The quick answer to this question is: absolutely.
Unlike many technologies that provide a great degree of technological risk and expense and may not be appropriate for a small business, virtualization is a mature technology (IBM CP/CMS circa 1968) that is well understood. In short, it provides a layer of hardware abstraction that can benefit an IT organization of any size. It may possibly apply even more to small business IT departments than to the enterprise space.
Before looking at how virtualization can benefit the SMB market I would like to provide some definitions. In today's IT landscape it has become popular to re-label many common technologies as "virtualization" for marketing reasons, unnecessarily complicating the issue.
True virtualization refers to the virtualizing of entire operating systems. Wikipedia uses the term platform virtualization and I will as well. Technically we could refer to this as "System Virtualization" or "Operating System Virtualization" to distinguish it from loosely-related technologies.
The basic concept of platform virtualization involves running an abstraction layer on a computer that emulates the hardware itself. Through the combination of abstraction and emulation we get what is known as a virtual machine. This virtual machine is a completely working "computer" onto which we can install an operating system just as if we were installing onto the bare metal of a dedicated machine.
Instead of being limited to only installing one operating system image per computer we can now with platform virtualization install many copies of the same or disparate operating systems onto the same piece of hardware. A powerful concept indeed.
The obviousness of the utility of this technology begs the obvious question: "If platform virtualization has been available since 1968, why is it only becoming popular and important recently?" This is an excellent question. The answer is actually quite simple.
Traditional platform virtualization technologies require a lot of support within the computer hardware itself. IBM has been building this type of support into its mainframe systems for decades. Large UNIX vendors like Sun have been providing this in their high-end UNIX servers for years as well.
These systems are highly specialized and typically run their own custom operating system(s). Generally only large IT shops could afford servers of this magnitude. Small shops did not have ready access to these technologies.
For those IT professionals who have worked with this type of equipment in the past the idea of virtualization was often so ingrained into the platform that it was often discussed very little. It was seen as simply an aspect of these high-end server systems and not necessarily a concept in its own right.
What has changed recently is the move to bring platform virtualization to the commodity hardware space occupied by the AMD and Intel (x86_64).
The first move was to use software alone to make this possible on the x86 processor family. The early players in this space were VMWare and Microsoft, with products like VMWare Workstation, Virtual PC, VMWare GSX and MS Virtual Server.
These products showed that no special hardware was needed to effectively virtualize whole operating systems. Companies of all sizes began to experiment with the concept of virtualizing their existing commodity platforms. This form of virtualization is known as "host-based virtualization" as it requires a host operating system on which the virtualization environment will run.
Following on the tail of these software-only solutions, the big processor vendors in the commodity space, AMD and Intel, began building virtualization capabilities into the processor. This allowed for more flexibility, security and performance. It brought the commodity x64 hardware market much more in line with the traditional offerings from the other processor families common in big iron servers.
By doing so, the virtualization market has really exploded. This is true both from the vendor side, as more and more vendors begin offering virtualization related products, and from the customer side, as virtualization begins to be better understood and its use becomes more commonplace.
With the latest rounds of purchasing, most small IT shops have purchased servers, and often desktops, that support hardware-level virtualization even without intending to prepare themselves for a move to virtualization, making the equation often tip in that direction naturally. This hardware-supported virtualization model is called "hypervisor-based virtualization" as all operating systems run on top of a tiny kernel called the hypervisor and no traditional operating system runs directly on the hardware.
There are two things that we can readily virtualize (without getting esoteric or starting to virtualize our routing and switching infrastructure): servers and desktops. By far the easier and more obvious choice is the virtualization of servers.
Virtualizing the server infrastructure, or part of it, is the first place that most IT shops look today. Most companies find that the majority of their servers are extremely underutilized with excess CPU, memory and drive capacity sitting idle. Meanwhile, additional workloads fail to find a home due to budget constraints, space or implementation time. Virtualization to the rescue.
Through virtualization we have the opportunity to run several virtual servers on a single piece of server hardware. We could virtualize just a single server system but this would not gain us any utilization advantages. Or, in theory we could virtualize hundreds of servers if our hardware could handle it.
Typically, small businesses can virtualize several typical servers roles onto a single physical server. Virtual machine density is, of course, determined by load characteristics as well as by the available hardware. Virtualization uses a lot of memory and storage, obviously, and so careful planning must be made.