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2TB VMDK limit exceeded - Snapshot and Backups fail

We had a VM (Windows Server 2008 R2 in a two-host ESX 5.0 vCenter environment) which was running out of space on one of its partitions. So we upgraded the VMDK to 2TB. We were aware of the 2TB - 512 bytes limit of VMDKs in ESX 5.0, so we had originally tried upgrading the VMDK to around 1.8TB, but vSphere automatically rounded it up to 2TB in the GUI window just before we pressed the OK button, and the change was committed to 2TB with no going back. Genius programming on VMware's part...

Now obviously VMware snapshots and backups are failing (we are using Veeam B&R). We've read about a few different resolutions online, but all of them seem to require in-depth testing beforehand as they are major changes. We also want to avoid having to move the data manually to another, smaller VMDK if possible. Any ideas?
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Avatar of Andrew Hancock (VMware vExpert PRO / EE Fellow/British Beekeeper)
Andrew Hancock (VMware vExpert PRO / EE Fellow/British Beekeeper)
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Thanks for the suggestions Andrew Hancock. Unfortunately, I'm a bit weary of upgrading the ESXi. I will probably have to go for the V2V conversion. What's strange is how the convertor tool can reduce the size of the VMDK without losing any data/sectors. Does it select to not convert/copy only blank sectors?
VMware Converter, is just a clone tool. So it creates the new size disk, and then streams the data across.
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Thanks Andrew. We also found another solution which is pointing the snapshots to a different datastore.

http://kb.vmware.com/selfservice/microsites/search.do?language=en_US&cmd=displayKC&externalId=1002929

Other forums have said that the solution solves the issue. Do you personally have any experience on whether this works or not in my scenario?
The maximum size of a virtual machine disk under your version of ESXi is 2TB-512bytes.

This includes the snapshot size, as you are at max, you will not be able top create a snapshot.

This is a common, issues amongst VMware Admins, forgetting about snapshots.

see here

http://kb.vmware.com/selfservice/microsites/search.do?cmd=displayKC&docType=kc&externalId=1012384&sliceId=2&docTypeID=DT_KB_1_1&dialogID=706551614&stateId=0%200%20706559858
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Unfortunately, that fix didn't work. Even though the workingDir configuration was successful, the snapshots failed with the same "File is larger than maximum file size supported" error.

We decided on updating the servers...
That is correct. (that fix only works, if you have issues with block size!)

You have exceeded the maximum size of the virtual machine disk (VMDK) by setting it to 2TB-512 bytes.

Any snapshot created will exceed the maximum size of  2TB-512 bytes.
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I have two questions...

1. If I upgrade, will that necessarily mean that the problem is solved? Would just upgrading the vSphere hosts upgrade all the VMDK's storage limits universally? Or will I have to still upgrade the virtual hardware, VMware Tools etc of the VMs?

2. Is the 2TB - 512 byte limit calculated on provisioned storage or used storage? The problematic VMs are currently thick provisioned and have around 1TB of user data on them. So if I were to convert them to thin via a storage migration, even though the provisioned storage would remain the same, the used storage would be halved. Would that solve the issue?
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