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I would like to make use of virtualization. I have 2 computers, one of the computers has a Core I7. I would like to run 4 virtual machines on the Core I7 computer where each one makes use of 1 core and 2 GB ram for a total of 4 cores and 8 GB.
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When you configure virtualization you can force a system to use 1 dedicated CPU for 1 virtual machine that is called CPU pinning but what you want to do that? You can configure each machine with one CPU and let the system hypervisor take care of CPU cycles on the basis of requirement. CPU pinning is important when you are quite sure that it will definitely make optimum utilization of 1 CPU.
By theory you can even assign 4 CPUs to all 4 virtual machine (though I wouldn't suggest that) and hypervisor will take care of CPU cycles to be assigned to VM.
When it comes to memory you can assign 2 GB to each of them but I would suggest going with 1.5 as you said you will be using for testing purpose I doubt you will need more than that. Incase you need you can increase as per your requirement. Leave some breathing space for base machine otherwise it will be quite slow.
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I have never set something like that up and I have a couple of important questions. On the Core I7 computer that I will be running the virtual machines on. What linux distro would be best suited to manage it. Also, what (only free) virtualization software should I use. More important, does it make sense, that I make sure all 4 virtual machines are 32 bit?
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You can go with CentOS with KVM, I have used virtualbox long back like 3 years ago and at that time wasn't impressed with the performance. Virtual box could be used but I cannot comment on that as I haven't used it lately. So for me CentOS + KVM works. That also answers your question regarding virtualization software that is you can go with either KVM or Virtualbox.
You can run 64 bit machines as you have got i7 processor. I am running 64 bit machines on my CentOS + KVM setup and those machines works pretty well.
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Another question, which I don't know how to google is this. How can I connect to that computer and use my virtual machine from the connected computer. I believe webhosts do this? You set up a virtual server for your webhosting and in a small monitor, you can watch your virtual machine boot? I would really like to know what software I need for this and how I can set it up.
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You can go with NAT or bridged configuration. You have to make sure that you have DHCP running in your setup for virtual machines to get IP incase you don't want to assign IPs manually else you can go with Bridge or NAT with static IPs on all machines. In this way you will be able to connect to any machine in your network with any other machine on your network.
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As a side note - the reason for 4 virtual machines is to practice networking including setting up file servers and apache servers and databases. For management and for user access.
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Should work!