Over the years there have been some controversy over this topic. Should vCenter Server be a physical or a virtual machine?

The most important aspect is that both solutions are supported by VMware.

http://www.vmware.com/pdf/vi3_vc_in_vm.pdf

Physical Solution Pro’s

• More scalable
• Hardware upgrades can be carried out
• It is not susceptible to a potential VI outage

Physical Solution Cons

• A dedicated physical server is required
• Extra Power usage
• Extra cooling considerations
• UPS considerations
• Backup must be done using tradition tools
• DR may be more difficult

Virtual Solution Pro’s

• You do not need a dedicated physical server (a way to reach a greater consolidation)
• Server Consolidation: instead of dedicating an entire physical server to VirtualCenter, you can run it in a virtual machine along with others on the same ESX Server host.
• Mobility: by encapsulating the VirtualCenter server in a virtual machine, you can transfer it from one host to another, enabling maintenance and other activities.
• Each backup solution that works for a VM work also in this case
• Snapshots: A snapshot of the VirtualCenter virtual machine can be used for backup,
  archiving, and other similar purposes.
• Availability: using VMware HA, you can provide high availability for the VirtualCenter server
• You can via DRS rules place the vCenter on certain hosts so you know where it is.

Virtual Solution Con’s

• It is susceptible to a potential VI outage
• No cold migration
• No cloning
• It must contend for resources along with other VMs
• If you wish to modify the hardware properties for the VirtualCenter virtual machine, you will need to schedule downtime for VirtualCenter. Then, you will need to connect to the ESX Server host directly with the VI Client, shut down the VirtualCenter virtual machine, and make the modifications.
• Careful consideration and design thinking needs to built into a vSphere environment where a vDS will be used – See below

Virtual vCenter and vDS

VMware specifically state about running vCenter within a distributed switch and they said point blank, “it is not supported”. They said “Because vCenter governs the distributed switch environment, you can’t have vCenter within the distributed switch.”

If you lose your Virtual Center you will have no way in moving virtual machines between different port groups on the vNetwork Distributed Switch. In addition, you will not be able to get a virtual machine from the traditional virtual switch to a port group on the vNetwork Distributed Switch. Extra to that, you can’t move a VM to another VMware vNetwork Distributed Switch. So that means if you are using VMware vSphere vNetwork Distributed Switches & you lose virtual center you are almost disabled on the networking part. If you lose connectivity on the classic virtual switch & your adapter on the distributed switch are OK you still can’t move your virtual machines to that distributed switch till Virtual Center is back.”

Does this mean a virtual infrastructure design should keep a vSS around? I would say “yes!”. Perhaps it’s now more important to dedicate 2 of the ESX host’s pNICs for the ESX Service Console / ESXi Management VMKernel isolated as a vSS. The 2 pNICs are not only for redundancy anymore, but also to support one or more standby VM portgroups in case they’re needed as a recovery network for VMs normally using the vDS. Of course, that means creating the appropriate trunking, and VLANs ahead of time. Have everything ready for a quick and easy change of critical VMs when needed.

Therefore, a hybrid design using both a vSS and a vDS is a smart “safety net” to have. Especially when an admin has to point the vSphere client directly at an ESX/ESXi host. The “safety net” vSS portgroups will be available from each host and the VMs can be easily switched via the vSphere Client GUI.

See this useful article by Duncan Epping

http://www.yellow-bricks.com/2012/02/08/distributed-vswitches-and-vcenter-outage-whats-the-deal/

In the event that the worst happens and you lose connectivity

VMware has provided a KB Article 1010555 which will allow an admin to create a vSS and move the vCenter VM on to this switch

KB1010555