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The Cause Of The Xen Linux Performance Issues
The Xen Dom0 support in the mainline Linux 3.0 kernel lacks proper CPU power management support to be able to switch between the processor's different frequency states, which can leave Xen in an under-performing configuration in not being able to tap any of the Turbo Boost states while also burning through more power when the system is idle.
These patches still aren't upstream in the mainline Linux kernel, but hopefully they will make it for the Linux 3.3 kernel as right now the "out of the box" experience is rather poor.
Besides tracking down this ACPI power management issue in Xen, the developer investigating the issue also carried out some new performance benchmarks under Xen compared to bare-metal and against KVM virtualization. The findings can be found on the Xen blog. The Xen developers used the Phoronix Test Suite for carrying out the performance tests.