Hi All 
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In the sixteenth part of our series, we'll discuss vSphere Upgrading. We'll cover vSphere Upgrading from 3.x/4.x to 5.x as well as in-place upgrade of vCenter Server Appliance.
Short, but important.
Now, Let's Start...
1. Upgrading ESXi 5.1 Options:
Force Migrate ESXi, Preserve VMFS Datastore: | This will take your current installation and configuration and attempt an upgrade/migration and keep your VMFS Datastores intact, so your VMs will be preserved if things go wrong. |
Install ESXi, Preserve VMFS Datastore: | This will install a fresh copy of ESXi 5.1 and leave your VMFS datastores intact, this will erase all custom configurations, it's a clean slate basically and you will have to re-add your VMs back to your inventory once you have reconfigured your host server. |
Install ESXi, Overwrite VMFS Datastore: | This does exactly what it sounds, it will install a clean copy of ESXi 5.1 and overwrite your current datastores - you will lose all information on that datastore. |
2. Steps:
1- ) Upgrade vCenter to 5.1 after installing SSO & Inventory Service.
2- ) Upgrade vSphere Client & Web Client.
3- ) Upgrade Update Manager if exists.
4- ) Upgrade ESXi Hosts.
5- ) Upgrade VMware Tools.
6- ) Upgrade VMware HW Version (VMs, DVSs, ect.)
7- ) Upgrade Datastores VMFS.
In case of upgrading failure, you have to install each component (SSO, then Inventory Services and finally vCenter Server 5.1) individually.
3. In-Place Upgrade of vCenter Appliance:
This official step-by-step guide by VMware is for upgrading vCenter Server Appliance:
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