then they would need to be on different physical drives to really see the benefit, no? –  Darael Apr 3 '12 at 16:48
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RE external drives - note that you'll want to look at how they connect, as USB 2.0 has bandwidth limits that may be too slow. This is probably why Dave M specified USB3 or eSATA for the external options. –  Darael Apr 3 '12 at 16:50
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It's true to an extent: The virtual disk files will have a different physical location on disk (by virtue of being different files) from any other files. However, with 8GiB of RAM, your system should not be reading from the disk on its own account unless you're trying to do things outside of the VM at the same time.

If you are, then you may notice some performance increase from moving the VM disk images to a different physical drive. On the other hand, if you're running multiple VMs concurrently you'll get best performance if they're on different physical drives from each other, or if you put their disk images on an SSD (which is expensive, but has the advantages that there's no drive head to impose seek-time costs).

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Even if the location is "different" both the VM and the OS are using the drive and accessing it just to run the base services. That creates Disk I/O issues. Even an SSD will have an issue but it may be less noticable. Getting the VM on a different drive eliminates the bottleneck. Since the VM appears to only have 1GB assigned, RAM seems an unlikley issue. More RAM may help the VM but disk I/O is a real problem in this scenario. –  Dave M Apr 3 '12 at 23:03
    
I wasn't meaning to suggest that the system drive should be replaced with an SSD, merely that it was an option when running several VMs if one didn't want to get a separate physical drive for each. –  Darael Apr 4 '12 at 3:48
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