I will always take a virtual-first approach and, if there is a good reason to NOT virtualize, will go physical. However, more than 10 years after VMware shipped its first product, there remain those that are skeptical of virtualization. The typical reasoning is the old all eggs in one basket argument that was common in the early days of virtualization. People dont want to see multiple services fail all at once should a server fail.
However, these organizations ignore the potential high availability benefits that can be wrought from a virtual environment. In fact, a virtual environment can provide even more availability in the event of a hardware failure, assuming that the organization is using multiple servers.
On the cost front, SMBs can buy servers that require less space, less power, and less cooling while, at the same time, buying fewer of them! There is certainly cost savings in that.
I still see SMBs and even small midmarket organizations that staunchly avoid virtualization due to their comfort levels with physical servers. A few years ago, I might have been a bit more understanding, but today, I believe that IT managers not willing to consider current standards are doing their companies a disservice. There are far too many benefits to be had from virtualization and the associated ecosystem than there are in sticking with physical servers. Its time to look to the present and makeover the data center.