Described is a server monitoring technology that is scalable to large numbers of servers, e.g., in a datacenter. Agents on servers run queries to monitor data sources for that server, such as performance counters and other events. The agents monitor their resource usage and those of monitored events to stay within an administrator-specified resource budget (policy), e.g., by modifying the running queries and/or monitoring parameters. A controller receives results of the monitoring, analyzes the results, and takes action as needed with respect to server operation and monitoring. The controller may dynamically update an agent's queries, monitoring parameters and/or monitored data post-processing operations. The controller may issue alerts and reports, including alerts indicative of inter-server problems between two or more servers.