By consolidating SQL Server database virtual machines onto fewer physical servers, you save on server hardware investments, administrative expenses, and deployment costs. If you run test and development instances as well as disaster recovery servers on VMware vSphere, you can significantly reduce costs by eliminating the need to maintain costly 1:1 server ratios and identical hardware to replicate your production environment.
VMware will tell you that SQL Server is an excellent candidate for virtualization, with your instance running at 85-95% of native performance. If you are already having performance issues, moving to a solution that only offers 85-95% of existing performance seems counter-productive. With new hardware you should be able to use VMware to boost performance to get enough of a performance boost to justify the management opportunities in VMware. VMware has conducted several performance studies with heavy workloads and aggressive consolidation densities to demonstrate the performance of SQL Server virtual machines, but you have to understand your performance options and opportunities.
Unlike traditional database consolidation in a physical server environment, using vSphere to consolidate your SQL Server databases offers a really good co-existence strategy, allowing for high consolidation ratios without sacrificing specific application needs. With vSphere, you can consolidate your SQL Server systems as-is, without having to change the database version or patch level, thus possibly reducing the need for expensive and complex application remediation.
There is very little difference between sizing SQL Server virtual machines and sizing physical SQL Server systems; just follow Microsoft guidelines, taking into account application requirements. As you begin to understand the performance characteristics of the environment, you can instantly adjust processor and memory with the VMware Hot-add feature.
By running SQL Server on vSphere, you might achieve a much more reliable and disaster-tolerant infrastructure. With your SQL Server systems encapsulated into virtual machines, there are many storage-based and software options for replicating to a disaster recovery site. These methods are also very cost-effective, allowing you to avoid need for identical hardware.
You can get more information on Best Practices for using SQL Server on VMware here.