With the arrival of Service Pack 1 for Windows Server 2008 R2, Dynamic Memory was introduced. In brief, Dynamic Memory is a memory management enhancement for Hyper-V which allows running virtual machines (VM) to allocate memory from the host and releasing it when possible, giving a minimum and maximum memory boundary. The main benefit is a higher VM density, because each VM will only allocate what’s required and you don’t have to approximate memory allocations.

Now this mechanism works well for many applications, but not for Exchange. Exchange’s goal – at least that of servers holding the mailbox role – is to claim as much memory as possible in order to cache information. This amount depends on the installed of memory (more information here). This cache is used for performance reasons, more cache means less I/O’s, less I/O’s result in better performance. You can guess what happens when you run Exchange with a minimal amount of memory and lots of dynamic memory configured, optionally shared with other Dynamic Memory-enabled VM’s. If Exchange starts up and wants to claim memory for caching or allocate memory for other reasons (transactions), instead of the memory being available instantly the host first needs to allocate it, or worse have other VM’s surrendering it their memory. That doesn’t make sense and will result in significant performance penalty.

Besides it being pointless to configure Dynamic Memory for Exchange, it’s also not recommended. From the Exchange 2010 System Requirements:

Many of the performance gains in recent versions of Exchange, especially those related to reduction in I/O, are based on highly efficient usage of large amounts of memory. When that memory is no longer available, the expected performance of the system can’t be achieved. For this reason, memory oversubscription or dynamic adjustment of virtual machine memory should be disabled for production Exchange servers.

Also, from the paper Implementing and Configuring Dynamic Memory, on applications that may not perform as well after Dynamic Memory is enabled:

• Applications that perform their own memory management by taking over certain aspects of memory management from the operating system. Such applications typically grab as much memory as they possibly can in order to ensure the application’s best performance which can cause the amount of memory allocated to their virtual machine to grow until it reaches the amount specified by the Maximum RAM setting;
• Applications where memory allocation is a one shot operation that is performed either when the application starts for the first time or each time the application starts.

Concluding, yes you can use Dynamic Memory for your lab or testing environment and it works. But don’t use it in production for Exchange Server.

Credits to Jetze who blogged about this originally here (Dutch).