Virtual-machine technology gained visibility in 2005 as companies consolidated servers and deployed shared resources to reduce spending on new servers. Applying technologies such as VMware and Xen, companies have been able to increase server utilization and therefore cut costs. Given these savings, adoption of virtual machine technology is likely to increase in 2006. Managing and auditing virtual machines is, however, a challenge for IT executives.If you replace a single operating system image on a server with eight virtual machines, you may have inadvertently increased the complexity of managing the system by a factor of eight.Virtualization does not, in itself, reduce the complexity of IT systems. In fact, quite the opposite - virtualization may temporarily increase complexity. Virtualization does provide standardization of the infrastructure, by abstracting the differences in hardware platforms and creating a homogeneous environment for the operating system. Operational costs for managing and auditing virtual machines are therefore likely to depend on the level of automation that can be introduced into a VM-based data center. By deploying automatic provisioning and auditing tools, IT executives can take advantage of the standardization provided by the VM and reduce operational costs. This is particularly important in the face of onerous regulatory compliance requirements.In our recent discussions with IT executives, we have found that regulatory compliance is an important consideration in the adoption of compute virtualization. Auditing for regulatory compliance often involves collecting tens of thousands of log entries per day. In a virtualized environment, this challenge changes in two ways: On the one hand, more virtual machines (perhaps up to eight per physical server) generate more log entries and require storage and correlation on a larger scale. On the other hand, having a homogeneous platform means that it is easier to automate many aspects of the auditing and management software.Companies embarking on a virtualization strategy must carefully consider the operational implications. Virtual machines can undoubtedly reduce capital expenditures on new servers. But, unless accompanied by automation of management and auditing tasks, virtualization can actually increase both the complexity and cost of management auditing and regulatory compliance.Compute virtualization vendors offer management applications that make it easier to provision virtual machines. Many third-party tools for auditing and compliance can also be deployed on a virtual machine. Companies should consider automated management and auditing tools as prerequisites for a successful virtualization strategy.