What has been the greatest benefit gained from your server virtualization/consolidation efforts?

What has been the greatest benefit gained from your server virtualization/consolidation efforts?
In the past 8 months, the company that I work for has invested significant time, money and talent on our server virtualization and consolidation efforts. The benefits include, but are not limited to: physical space reduction, BTU savings, reduced downtime, better fault tolerance, administration efficiencies, reduction in TCO and reduced time to deploy. I would like to hear from others that have gone through this. What were the benefits that you realized in order of importance?

I don't agree that getting smaller is always better. I've known some consolidation plans based solely on the fact that it was proven to save money, but at the expense of greater lag times for customers and a single point of failure. For example, one place I worked in had 11 offices around the country, all with their own Exchange servers. When a server went down, it only affected that office. The consolidation plans came and migrated all users across the country to a single Exchange server in one location, managed by outside contractors. Well the backbone outages were more noticably frequent because everyone was affected all at once, while the bandwidth costs increased to support the new level of traffic. Customer-wise it was better before the consolidation plans even though the number of servers was more. Plsu since an outside contractor was in charge, we never knew who was reading our mail or who was backing up our data properly. We used to just go ask the local IT guy what he used to do. That's my experience, in summary: managers usually focus on costs alone rather than employee morale or productivity, probably managers see those commercials on TV telling them that consolidation is good good good, and because they feel that since IT is mostly a support role, that they have to "do something" to justify those hefty cost-per-person IT dollars.

We're currently just starting to consolidate, and in our case it boils down to two things:
- Flexibility. Particularly the ability to spin up complete development and testing environments without waiting for additional hardware (or keeping it on standby). These are systems that don't require many resources.
- Ease of administration. The ability to migrate images to re-balance resource usage, or to upgrade and test new OS or application versions on new clean images, test them, and then just switch them without rebooting physical hardware (and when reboots can't be avoided, temporarily migrating things to other servers if needed) are all very compelling. Especially since much of it can be automated.

Reduced downtime / fault tolerance is not a big deal in our case since we already have failover for all functions, and in most cases we have quadruple redundancy (pairs of active-active in two separate geographical locations).

Better utilization and space reduction etc. is hardly on our radar at all, actually, since we already have a very high utilization of almost all of our servers.

For us, virtualization works well for development environments only. That is, environments that are used infrequently and with overall low average and top utilization. Our tests demonstrated that virtualization imposes CPU utilization overhead of around 30%. Having all our service and web instances configured to allow multiples of them running on "bare" OS, we get more work done by same amount of hardware. For us, load profile is similar throughout the day, that is, peak is peak and all subsystems experience higher load. When off-peak, there is no consumer of this spare cycles that can be thought of.

First of all, when thinking of/planning to/going to virtualize/consolidate make sure the "customer" (whoever is going to interact with or use the server/machine) gets the same or better performance. E..g. average downtime will probably increase when many services are consolidated on one machine or if one machine hosts several virtual machines...
That being said, the biggest gain then is "internal", i.e. the ones maintaining see nearly all the benefits: less physical (and maybe even cheaper) hardware to deal with, easy "refresh" (e.g. VMWare: just take a (backup) image and restart the virtual machine),...
As a side note: you should be prepared to "undo" a consolidation - e.g. when running the mail server (software) and file server on the same (virtual) machine, make sure both are accessed separately (e.g. different IP-addresses) - in case of trouble (and/or performance problems), you can "separate" the functions and run them on different (virtual) machines.